The semiconductor industry, which makes vital components for the technologies we all depend on, hit the headlines over the past year. And it wasn’t all good news. Supply shortages led to bottlenecks in the production of everything from cars to computers and highlighted how tiny chips are critical to the smooth functioning of the global economy. In many ways, our world is “built” on semiconductors. With chip demand set to rise over the coming decade, semiconductor manufacturing and design companies would benefit now from a deep analysis of where the market is headed and what will drive demand over the long term.
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As the impact of digital on lives and businesses has accelerated, semiconductor markets have boomed, with sales growing by more than 20 percent to about $600 billion in 2021. McKinsey analysis based on a range of macroeconomic assumptions suggests the industry’s aggregate annual growth could average from 6 to 8 percent a year up to 2030.
The result? A $1 trillion dollar industry by the end of the decade, assuming average price increases of about 2 percent a year and a return to balanced supply and demand after current volatility.
Amid megatrends that include remote working, the growth of AI, and soaring demand for electric vehicles, manufacturers and designers should now take stock and ensure they are best placed to reap the rewards.
Assuming EBITA margins of 25 to 30 percent, current equity valuations support average revenue growth of 6 to 10 percent up to 2030 across the industry, analysis of 48 listed companies shows. Still, some companies are better placed than others, and growth in individual subsegments could range from as little as 5 percent to as much as 15 percent (exhibit).
