Now is a good time to buy memory because prices rise next year, Gartner predicts
To blame? The usual suspect – AI's appetite for chips
The semiconductor market is poised to return to growth next year, driven by AI increasing the volume of orders for memory and causing a spike in prices as demand catches up with the capacity of silicon manufacturers.
This is according to Gartner, which estimates that global semiconductor revenues will rise 16.8 percent year-on-year in 2024 to $624 billion following a contraction in sales for 2023.
There has been a slowdown in both server and PC shipments this year, although the market has seen strong demand for GPUs thanks to the boom in interest in AI workloads. An oversupply of memory components has helped to keep pricing low and demand for smartphones has also been sluggish.
However, if Gartner is right then 2024 will see resurgence in demand across all semiconductor types, especially in memory which is forecast to see a double-digit revenue expansion.
"New workloads are driving demand for more memory in servers," Gartner VP Analyst Alan Priestley told The Register, referring largely to AI, of course.
In fact, the company estimates that infusing AI into datacenter applications will lead to more than a fifth of all new servers incorporating "workload accelerators" by 2027.
However, the AI largesse is not spread evenly. Only one silicon vendor – Nvidia with its GPU products – has really enjoyed the benefit from the AI craze so far, with CPU makers not seeing a boost in revenue, Priestley said. This is perhaps why the likes of Intel are touting the concept of the "AI PC" recently.
This may change in the second half of next year, when broader deployment of AI technologies is likely to kick in, Priestley said.
He noted that one factor in Nvidia's success is that it markets silicon as part of high-value finished products such as GPU adapters and DGX systems, rather than just selling chips like the CPU makers do.
Gartner's current forecast is that there will be a recovery in the market for client devices such as desktops and laptops as well, and this could be boosted if the rumors of a new platform release from Microsoft – Windows 12 – turn out to be true.
"Potentially, if we see a new OS on the on a PC, that might cause everyone to move up from a 16GB to a 32GB configuration," Priestley said, although he expressed skepticism that a new version of Windows would drive a wave of new system purchases any time soon.
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"Every time we get a new version of Windows, it is slated to create an uptick in the PC market, but that often doesn't happen nowadays," he told us.
"The question is going to be what is the killer app? What's the value proposition that says I've got to change from Windows 10/11 to Windows 12? Is it compelling enough to make me go out and buy a new PC?"
Looking at memory overall, the market is in a slowdown right now and there is over capacity from the chipmakers, thus prices have dropped, Priestley said.
New workloads are driving demand for more memory and these are likely to see more memory demand in servers next year. This will lead to DRAM revenue increasing 88 percent to $87.4 billion, Gartner forecasts, so "now is a good time to buy memory" if you expect to need it, Priestley said.
For NAND flash the story is the same; revenue is set to decline 38.8 percent by the end of this year, but jump back up 49.6 percent next year to reach $53 billion.
"The problem with the semi industry is that the unit of expansion is a fab. So when you put a new fab in place, it increases your capacity significantly. Until demand comes back up again or it ramps to meet what your total capacity is, there's a period of over-capacity which is where we are at the moment," he explained.
Another factor in the semiconductor recovery is the automotive industry. This is due to an ongoing transition to electric vehicles, and increasing levels of autonomy, which is driving up the silicon content inside cars.
"Electric vehicles require significant electronics to control the batteries and the powertrain," Priestley said. "We're also seeing a growth in the sophistication of in car electronics. They may not be fully autonomous, but they do a lot more to monitor what you're doing and how you're driving, and attempt to keep the car safe, and these features require high-value semiconductor content." ®