An interview with Jean-Christophe Eloy, President & Founder, Yole Group – Written by Junko Yoshida for Ojo & Yoshida Report.
What’s at stake?
The headlines of 2023 have heralded the march of generative AI, geopolitical tussles over trade and technology and a bubble of government funding to private companies for local chip production. As a result, the semiconductor industry has more political power, economic force and self-importance than ever before. The question in 2024 is how responsibly and effectively chip suppliers will end up flexing all this muscle.
Unquestionably, the chip industry has become a star on the political and economic stages, as the Wall Street Journal aptly noted. The trend will continue in 2024, potentially altering the whos, hows and whats of the semiconductor landscape.
While technological progress has created a fiercely competitive market among leading chip suppliers, 2023 also solidified the semiconductor market around single winners – with no comparable rivals – in the critical areas of lithography (ASML) and foundries (TSMC). That gap between champions and also-rans could eventually recoil on the chip sector, with the industry’s strength limited by the weakest link in the supply chain.
The Ojo-Yoshida Report sat down with Jean-Christophe Eloy, president and CEO of Yole Group (Lyon, France), to hear his assessment of 2023. He told us what stood out (events, companies, technology and business/market trends), what concerns him most (boobytraps awaiting the chip industry), and big shifts he sees in China’s semiconductor plans (and their impact on the West).
Massive investment plans in chip manufacturing
First, said Eloy, the tone of the semiconductor industry globally in 2023 was “incredible investment – or forecast investments – in semiconductor manufacturing capabilities. You’ve never had so many companies investing in production.”
Although some plans have been postponed because the market is not moving fast enough, the delivery of investment for the next five years is incredible.
Automotive as a platform of innovation
Equally significant, Eloy pointed out, “Automotive is becoming more and more a platform of innovation.”
Long past are days when carmakers, oblivious to what’s inside, just ordered vehicle functions in a series of boxes from Tier Ones.
Car OEMs today are homing in on the semiconductor industry.
Remember when the rise of PCs and smartphones reconfigured the semiconductor market? Similarly, new vehicle architectures that demand fewer ECUs, more processing power with less power drain — aimed at extending the range of EVs — have pressured semiconductor suppliers to re-think technology choices and chip development priorities. Meanwhile, they have to plot a new partnership with automakers.
Watch out as automakers demand chiplets, powerful processors and much more efficient power management schemes for EVs.
Drop in chip sales in 2023
Not everything was rosy in the semiconductor market. In 2023, sales of mobile phones continued to drop, said Eloy. A decline in the semiconductor business as much as roughly 20 percent is anticipated for 2023, he added. He believes the cause is a decline in the memory price.
Eloy, nonetheless, expects the slipping demand for mobile phones to bottom out. “Sooner or later, people have to replace their phones.”
As for the 2024 outlook of the semiconductor market, he sees demand going “back to normal.” Noting that overall unit sales are steady, he expects no change in system companies’ appetite for chips.
Eloy said the decreased chip price in 2023 resulted from course corrections by suppliers. He estimated that chip companies boosted prices for some products as much as 30 percent during the pandemic, seeking more revenue from fewer customers… Full written interview
Global Semiconductor Industry: What Changed in 2023