Q2 Global semiconductor manufacturing continues to show signs of improvement.

In its Q2 2024 Semiconductor Manufacturing Monitor (SMM) report, prepared in conjunction with TechInsights, SEMI recently announced that the global semiconductor manufacturing industry continued to show signs of improvement in the second quarter of 2024, with significant growth in IC sales, stabilization of capital expenditures, and increased capacity installed in fabs. While slower recovery in some end markets impacted growth rates in the first half of the year, surging demand for AI chips and high bandwidth memory (HBM) created strong tailwinds for industry expansion.

Seasonality and weaker-than-expected consumer demand impacted electronics sales in the first half of 2024, resulting in a 0.8% year-over-year decline. Beginning in the third quarter of 2024, electronics sales are expected to rebound, increasing 4 percent year-over-year and 9 percent sequentially. IC sales increased 27 percent year-over-year in the second quarter of 2024 and are expected to increase a further 29 percent in the third quarter of 2024, surpassing the record level of 2021, as artificial intelligence-driven demand continues to drive IC sales growth. Improved demand also resulted in a 2.6 percent year-over-year decline in IC inventory levels in the first half of 2024.

Installed fab capacity reached 40.5 million wafers per quarter (in 300mm wafer equivalents) in the second quarter of 2024 and is expected to grow 1.6% in the third quarter of 2024. Foundry and logic-related capacity grew more strongly at 2.0 percent in the second quarter of 2024 and is expected to grow 1.9 percent in the third quarter of 2024, driven by increased capacity at advanced nodes. Memory capacity grew 0.7 percent in the second quarter of 2024 and is expected to grow 1.1 percent in the third quarter of 2024, driven by strong HBM demand and improved memory pricing conditions. Installed capacity increased in all tracked regions in the second quarter of 2024, with China remaining the fastest growing region despite average fab utilization.

Semiconductor capital expenditures remained conservative in the first half of 2024, declining 9.8% year-over-year. With growing demand for AI chips and rapid adoption of HBM, this trend is expected to turn positive starting in Q3 2024, with memory capex up 16% YoY and non-memory related capex up 6% YoY.

While semiconductor capex was modest in the first half of the year, we expect to see a positive trend in the third quarter of 2024, led by memory capex,” said Clark Tseng, senior director of market intelligence at SEMI. Strong demand for AI chips and high bandwidth memory is driving performance across all areas of the semiconductor manufacturing ecosystem.”

Boris Metodiev, Director of Market Analysis at TechInsights, said, “The entire semiconductor supply chain is recovering this year as the market prepares for the 2025 surge. Artificial Intelligence will undoubtedly continue to drive high-value ICs into the market, while also supporting capital expenditures to expand capacity for AI chips, especially HBM. As consumer demand recovers and new technologies such as AI are pushed to the forefront, unit volumes and especially revenues will recover and support broader semiconductor manufacturing.”

Earlier, foundry duo SMIC and Hua Hong Semiconductor released their Q2 2024 results one after another. Notably, both companies saw varying degrees of growth in Q2 revenue sequentially, with SMIC‘s Q2 revenue of $1.901 billion up 8.6% sequentially and 21.8% year-over-year, and Hua Hong Semiconductor‘s Q2 sales revenue of $479 million up 4.0% sequentially, though down 24.2% year-over-year.

In addition to improved financials, both companies‘ capacity utilization rates also improved further from the previous quarter. SMIC‘s capacity utilization reached 85.2 percent in the second quarter, up 4.4 percentage points sequentially, while Hua Hong Semiconductor‘s capacity utilization was 97.9 percent, up 6.2 percent sequentially. Meanwhile, both companies said the market is slowly recovering. Among them, the president of Hua Hong Semiconductor, Mr. Tang Junjun, said that the semiconductor market is experiencing a slow recovery from the bottom.

The data showed that Hua Hong Semiconductor‘s monthly production capacity was 391,000 8-inch equivalent wafers, with an overall capacity utilization rate of 97.9%, up 6.2 percentage points from the previous quarter.

In this regard, Tang Junjun said: “At the beginning of the second quarter, the capacity utilization rate of the 8-inch platform had not yet reached 100%, but has fully exceeded 100% as of today. In the first half of the year, our capacity utilization rate was close to 100%, mainly due to the demand driven by consumer electronics. From the process platform point of view, RF, image sensors, power management, especially BCD [Bipolar-CMOS-DMOS, this process technology can produce bipolar, CMOS and DMOS devices on the same chip] platform by part of the consumer electronics sector is very obvious. The embedded and standalone non-volatile memory platforms have gradually caught up in terms of shipments, and although prices have not yet recovered to the desired level, we believe that demand for MCUs and smart cards will lead to a gradual recovery in revenue for this process platform. From an overall perspective, it seems that only IGBTs (insulated gate bipolar transistors) are still weak, and we expect a gradual recovery in the second half of the year.”

Navy Zhao, co-CEO of SMIC, also said that from a demand perspective, with the gradual recovery of low- and mid-range consumer electronics in the second quarter, the willingness to stock up is higher than before for all links in the industry chain, from design firms to end manufacturers.

A number of mainstream organizations in the industry are also more optimistic about the semiconductor market in 2024. IDC predicts that global semiconductor sales will reach $632.8 billion in 2024, a year-on-year increase of 20.20%; Gartner also believes that global semiconductor sales will usher in a growth market in 2024, with a growth rate of 16.80%. wsts forecast is relatively conservative, which said that because of the WSTS forecast is relatively conservative, it said that due to the popularization of generative AI, driven by the demand for related semiconductor products, and storage demand is expected to show a significant recovery, so the global semiconductor sales in 2024 will grow by 13.1%, amounting to 588.364 billion U.S. dollars, once again hitting a record high.