The latest market update from Future Horizons states that the European semiconductor market is entering a recession and is particularly fragile.

Malcolm Penn, Chairman and CEO of market research firm Future Horizons, stated in the quarterly update of the semiconductor market, "There is a great deal of uncertainty this year."

He predicts that the semiconductor market will grow by 15% in 2024 and 8% in 2025, as the economy begins to decline. "Every warning light is at least flashing amber, if not red," he said.

He said, "Initially, the forecast for 2024 was 16%, but since January, the situation has become very bad. It's a very dramatic turnaround, a turbulent period."

"The situation in Europe is not good. When the market is in a downturn, Europe's industrial and automotive sectors performed well. But the situation is not the same as before. Europe is about a year behind the rest of the world in entering the downturn, and now the automotive and industrial sectors are performing poorly, so we see negative growth there."

Although spending is slowing down, the sharp increase in semiconductor capital expenditures remains a significant concern.

"46.5% of total capital expenditures are flowing into China, which only produces 10% of the units. There are several areas of concern because capital expenditures are being used for more mature technologies, analog, and microcontrollers. The most affected regions are Europe and Japan, not the United States."

"China's investment is focused on 300mm technology, while most countries in the world are focused on 200mm technology. It will be very difficult to compete with the cost structure of 300mm. This may force traditional companies to upgrade, which means they need to build new factories because the ceiling is not high enough to accommodate 300mm equipment. This may lead to more consolidation or more surplus equipment," he said.

It is expected that the economic recession will occur in early 2025 before the recovery of the semiconductor market in Europe.

"The death cross will signal the industry falling into trouble again," he said. "It's unlikely to happen this year, but it's very likely to happen in the first quarter of 2025. We are facing some risks. Optoelectronics and discrete devices are performing poorly, and every electronic product has discrete devices. The microcontroller market is shrinking and experiencing negative growth. The analog market has also experienced 17 months of negative growth, which is a benchmark for the industry."

"It takes six months to control inventory, and it also takes a long time to absorb 20% excess capacity, but we are increasing production capacity, so our excess capacity may continue into full year 2025, or even longer."

He said that although Intel will continue to struggle, Moore's Law will continue to drive the development of the industry.

"Moore's Law has been killed more times than Dracula, but it is not dead, not even sick. Dennard scaling has come to an end, that's for sure, but that was never Moore's Law. We are now building many 3D structures, both vertical and horizontal, and these roadmaps are very secure in the next 10 to 15 years," he said.

"Intel is facing huge challenges," he said. "They are struggling, losing money, laying off employees, which is not a good sign."

When you fall behind, it takes ten years to catch up. My concerns as a semiconductor director are that they can succeed, because they have lost their focus. Technically, if they can hire talent, they should be able to do it, but engineers also hope to work for successful companies facing technical challenges.

But in the chip manufacturing industry, Taiwan Semiconductor and Samsung need fierce competition. "What we need is not just competition between the two companies, which is not good for the industry," he said.

This article is selected from "Semiconductor Industry Observations"; Editor: He Yucheng.