McKinsey: Give semiconductors a decade to build a trillion-dollar industry

According to research by McKinsey, the global semiconductor industry will grow rapidly in the next decade and is expected to develop into a trillion-dollar industry by 2030.

The semiconductor industry, responsible for making vital components for the technology we rely on, made headlines last year, and those headlines weren’t all good news. Supply shortages have caused bottlenecks in production from cars to computers, and underscored the critical role tiny chips play in the smooth functioning of the global economy. In many areas, our world is “built” on semiconductors.As demand for chips continues to rise over the next decade, semiconductor manufacturing and design companies will benefit from an in-depth analysis of where the market is headed and the factors driving long-term demand.

As the impact of digitalization on life and business accelerates, the semiconductor market is booming, with sales increasing by more than 20% in 2021 to approximately $600 billion. McKinsey’s analysis based on a range of macroeconomic assumptions suggests that the industry could grow by 6% to 8% annually through 2030.

What is the result?Assuming an average price increase of about 2% per year and a return to balance between supply and demand from the current volatility, a trillion-dollar industry will be formed in ten years.

With megatrends including telecommuting, advances in artificial intelligence and soaring demand for electric vehicles, it’s time for manufacturers and designers to assess to make sure they’re in the best position to reap the rewards.

Drilling down into individual market segments, roughly 70% of the growth is expected to be driven by three industries: automotive, computing and data storage, and wireless communications.

The strongest growth area is likely to be in automotive, where demand will triple, driven by applications such as autonomous driving and electric vehicles. In 2021, the automotive industry will only account for 8% of semiconductor demand, and a decade from now, that number will rise to 13% to 15%. On this basis, industry expansion in the field over the next few years will rise to as much as 20%.

The analysis shows that the computing and data storage market will grow by 4% to 6%, likely driven by demand for servers that support applications such as artificial intelligence and cloud computing. Meanwhile, in wireless communications, as emerging markets transition from low-end to mid-market, smartphones account for the largest share of industry expansion, supported by 5G growth.