2024-2025 Semiconductor Industry Outlook with TechInsights

share his invaluable insights on the current state and future of the semiconductor industry . From the impact of AI and robotics to geopolitical influences and the latest from CES 2024 , we're covering it all . So let's get started and explore what lies ahead in this ever-evolving industry . Risto , happy new year 2024 and welcome back to the show .

So , Risto , I want to kick this off . It's hard to believe , but this time last year , ChatGPT from OpenAI had just debuted on the scene and it's only been a year , but it feels like the entire world is now obsessed with AI . We've now got chip manufacturers and hyperscalers battling for market dominance and , to paraphrase Lisa Su ,

CEO of AMD, she said last year has shown us that AI isn't just a cool new thing , it's the future of computing . I thought that was interesting . I would say it's the future - full stop , and nowhere was this more apparent than CES 2024 , which ended , as you know , just a couple of weeks ago .

So, our Advantest team was there and what we saw, literally every single company's messaging and product centered around AI in some way . So, the question is: What happened in 2023 ? And did we literally just see the entire world change in the blink of an eye ?

The adoption rates , the usage rates just went through the roof and people were fascinated because the ChatGPT literally could take a lot of human tasks, which were traditionally human tasks , and suddenly they became very , very easy to do .

But you know , they joke around , like my people are, why don't you take this data check , call the ChatGPT and write the report on this ? And then , just, you know , you mentioned Lisa Su , and AMD , a great company , and Lisa put out this $400 billion dollar market size in four or five years and it became a huge head scratcher for us .

For example , are we going to go against Lisa and say, no , it's not 400 , or are we going to go figure out what Lisa's thinking is or AMD's thinking is ? And those are kind of the ramifications . And then we can't forgo the comment that NVIDIA became a trillion dollar market capitalization company .

And there were not a lot of those companies and now we have a semiconductor company there with that . So that obviously got the fascination of the whole financial world in a single say then . So we had a , let's say , a perfect storm that was lit up in the late 2022 . So yeah , that's where we are .

to mow your lawn and to help the elderly . Healthcare- expanding applications and computer vision , which go hand in hand with the AI . And then the momentum in spatial computing , which is the rebranded term for AR and VR . Of course , EVs and automobiles and the innovations in micro LEDs and transparent displays .

So, the question is, I mean , these are the six themes that we sort of took away and that people were talking about . Do these six themes resonate with TechI nsights and your observations , and why these six ? I mean AI notwithstanding why these six , and are there others that we should be thinking about ?

Then you got robotics , computer vision , spatial computing , which is a technology . EV, a kind of application , but driven by technology pieces . And micro LED , which is definitely a device . Those five are all centered and driven by AI . So, it's a kind of catch all AI show .

I was not able to make the show myself , but you know, we had a 10- person team there and when you look at the comments , they are either driven by AI or they drive AI, one way or the other . So, you know, take micro LED driving data to AI .

Take an EV that uses AI or, let's say , autonomous vehicles: they require that AI component to become fully functional . Spatial computing , a world of AI and computer vision driving data to AI and robotics is going to be a great user of AI .

So, you have actually a huge amount of technologies that are basically co-habiting the marketplace , and the AI is in the center .

Like everything now doesn't matter what it is: agriculture , industry , gas , oil- mining , your grocery stores, everything has AI as part of the growth behind it now .

The reason I want to talk about spatial computing is because Apple's Pro Vision is actually coming out next week, and there's been a lot of sneak peeks at it and a lot of videos , and

it's getting a lot of press in the media . So , from that aspect , how do you see this technology impacting the semiconductor industry ?

Basically , I'm going to say , from the perspective of silicon, it will take more silicon per whatever your measurement is, compared to what the previous applications were , whether it was your smartphone or your TV having that experience . But yeah , that's kind of the experience we should expect from that .

As it unveiled it there , I think it was 77- inch micro LED display to sort of open CES . But I kind of want to draw everyone's attention to the technology has been in research and development for the past six- plus years . And Advantest has been working with those companies on developing next generation test solutions for that space .

The technology is still expensive , I think , compared to traditional displays , but I do see a lot of potential industry use cases . So , from TechI nsights and from your perspective , how do you see this market and its impact on the semiconductor industry ?

You know , again , it's a progression of display technology providing the users , the consumers , richer experience . I wish I had seen that 77- inch display from Samsung . And, you know, you need to start building your house around the display technology rather than fitting your display into your house .

So it's kind of an interesting way to start to change the world around us . But , yeah , you have a completely different experience as a consumer or user of that display technology . So that's what we will see .

There were pullbacks , a lot of companies announced layoffs , orders were shifted out and

the entire ecosystem sort of slowed down for a bit . So, it's over, 2023 is completed . How did the semiconductor industry end up versus the expectations ?

We did keep our view that it is unavoidable , probably milder , and that certainly was the case . The interesting observations from last year is, that when you think that the business is darkest , that's when we are at the bottom and sure enough, the bottom was second quarter around May and June . A and now in the third quarter things started to turn up .

It did not feel like that , but you know , if you look at the data and how things evolved , you noticed the space in the memory obviously started to see that improvement . But also the logic , especially in the fourth quarter , started to get back to it then .

The interesting observation is there that the power in analog segments didn't follow the downturn but almost like a year behind . Now that you see memory and logic recovery nicely , we actually see power and analog having a slowdown now . So that's kind of interesting how the different segments experience the cycle .

In our expectation , for power and analog , that the cycle is a lot milder and so there were such a shortage of those components in 2021 , 2022 or even still .

Why the acquisition and what could it mean for the industry and what should we be thinking about there ?

Synopsys is what I would call, and this is with the huge respect the classical EDA company providing . And they have recognized the value of simulation . They have definitely invested money on their simulation capabilities . And then Ansys comes from different origins , not the classical EDA , but they built out their capabilities through simulation .

So, there is now a strong EDA and a strong simulation capabilities brought together . I haven't seen and haven't had a chance to really talk to customers and users , but my understanding is that it's really customer-driven that they actually see that .

If these two guys can combine their tools , there's going to a very very nice outcome for the customers So, So that's also driving the acquisition from the background and I think it's listed as a merger . But basically that's the setup .

Maybe it's a bit convoluted , but the way I interpret it, is that it's saying, right now , we're in the throes of AI implementation , with big data , and the companies that embrace and implement AI throughout their ecosystem .

And the ones , of course , that have access to the big data sources, those are the companies that are best positioned to win in this winner-take-all scenario , or winner-take-all game . I guess maybe you could think that acquisition is kind of part of that thinking . Is that the right way to think about this , or should we be thinking about it in a different way ?

simulation capabilities to build into that design . So, you actually start to see how that design is going to turn out in the real world . So big data plays a huge role . It's just that the big data is within the semiconductor world . When we talk about the big data , we talk about Googles and Facebooks , and this is a different application of that big data .

What should we expect for the semiconductor industry in the next year or so ?

Let's assume Lisa Su's forecast of 400 billion becomes true, it will definitely push that one trillion number higher , for sure . Now , Price waterhouse Coopers , whichever ways they came up with that , the analysis of 15 trillion , well , we don't have to worry about the funding of that trillion dollars anymore because the money is there .

So , you got to get both sides to kind of align . That actually describes that . The environment around AI . Lisa Su basically saying , we have to build up the supply here to to reap those benefits, and the numbers get big very quickly . That's the long term . Let's look at the the shorter term , the 2024 and 2025 .

I mean , I presented early January our 2024 and 2025 forecast publicly . We are very positive . You know 16% up on semiconductors this year and after 10% to 25% . When I was presenting , I made comments that I am a little bit concerned on the demand side because at the time we added that demand side .

It was still a little bit cloudy worried, about the inventories . You know once TSMC announced their fourth quarter numbers gave the projections for 2024 , those demand concerns are way gone . We're going to see a classical upturn , for sure, in the in the next couple of years . And then the only question is, what kind of numbers we can truly see .

But but the very healthy two , three years ahead of us right now .

Obviously , with these large numbers like 15 trillion and 400 billion we're seeing now countries positioning and investing at- you know, that they're all vying for their position to compete for what looks to be a very lucrative economic opportunity , and so we have the CHIPS Act here in the US and then other countries

have their own versions of the CHIPS Act . So , considering the challenges around AI governance , reliability , AI security . Are there any geopolitical shifts or anything that you're seeing , and what should we be watching for ?

In case of China , they are limited on access to the most advanced technologies , which creates its own challenges . Then United States is clearly given Nvidia, AMD, US government is taking a very aggressive approach to it . And then Europe is still kind of a little bit , let's say , evaluating and looking what they potentially can do .

They see the opportunity to some other parts of the economies , but for sure AI . And you can look at it from a regional , geopolitical perspective . But equally , one step down , corporations , the competition - they got hyper scalers . The competition is fierce because you may decide really winners and losers on this technology cycle .

You know , look at Amazon , Microsoft , Google , Facebook , Apple how those have to invest and find the best applications and what fits their business . On that geopolitical level you go one step lower . You have that corporate level and the competition is as fierce, if not more fierce than geopolitically .

So, that's an interesting thing to think about at the end of the interview here relative to AI . But very nice to be back . I really enjoyed it .

And don't forget to tune in to our next Advantest Talks Semi episode , where we'll continue to delve into the world of technology and innovation . Thank you for listening .