TOKYO -- Global semiconductor demand, driven by artificial intelligence-related data centers and the electric vehicle sector, is expected to begin recovering in the April to June period of this year as major chip makers gear up to raise production, according to experts. The resulting turn in the boom-bust "silicon cycle" is expected to help the global economy.

Nikkei asked 10 organizations and individuals, including research agencies, analysts, and specialist trading companies, to rate supply and demand for semiconductors this year on a five-point scale per quarter, from oversupply to undersupply by type and use.

Eighty percent of companies globally will use generative AI in their business by 2026, according to a forecast by U.S. research company Gartner, up from less than 5% in 2023. Microsoft, Amazon.com and others will expand their AI services.

The AI semiconductor market is expected to surge to $119.4 billion in 2027, comprising nearly 20% of the global semiconductor market, according to Germany's Statista.

"AI will be installed in smartphones and PCs. Generative AI-related investment will revitalize and significantly boost the growth of the semiconductor market," said Akira Minamikawa of Omdia.

Semiconductor giants are increasing production in anticipation of strong demand.

"As demand from the AI sector is exceeding our production capacity, we will make further investments," said C.C. Wei, CEO of Taiwanese chipmaker TSMC, at an earnings briefing last October.

Demand for power semiconductors, which are installed in EVs, will also rise starting in the second half of 2024. BMW aims to increase EV sales to 50% of the carmaker's total by 2030, and Toyota will raise its global EV sales to the 1.5 million-unit range by 2026.

German chip giant Infineon Technologies will invest 2 billion euros ($2.18 billion) to begin operating its new power semiconductor plant in Malaysia this year. Renesas Electronics in the first half of this year will restart a mothballed plant for the first time in 10 years to double its supply. Ryoyo Electro, a semiconductor trading company, expects that "a high level of automotive semiconductor orders for EVs and advanced driver assistance systems will continue."

As a reaction to the higher demand during the coronavirus pandemic, semiconductor demand for smartphones, PCs and other digital devices slowed last year, which led to a rapid buildup of semiconductor inventories. Later in the year, however, semiconductor manufacturers reduced their production and inventory levels.

Reference source: https://asia.nikkei.com/Business/Tech/Semiconductors/Global-chip-demand-to-rise-by-2nd-quarter-of-2024-experts-say