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Automotive Semiconductor Market Growth in 2024

Growth and Prospects of the Automotive Semiconductor Market in 2024

The automotive semiconductor industry has shown robust growth since 2021, recovering from pandemic-related disruptions. According to estimates from Semiconductor Intelligence, the automotive semiconductor market reached $67 billion in 2023, an increase of 12% from 2022. The top twelve suppliers accounted for over three-quarters of the market, with Infineon Technologies being the largest automotive semiconductor supplier at $9.2 billion, representing 13.7% of the market. NXP Semiconductors was second with 11.2%, and STMicroelectronics was third with 10.6%. Together, these three companies make up over one-third of the market. For most of these companies, the automotive sector constitutes a significant part of their total revenues, with percentages ranging from 34% to 56%.

Market Share and Growth Trends

The automotive semiconductor market has experienced strong growth since 2021, but signs of a slowdown are emerging. The quarterly automotive semiconductor revenue of the top three suppliers reflects this trend. Infineon reported strong growth through 2022 and early 2023, peaking in Q2 2023 and declining since then. However, Infineon’s automotive revenue guidance for Q2 2024 projects a 5% quarter-to-quarter growth. NXP saw quarter-to-quarter revenue growth through Q4 2023 but reported a 5% decline in Q1 2024, citing continued inventory reductions and a soft overall automotive market in the first half of 2024. STMicroelectronics had strong quarter-to-quarter revenue growth in 2022 and 2023, averaging 7%, but this growth ended in Q1 2024 when ST reported a 23% decline in automotive revenue, citing a “deceleration phase.”

Vehicle Production and Semiconductor Content

Motor vehicle production in 2023 was 93.5 million units, according to the International Organization of Motor Vehicle Manufacturers (OICA), a 10% increase from 2022. This was the strongest production growth since the 26% increase in 2010 during the recovery from the Great Recession of 2008-2009. The 93.5 million vehicles in 2023 were still below the all-time high of 97.3 million vehicles in 2017. The industry experienced moderate declines in 2018 and 2019 before dropping 15.4% in 2020 due to pandemic-related shutdowns. It appears much of the pent-up demand for automobiles has been satisfied. S&P Global Mobility’s April 2024 forecast is for light vehicle production growth in the 0% to 2% range over the next three years.

Despite the slowdown in vehicle production growth, the automotive semiconductor market growth is driven by increasing semiconductor content per vehicle. Two key drivers of this increase are electric vehicles (EVs) and driver-assist systems. EVs, which include battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), have a higher semiconductor content than other vehicles and thus drive automotive semiconductor market growth. EVs have grown rapidly in recent years. Autovista24 estimates EV sales grew 54% in 2022 and 35% in 2023. However, growth is expected to moderate to the 17% to 22% range over the next six years.

Driver-Assist Systems and Autonomous Driving

Driver-assist systems have also been a key driver of semiconductor content. The ultimate goal of driver-assist systems is self-driving cars, or fully autonomous driving. However, self-driving cars are several years away from being commonplace. McKinsey & Company has estimated that by 2030, 12% of passenger vehicles sold will have fully autonomous driving technology installed (level 4 technology). By 2035, it could be 37%. S&P Global Mobility is more pessimistic, predicting only 6% of light vehicles sold in 2035 will have level 4 autonomous driving installed. Thus, the impact of self-driving cars on the semiconductor market is not likely to be of major significance in the next few years.

The overall semiconductor market has been weak in the last two years after strong pandemic recovery growth of 26% in 2021. According to WSTS, the semiconductor market grew only 3.3% in 2022 and declined 8.2% in 2023. WSTS’ May 2024 forecast was for strong growth of 16.0% in 2024 and 12.5% in 2025. As we stated in our March 2023 newsletter, automotive has been the lone bright spot in the semiconductor market in the last two years. IDC estimated the automotive semiconductor market grew 17% in 2022 and 10% in 2023. IDC’s May 2024 forecast called for automotive semiconductor market growth to slow to the 5% to 7% range over the next three years.

Future of the Automotive Semiconductor Market

The combination of slowing production of light vehicles, slower growth of EVs, and delayed deployment of autonomous-driving vehicles will reduce the growth rate of the automotive semiconductor market. The semiconductor industry can no longer count on the automotive sector as a major driver in the next couple of years. However, other sectors are expected to drive growth. Artificial intelligence (AI) is growing rapidly, spurring growth in the computer sector. The memory market has recovered from weak demand and overcapacity. The smartphone market has turned positive in 2024 after declines in 2022 and 2023. Yet the major automotive semiconductor companies are heavily dependent on the automotive sector for the majority of their revenues.