AI-Driven Demand Propels Semiconductor Revenues Amid Sectoral Challenges

The semiconductor industry experienced a remarkable surge in 2024, with annual revenues climbing approximately 25% to reach $683 billion. This growth was predominantly fueled by escalating demand for artificial intelligence applications, particularly high-bandwidth memory used in AI graphics processing units . The memory segment, buoyed by HBM, saw a 74% year-over-year increase, significantly contributing to the industry’s overall rebound from a challenging 2023.

SK hynix reported record-breaking figures in the third quarter of 2024, with revenues of ₩17.5731 trillion and an operating profit of ₩7.03 trillion. The company attributed this performance to robust demand for AI memory, especially HBM, which saw sales increase by over 70% from the previous quarter and more than 330% compared to the same period last year. SK hynix anticipates that HBM will constitute more than 40% of its total DRAM revenue in the fourth quarter.

Similarly, Micron Technology experienced strong demand in its AI data-center segment, particularly for HBM products. However, the company faced headwinds due to weak consumer demand in other areas, such as personal computers and smartphones. Micron projected second-quarter revenue of $7.90 billion, falling short of analysts’ estimates of $8.98 billion. This shortfall was largely attributed to a supply glut and diminished demand in the broader market, despite the growth in AI-related products.

Conversely, Samsung Electronics faced challenges in the AI sector, issuing a public apology after underperforming and acknowledging a “crisis” following disappointing third-quarter profit guidance. The company’s preliminary operating profit was reported at ₩9.1 trillion, down almost 13% from the previous quarter. Samsung’s leadership expressed regret over lagging performance compared to rivals like SK hynix and Micron Technology, citing intensified competition in AI and high-end smartphones.

The industrial semiconductor segment faced a second consecutive year of decline in 2024, posing challenges for companies focused on this sector. Additionally, the automotive semiconductor market, after nearly doubling in size from 2020 to 2023, experienced a revenue contraction in 2024 due to weakening demand, disrupting its previously steady upward trajectory.

Market analysts project continued growth in the semiconductor industry, driven by AI and memory demand. The DRAM market is expected to reach $90.7 billion in 2024, a 75% increase compared to 2023, with further growth anticipated in 2025. HBM, in particular, is forecasted to play a significant role, contributing 5% of DRAM bit shipments and 20% of revenue in 2024. Despite these positive projections, the industry remains susceptible to volatility due to the cyclical nature of supply and demand dynamics.