A Surging Semiconductor Sector
·
McKinsey Estimates $1tn Industry by
2030
·
About 70 percent of growth is
predicted to be driven by just three industries: automotive, computation and
data storage, and wireless.
[ABS News Service/06.04.2022]
Supply chain choke points. To counter the global chip shortage, chipmakers have sought
to increase production. But a lack of chips is choking off the supply chain itself.
For example, the CEO of one large supplier of chip-making equipment has said that
his company can’t find enough chips to make its tools, resulting in long lead times.
The biggest chip shortages aren’t in cutting-edge semiconductors but in the less
sophisticated ones—those used in industrial equipment and cars.
New rules of car buying. People looking to buy a new car should expect to pay premium
prices or be prepared to wait until next year. In 2021, carmakers produced about
two million fewer cars than they did in 2019. Since their supply of chips is limited,
auto manufacturers can’t build enough cars to satisfy consumer demand. In addition
to making fewer cars, many automakers are assembling cars without advanced features
like automatic parking or climate-control functions for rear seats.
The
semiconductor decade: A trillion-dollar industry
The semiconductor industry, which makes vital components for
the technologies we all depend on, hit the headlines over the past year. And it
wasn’t all good news. Supply shortages led to bottlenecks in the production of everything
from cars to computers and highlighted how tiny chips are critical to the smooth
functioning of the global economy. In many ways, our world is “built” on semiconductors.
With chip demand set to rise over the coming decade, semiconductor manufacturing
and design companies would benefit now from a deep analysis of where the market
is headed and what will drive demand over the long term.
As the impact of digital on lives and businesses has accelerated,
semiconductor markets have boomed, with sales growing by more than 20 percent to
about $600 billion in 2021. McKinsey analysis based on a range of macroeconomic
assumptions suggests the industry’s aggregate annual growth could average from 6
to 8 percent a year up to 2030.
The result? A $1 trillion dollar industry by the end of the
decade, assuming average price increases of about 2 percent a year and a return
to balanced supply and demand after current volatility.
Amid megatrends that include remote working, the growth of
AI, and soaring demand for electric vehicles, manufacturers and designers should
now take stock and ensure they are best placed to reap the rewards.
Assuming EBITA margins of 25 to 30 percent, current equity
valuations support average revenue growth of 6 to 10 percent up to 2030 across the
industry, analysis of 48 listed companies shows. Still,
some companies are better placed than others, and growth in individual sub
segments could range from as little as 5 percent to as much as 15 percent.
Drilling down into individual sub segments, about 70 percent
of growth is predicted to be driven by just three industries: automotive, computation
and data storage, and wireless.
About 70 percent of growth
is predicted to be driven by just three industries: automotive, computation and
data storage, and wireless.
The strongest-growing segment is likely to be automotive,
where we could see a tripling of demand, fueled by applications such as autonomous
driving and e-mobility. The 2030 cost of semiconductor content in a Society of Automotive
Engineers (SAE) Level 4 car with an electric drivetrain could be about $4,000 compared
with $500 for an SAE Level 1 car powered by an internal-combustion engine. Accounting
for just 8 percent of semiconductor demand in 2021, the automotive industry could
represent from 13 to 15 percent of demand by the end of the decade. On that basis,
the segment would be responsible for as much as 20 percent of industry expansion
over the coming years.
Growth of 4 to 6 percent in the computation and data-storage
market could be fueled by demand for servers to support applications such as AI
and cloud computing, the analysis shows. In the wireless segment, meanwhile, smartphones
could account for the majority of expansion, amid a shift from lower-tier to mid-tier
segments in emerging markets and backed by growth in 5G.
What do these lessons mean for decision makers? Certainly,
the outlook for the semiconductor industry looks bright, notwithstanding potential
short-term volatility due to supply–demand mismatches, as well as a changing global
economic and geopolitical outlook. With growth set to continue in the longer term,
the task for industry leaders will be to focus strategically on R&D, factories,
and sourcing, and to apply the lessons of the modeling to unlock areas of opportunity.