In a notable transformation, the semiconductor industry is poised for a comeback after experiencing a downturn in capital expenditures in the first half of 2024. Recent reports from the Semiconductor Equipment and Materials International (SEMI) indicate a positive shift in the landscape, with projections showing a robust growth trajectory beginning in the third quarter of 2024. This resurgence is primarily driven by a seasonal uptick and an escalating demand for investments in artificial intelligence (AI), particularly within the data center sector.

The trend observed is particularly significant as it marks the first quarterly growth across key industry indicators in two yearsIn stark contrast to the struggles seen in the consumer, automotive, and industrial markets, the semiconductor manufacturing sector is demonstrating resilience and an ability to rebound quicklyAnalysts forecast that this growth will continue through the fourth quarter of 2024, suggesting a reinvigorated market outlook.

The momentum is reflected in the electronic product sales, which rebounded with an impressive 8% quarter-over-quarter increase in the third quarter of 2024, following a slump in the earlier part of the year

Future forecasts are even more optimistic, with anticipated growth rates of 20% in the fourth quarterSimilarly, integrated circuit (IC) sales also saw a 12% quarter-on-quarter increase in the same period, with an expected additional growth of 10% in the final quarter of the yearOver the entire year, the semiconductor sector is expected to witness an overall IC sales increase of more than 20%, primarily driven by a resurgence in storage products and heightened demand for memory chips in data centers.

Interestingly, capital expenditures in the semiconductor segment showcased a pattern consistent with sales, initially dipping in the first half of 2024 before turning positively in the latter half of the yearNotably, the third quarter saw capital expenditure related to storage see a staggering 34% month-over-month increase and a 67% year-over-year boostThese patterns reflect an improving market for memory integrated circuits relative to the previous year

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The anticipated rise in total semiconductor capital expenditures for the fourth quarter, projected at a 27% increase over the third quarter and a 31% year-over-year growth, underscores the industry’s rapid recovery.

Investment in semiconductor equipment has also exceeded previous expectations, buoyed by substantial investments flowing from China and increased spending related to high bandwidth memory (HBM) and advanced packaging technologiesSuch growth has been particularly pronounced in expenditures associated with wafer fabrication equipment (WFE), which saw a year-on-year increase of 15% and an 11% sequential rise in the third quarter of 2024. China’s investment continues to play a vital role in supporting the WFE market’s growth trajectory, making it a focal point in the global semiconductor narrative.

Moreover, the testing, assembly, and packaging sectors reported impressive year-on-year performance increases of 40% and 31% respectively, a growth trend expected to hold firm through the remainder of the year

The quarterly capacity for wafer foundries reached 41.4 million wafers, indicating a steady expansion that’s set to increase by another 1.6% in the fourth quarter of 2024. Both the foundry and the logic segments are experiencing sustained growth, with predictions for increases of roughly 2% and 2.2% respectively, as a result of capacity expansion across both advanced and mature nodes.

This renewed vitality in the semiconductor industry comes on the heels of a challenging period from 2022 to 2023, marked by cyclical lows that hindered growthHowever, the dawn of a new AI era, coupled with recovering market demands and terminal innovations, is inducing a phase of mild recovery in the sectorWith profitability on the rise, publicly listed companies in the semiconductor space are navigating towards mergers and acquisitions as a strategic move to bolster resources and create synergies during this recovery phase.

Looking at the recently published third-quarter earnings reports, the semiconductor sector’s performance trends upward with numerous companies reporting impressive growth metrics

Data emerging from Huafu Securities indicates that revenue for semiconductor-associated publicly traded companies surged to approximately 377.69 billion yuan in the first three quarters of 2024, reflecting a year-on-year growth of 22.84%. Net profits attributable to shareholders reached 25.731 billion yuan, signifying a remarkable 42.58% year-on-year uptickNotably, about 43% of these 66 companies recorded year-on-year profit increases, a significant improvement over previous periods, suggesting robust market demand recovering speedily.

The international semiconductor sales landscape is similarly revitalizing, showcasing strong year-on-year increases as evidenced by data from the Semiconductor Industry Association (SIA), which reported that global semiconductor sales hit $166 billion in the third quarter of 2024 — a substantial increase of 23.2% year-on-year and 10.7% quarter-on-quarter

This marks the largest quarterly sales increase since 2016. Furthermore, data from the National Customs Administration of China revealed that integrated circuit exports for the first ten months of 2024 totaled approximately 931.17 billion yuan, marking a 21.4% increase compared to the previous year.

Adding to the positive sentiment in the industry, a flurry of encouraging policies has emerged to bolster the semiconductor realmSince the beginning of the year, the China Securities Regulatory Commission has introduced several measures aimed at supporting technological development and facilitating mergers and acquisitions within the sectorThe number of semiconductor-related public companies disclosing M&A activities has escalated to 58 this year, reflecting a substantial year-over-year increase of over 41%. This indicates a robust appetite among companies to consolidate resources and achieve higher levels of coordination and integration as they navigate the ongoing recovery process.