Chipmakers heading for an epic rebound

CHIPMAKERS are once again on the cusp of a new revolution.

The semiconductor industry has been mired in a downturn since Q4 as chip sales plunged by nearly 10 per cent year on year, the first negative print since 2019. Fast forward to today, the slump in sales has worsened, coming in at minus 20 per cent as at Q2 of 2023. This comes as many chipmakers, including the likes of TSMC (Taiwan Semiconductor Manufacturing Co) continue to warn of falling demand and rising inventories, a trend that is likely to persist for the remainder of the year.

Despite the grim near-term outlook, we think the industry is headed for a rebound with the potential for semiconductor sales to rise 40 per cent year on year by Q2 of 2025. Underpinning this prediction is our belief that chipmakers will see a massive structural increase in demand as the world becomes increasingly digitalised, leading to (i) more semiconductor applications and (ii) higher silicon content in them.