Weak demand leads to declining quarter for semiconductor market

In the first quarter of the year, the semiconductor market typically experiences a downturn, with revenue dropping by 4.4% after a robust fourth quarter driven by seasonal demand. Most segments within the semiconductor market saw declines this quarter.

The consumer segment suffered the most, with a 10.4% decline from 4Q23, while the industrial segment decreased by 8.5% due to inventory adjustments. Even the automotive segment, which had seen consistent growth for years, faced a 5.1% decline in 1Q24, according to Omdia.

However, these declines were partially offset by a 3.7% growth in the data processing division, fuelled by continued high demand for Nvidia's chips and other AI-related products.

Total semiconductor revenue

Nvidia has continued its strong growth, increasing its market share by over two percentage points to now represent 14.5% of the total semiconductor market revenue. It has surpassed traditional leaders Samsung and Intel, who together hold 18.6% of the market. Additionally, the resurgence of memory growth has boosted the market share rankings of SK Hynix and Micron.

The automotive sector, which initially resisted the industry-wide semiconductor market growth triggered by the COVID-19 pandemic, eventually succumbed to decline but quickly recovered. After 13 consecutive quarters of revenue growth starting in 3Q20, the automotive segment saw a slight downturn of 0.6% in 4Q23. The decline deepened in 1Q24 with a 5.1% drop from the previous quarter, reflecting a broader slowdown in demand for cars. The growth rate of electric vehicles has also slowed in recent quarters, prompting a recalibration in semiconductor demand. Despite these challenges, the automotive semiconductor market remains a promising long-term growth area, expected to climb over the next five years.

Omdia’s Global Semiconductor Manufacturing Market Tracker (GMMT) and the Pure Play Foundry Tracker (4Q23 reports), find that the combined factory utilisations (IDM + Foundry) reflect the overall trend within the semiconductor industry. After reaching a zenith in semiconductor demand during the COVID era’s early stages in 2022, utilisation rates plummeted in 2H22 due to substantial softening in demand and record-high inventory levels. Despite semiconductor revenue experiencing growth throughout 2023, fab utilisation rates have remained in the low 80% figures.

“Utilisation rates began a slight uptick in 2H23 as the market began seeking equilibrium. However, it has yet to materialise as traditional demand patterns have not fully emerged. Demand will continue to improve in 2H24, which should lead to inventory corrections consequently driving up factory utilization rates once again,” says Omdia Chief Analyst Craig Stice in a press release.