Global semiconductor sales dropped about 8% in 2023 but are expected to recover in 2024. As integrated circuits are found in most key products, this underlines the likelihood of a recovery of world trade in 2024. However, trade flows are likely to change over the coming years as China, the US and Europe build up own capacity and support the development of new fabs in South and Southeast Asia. Machinery trade indicates an emerging shift away from Taiwan and Korea based production of integrated chip production.
Semiconductor Sales in 2023 and Outlook for 2024
Semiconductor trade is a bellwether for multiple industries that require chips, including computers, phones, and automotive parts. Just under a year ago, we took a look at the state of trade in semiconductors and machinery through to February 2023. Global sales of semiconductors at the time had been declining since July/August 2022, pointing to further weakness in Chinese exports, which ultimately ended the year down by about 6.5%.
Overall semiconductor sales finished the year down 8%, with the biggest decline of 12% coming from Asia Pacific excluding Japan, which primarily comprises China. This was somewhat less than the 9.4% worldwide and 14.4% Asia Pacific decline predicted by World Semiconductor Trade Statistics (WSTS) in November 2023.
However, overall sales numbers reached a turning point in September 2023 and the fourth quarter grew by 12% with Asia Pacific excluding Japan growing at almost 16%.
For 2024, WSTS predicts growth of 13.1% on a worldwide basis, with Americas and Asia Pacific growing at 22.3% and 12%, respectively. From a product perspective, over 80% of semiconductor sales are related to integrated circuits and the remainder in discrete semiconductors, optoelectronics, and sensors. Integrated circuit sales primarily include computer processors and memory chips. Integrated circuit sales are expected to grow by almost 16% in 2024, driven largely by a 45% growth in memory chips, which saw steep declines in 2023 and 2022.
Trade Impacts
In a normal environment this would be good for global and particularly Chinese trade, but the structure of the semiconductor production business is potentially undergoing some fundamental changes due to geopolitical tensions between the US and its “allies” and China. One factor is the CHIPS Act, passed in August 2022, which earmarks just under $53 billion in subsidies and investments to move semiconductor factories to the United States. Some amounts of funding have also been allocated to fund expansion of production abroad in Vietnam, Philippines, Indonesia, Costa Rica and Panama. The European Union passed their own Chips Act (Regulation (EU) 2023/1781) in September 2023, which pledges €42 billion in subsidies.
This subsidy spree has been complemented by export and imports bans. For example, ASML mentioned in their latest earning results that they do not expect to receive export licenses for their more advanced chip producing equipment. US companies also face export controls in selling products to China. It is difficult to determine how this will all play out in the long term, but trade patterns will change.
Chinese Trade in Semiconductors and Semiconductor Machinery
As much of the attention is focused on China, it’s worth exploring how trade of semiconductors and semiconductor machinery has changed in and out of China.
Imports of integrated circuits declined by 17% in value and 16% in weight terms in 2023. Exports declined by 12% in value and 8% in weight terms. Imports are about twice exports in value terms but equal in weight terms.
However, both imports and exports of semiconductor producing machinery have increased substantially in the last 12 months. Imports have increased from all main origins – Japan, Netherlands, Singapore, Malaysia, and the US. The level of granularity in trade data does not provide detail on the type of machinery – i.e. Extreme Ultraviolet (EUV) vs Deep Ultraviolet (DUV) machinery, but the increase is nonetheless notable.
At the same time, exports of machinery from China have also increased, particularly to Vietnam, Thailand, and India.
Semiconductor Machinery Exports from Netherlands, US and Japan
The US, European Union and Japan have traditionally been the main exporters of semiconductor producing machinery.
EU trade data for last year shows an 11% increase in the value of semiconductor producing machinery. What those headline numbers hide, however, is a 51% drop in exports to Taiwan coupled with a 116% increase to China, 7% increase to South Korea, and 26% increase to the US. These figures would indicate diversification of chip production away from Taiwan and confirm the ramp up in production capabilities in Chinese trade data. More Chinese production capacity will ultimately mean less cross border movement of semiconductors into China but could see an increase in exports of components particularly to Southeast Asia.
US exports of machinery for producing integrated circuits dropped by almost 30% in 2023. Ironically the only major market that did not show any major declines and even saw values and volumes pick up in the latter half of the year. That is more or less consistent with Chinese trade data. US data also show increased levels of exports to Malaysia and India, as well as growing exports to the Netherlands.
Japanese data shows a decline of exports of 12% in 2023, like with other countries, this is driven by a steep decline in exports to Taiwan, which dropped 44%. Exports to China, on the other hand were up 24%. Malaysia has also been a beneficiary of increased exports, with trade value up substantially in 2022 and 2023.
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