Shares of semiconductor manufacturer Nvidia (NVDA -0.98%) -- a supplier of chips for video gaming, cryptocurrency mining, artificial intelligence, and other markets -- had jumped a solid 3.3% in Wednesday trading after CNBC reported last night that Goldman Sachs is bullish on U.S. semiconductor stocks.
More than just one analyst's opinion, however, this is a story with some data behind it.
Tech market intelligence source International Data Corporation has just released its forecast for the semiconductor industry over the next two years. And according to this report, chip sales that grew 11% last year and 17% this year aren't likely to slow down anytime soon.
Mobile phones, notebooks, servers, automotive, smart-home devices, gaming, wearables, and Wi-Fi access are all growth markets for semiconductors, IDC says. And that will continue to drive chipmakers' revenue higher in 2022. Semiconductor sales tied to 5G communications in particular are expected to explode higher: as much as 128% IDC says. But other sectors won't be slouches, either. The report predicts these surges for chip sales in the following markets:
- Mobile phones, 28.5%.
- Game consoles, 34%.
- Automotive applications, 22.8%;
- Wearables, 21%.
- Smart-home devices, 20%.
- Laptops, 11.8%.
But what about the semiconductor shortage? Well, there's good news and better news on that front.
The good news (for buyers) is that the chip shortage is nearing an end. IDC predicts that shortages will continue easing through the fourth quarter of 2021, and "the industry will see normalization and balance by the middle of 2022, with a potential for overcapacity in 2023 as larger scale capacity expansions begin to come on line toward the end of 2022."
Granted, overcapacity sounds like bad news to investors familiar with how cyclical industries work. But even here, IDC predicts that "unit volume growth in many of the markets ... will also continue to drive very good growth for the semiconductor market." Basically, even if pricing power declines, IDC thinks that chip companies like Nvidia should be able to make it up on volume (as the saying goes), and continue to produce good growth.
Ultimately, by 2025, IDC sees the global semiconductor industry having $600 billion in annual sales, a compound annual growth rate of 5.3% from today.