In the early 2020s, semiconductor companies and their customers faced a perfect storm of challenges. COVID-19 lockdowns in the second quarter of 2020, a trade war between China and the US in 2021-22, and the conflict between Ukraine and Russia.
In addition, there were setbacks specific to the semiconductor sector. Japan’s Asahi Kasei semiconductor plant, which specializes in ADC and DAC components, caught fire in October 2020. In 2021, a Renesas Electronics Japanese factory, which supplies 30% of the global market for car microcontroller units, caught fire in March 2021. In January 2022, a fire at an ASML plant in Berlin affected the production of EUV lithography equipment used in chip production.
Other disruptive events working against chip makers included a severe winter storm in February 2021 in Austin, Texas. The storm caused a power outage forcing the closure of three semiconductor plants owned by Samsung, Infineon, and NXP Semiconductors for several months, a major global supply setback for the chip industry.
At the same time, consumer demand for electronic products was soaring, as was chip demand by equipment manufacturers.
An Overview of High Tech & Consumer Electronics Heading into 2024
It wasn’t until mid-2023 that chip production finally rebounded, bringing relief to chip makers and their customers. As we welcome 2024 and the opportunities that come with it, here is a summary of three areas across the world of high tech:
1. Hyperscale Computing and Enterprise Storage
Hyperscaling is the ability of computer architecture to scale up or down as demand for service increases and decreases. It includes computing, memory, networking, and storage resources given a specific set of nodes that increase the number of distributed computing assets.
Hyperscaling is essential for building robust, scalable clouds and distributed storage systems. It is integrated into the infrastructure required to run large, distributed sites such as Google, Facebook, Twitter, Amazon, Microsoft, IBM Cloud or Oracle.
Companies such as Ericsson, AMD, and Intel provide hyperscale infrastructure kits for IT service providers. Scaleway, Switch, Alibaba, Digital Realty Trust, Equinix, IBM, QTS, Oracle, Facebook, Amazon Web Services, SAP, Microsoft, and Google build data centers for hyperscale computing.
This typically involves the ability to seamlessly provide and add compute, memory, networking, and storage resources to a given node or set of nodes that comprise a larger computing, distributed computing, or grid computing environment. Hyperscale computing is necessary to build a robust and scalable cloud, big data, map-reduce, or distributed storage system. It is often associated with the infrastructure required to run large, distributed sites such as Google, Facebook, Twitter, Amazon, Microsoft, IBM Cloud, or Oracle.
Companies like Scaleway, Switch, Alibaba, IBM, QTS, Digital Realty Trust, Equinix, Oracle, Facebook, Amazon Web Services, SAP, Microsoft, and Google build data centers for hyperscale computing. Data centers are the unseen engines behind everything from mobile banking transactions and social media posts to cutting-edge technologies such as artificial intelligence (AI) and fully immersive gaming.
Network connectivity is an extensive and comprehensive process by which various parts of a specific network connect. Parts of a network can connect via switches, gateways, and routers. Network connectivity is crucial because it facilitates connectivity between devices and computers, allowing them to communicate.
Security is always a major concern regarding network connectivity because poor network security can put the data kept within the network at risk. By securing your network connectivity, you’ll protect yourself from data breaches, network breaches, and many other cyber threats.
It is an exciting time for high-tech companies that presents opportunities and challenges. As more applications move to the cloud and the AI boom accelerates, things like the power, cooling, and security needs of data center operations also change.
The generative AI boom, triggered by the success of ChatGPT, has been good for many companies. For example, Nvidia’s growth rate is shifting into hyperdrive. The company’s chips provide the processing horsepower that enables the language model. As a result, Nvidia has enjoyed a 65% to 70% share of the data center market in recent years, according to Supplyframe Commodity IQ.
2. Consumer Electronics
After four bumpy years; the consumer electronics market is poised for modest growth in 2024, with demand focused primarily on modestly priced products that are smart, cordless, multifunctional, and environmentally sustainable, according to one home appliance source. Other consumer considerations include the product’s life expectancy, repairability, and energy efficiency.
Artificial intelligence (AI) is a relatively new entrant in the consumer electronics sector that can make decisions based on programmed user preferences. For example, AI can save energy based on preferences programmed by the user.
The available supply of semiconductors will determine the refresh cycle for personal computers, smartphones, appliances, and other consumer electronics in 2024. For example, the aging installed base of commercial PCs surpassing the four-year mark by 2024 is expected to necessitate a refresh. The total PC market in 2024 should grow by 3.4% compared to 2023.
Global manufacturing of consumer electronics is also being reshuffled. China has been the primary electronics manufacturer for many years, but India is emerging as a viable competitor. The Indian electronics industry is one of the fastest growing in the world, driven by the Indian government and a technically sophisticated new generation of industry leaders.
Apple is reportedly doubling down on manufacturing in India, as is Foxconn, a major Apple supplier. Foxconn plans to manufacture Apple iPhones in India. A recent report suggested that India will become a $300 billion electronics industry in the next few years.
3. Networking and Connectivity
Network operators have recently begun to transition to 5G networks and use artificial intelligence (AI) and machine learning (ML) to optimize operations. Making deployments easier and coverage wider are also considerations as operator spending declines, which will drive down networking costs. Broader coverage will enable new use cases at heavy industrial sites, such as remote oil drilling and mining.
In 2024, an increasing number of operators will be accessing the new spectrum, including the newest 6 GHz band, which will help elevate the speed, capacity, and performance of connected experiences in 2024.
Wi-Fi is poised to play an even more critical role as new technologies emerge. The upgrade to Wi-Fi 7 is four times faster than Wi-Fi 6, can support uninterrupted streaming, and enables real-time engagement when traffic is high. This stage is the convergence of cellular and Wi-Fi networks, creating a unified platform that seamlessly shifts between technologies driving innovation, augmenting connectivity, and delivering superior user experiences.
In 2024, the focus will be on identifying new use cases for 5G networks and more operators using AI and ML to optimize operations and drive revenue. The ability to make deployments easier and coverage wider will also be a key consideration as operators rein in spending. Easier deployments will help drive the cost of networking in general. At the same time, broader coverage will enable new use cases, such as remote operations across vast isolated sites like oil drilling, mining, and other heavy industries.
What’s Next For High Tech in 2024
Prospects look good for strong growth in the 2024 chip market. According to SEMI, global semiconductor capacity is projected to increase by 6.4% in 2024, which would top the 30 million wafers-per-month growth of 5.5% in 2023.
The four most significant semiconductor applications are smartphones, PCs, servers, and the automotive sector. Global server shipments will likely see single-digit growth in 2024, which aligns with the semiconductor market recovery. Smartphone shipments will likely resume positive growth in 2024, and PC shipments will see single-digit growth. Demand for smartphones, PCs, and servers will account for 40% of global semiconductor demand in 2024.
With the growing popularity of electric vehicles (EVs), the introduction of Advanced Driver Assistance Systems (ADAS), and intelligent cockpits, the automotive sector’s demand for new digital applications is steadily increasing, which requires an increase in semiconductors. EVs will account for most of the automotive chip market through 2030, representing 89% of the total $147 billion automotive semiconductor chip market, according to McKinsey & Co.
Yet, even with record-setting semiconductor growth rate ahead, forecasts suggest there will not be enough supply. Companies that require the latest semiconductors must focus on resilience in the design phase and remain agile in their sourcing stage.
Business managers at high-tech companies need to focus on reducing the risk of charting a course for more resilient futures. Here are three areas that design and engineering teams need to focus on:
1. Knowledge is about arming engineering and their teammates in procurement and component sourcing to make more informed part decisions when the cost of change is lowest.
2. Intelligence applies the insights from component sourcing and couples it with part intelligence that results in actions and workflows across the organization to lower cost and risk, which the enterprise can adapt quickly to address supply disruptions.
3. Optimization delivers a complete closed-loop component management digital twin with built-in traceability and comprehensive manufacturing experiences. It also includes AI-driven analytics that makes the optimal choice at every point when making technical and business decisions.
This three-phase approach can transform organizations and shift supply chain resilience back to the point of design. By connecting the value chain to the engineer’s desktop, system design companies can achieve higher levels of digital transformation and increase profitability as they are empowered to realize tomorrow’s designs today.
Today, the cost of doing business is high and growing higher. Influenced by a global electronics value chain already facing rapidly dynamic market forces have been amplified by the pandemic and global chip shortages of the last few years. Functional silos, disparate systems, and fragmented cross-functional decision-making processes in organizations add even more complexity to the supply-chain problem.
Over to You
We’re witnessing a global age of digital transformation in 2024. Digital products and services are everywhere. Global supply chains are growing more complex as distributed teams collaborate and function as one complex machine. Numerous suppliers add to the complexity of manufacturing in ever-expanding geographies.
As the electronics industry matures, companies are developing and investing in new engineering tools to accelerate innovation. Today, product release cycles are defined in months rather than years and are produced with fewer resources due to tightening budgets.
Visit our High Tech and Consumer Electronics Page to learn more about how Supplyframe partners with leaders in this industry to provide intelligence for what’s next.