The semiconductor industry is experiencing a significant resurgence, largely driven by the recovery of the memory chip market and the surging demand arising from artificial intelligence (AI) and high-performance computing applicationsAs various sectors flourish, the market outlook for 2024 is becoming increasingly optimistic, and companies closely linked to the production of end products, especially in the packaging and testing segments, have already started to witness substantial growth in their performancesNotably, expectations remain high for the latter half of the year, as conditions are poised to stay buoyant.

NVIDIA has pioneered the development of AI chips, creating a ripple effect throughout its supply chainAdditionally, AMD has outshined competitors with a staggering 100% growth in its data center revenues during the second quarter of the fiscal year

This surge has greatly benefited companies involved in the supply chain, such as Tongfu Microelectronics based in China, which recently reported a robust recovery with an 11.83% increase in revenue and net profits turning positive in the first half of 2024.

The recovery is not exclusive to Tongfu MicroelectronicsTwo further leading packaging and testing firms in China's A-share market, JCET Group and Huatian Technology, also reported impressive year-on-year growth in their first-half performancesWith their focus on capital investment, the three firms raised substantial funds through private placements between 2021 and 2022, aimed at upgrading production lines and expanding capacityAs of mid-2024, these advancements are aligning precisely with the uptick in chip demand spurred by the AI boom.

As shipments of end products improve and inventory pressures dissipate, the semiconductor industry's prospects appear brighter than ever, marking the onset of a new growth phase

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Sales figures are expected to lift, aided by the significant transition towards generative AI-driven applications and innovations in consumer electronicsProducts such as AI smartphones and AI laptops necessitate advanced packaging technologies, while high-value sectors including automotive electronics, high-performance computing, storage, and 5G connectivity are invigorating market growthConsequently, packaging manufacturers are increasingly channeling their efforts towards high-performance packaging techniques, ultimately amplifying the industry's overall value.

The packaging and testing sector—often viewed as a downstream component within the semiconductor supply chain—has recently experienced a pronounced recoveryThis sector's revenue is closely correlated with semiconductor sales volumes, as it ties directly into inventory management for design manufacturers

Research indicates that when inventories rise, design firms might cut orders for packaging services, leading to marked declines in the packaging and testing businesses' revenues; however, when downstream demand improves, these same firms quickly resume orders, thereby driving the entire supply chain towards recovery.

Industry forecasts suggest an optimistic outlook for leading global packaging and testing firms, with Anke Technology projecting stronger seasonal growth in the latter half of the year, particularly within automotive and industrial segmentsAdvanced packaging companies are also expressing heightened confidence, with ASE's second-quarter utilization rates surpassing 60% and expectations to exceed 65% in the third quarter before potentially reaching 70% by the fourth quarterMirroring these sentiments, revenue growth among Taiwanese packaging firms has seen consistent year-over-year improvement over the past seven months, signaling a sustained recovery trend.

Investment firms like Guojin Securities have noted that the revenue fluctuations of major global packaging and testing manufacturers align closely with overall semiconductor sales trends

Seasonal sales patterns highlight peaks in revenue during the first and fourth quarters, with notable dips in the second and third quarters owing to traditional fluctuations in electronic product demandWith downstream demand having rebounded in 2024, A-share analog and digital chip designers reported improved inventory turnover rates in the second quarter, setting the stage for the industry to enter a peak season in the latter half of the yearExpectations remain high that this recovery trend in inventory turnover will persist.

The integration of AI into everyday consumer electronics promises to spur renewed demand for upgradesIn terms of the smartphone market, the second quarter of 2024 saw a remarkable double-digit growth in global shipments, totaling 290 million units, propelled by product innovations and improved market conditionsSeveral industry analysts anticipate that 2024 may very well mark the dawn of AI-driven smartphones, with projected penetration rates reaching 16% globally, and an expected jump to 54% by 2028. Conversely, in the PC market, both desktop and laptop shipments demonstrated a 3.4% year-on-year growth, achieving 62.8 million units in Q2 2024—a trend projected to continue as the sector transitions towards Windows 11 and AI-PC interfaces.

In cloud computing, the rapid evolution of digital high-performance signal processing chip requirements accompanying the rollout of 5G networks and data centers indicates a strengthening market

Current forecasts predicting a 33% increase in the global AI chip market size to reach $71.3 billion in 2024, followed by an anticipated 29% growth to $92 billion by 2025, reveal a bullish sentiment among industry playersMoreover, the market for AI chips in servers is set to scale to $21 billion, showcasing a year-on-year growth of approximately 40% and projected to hit $33 billion by 2028, painting a picture of sustained upward momentum.

On the automotive electronics front, the ongoing shift towards smarter vehicles is underpinned by advancements in autonomous driving, high-performance computing, and power modulesIt is estimated that by the end of 2024, the market for semiconductor products related to autonomous driving and high-performance in-vehicle computing will grow to $25.9 billion, while the automotive power semiconductor sector is expected to reach $16.6 billion

Such robust growth aids manufacturers in solidifying their market positions and seizing new opportunities rapidly.

Within the domestic landscape, JCET Group stands out as the leader in the packaging and testing realm, boasting a 10.27% share in the global outsourced packaging marketIn the first half of 2024, the company reported revenues of 15.49 billion yuan, representing a 27.2% year-on-year increase, with robust growth of 36.9% observed in the second quarter aloneThe firm also demonstrated net profits of 620 million yuan, which is an impressive growth of 25% compared to the previous year's figuresAn overview of their financial performance indicates substantial positive growth across many sectors, with communication electronics, consumer electronics, computation electronics, industrial and medical electronics, and automotive electronics showing particularly strong momentum.

Tongfu Microelectronics, positioned second in the sector, showcased similar trends, achieving 11.83% revenue growth year-on-year in the first half of 2024, with net profits transforming from losses to peering into the positive spectrum

Notably, the company’s profit recovery mirrors its past peak performance, illustrating just how significant this rebound has been.

Huatian Technology also posted impressive results in the market—recording revenues of 6.718 billion yuan and net profits significantly surging by over 250% in the first half of 2024. Their second-quarter performance reflected a remarkable rebound as well, contributing substantially to the conviction that the semiconductor landscape in China, especially packaging and testing, is on an upward trajectory.

Driving further industry upgrades are advancements in packaging technologies, particularly in AI chips and memory chips, evidenced by sizeable investments from industry giants such as TSMC and IntelThis escalates potential opportunities and challenges for semiconductor packaging enterprises, indicating a competitive landscape that must rapidly adapt to evolving market demands.

Domestically, leading firms like JCET, Tongfu Microelectronics, and Huatian Technology have aggressively pursued funding for technological upgrades over the past couple of years, raising significant capital to enhance production capabilities

This proactive approach positions them well to leverage the escalating market requirements driven by advanced packaging needsFor instance, JCET has maintained a stable sales expenses rate while incrementally raising its R&D expenses, showcasing deliberate investments in innovation.

These firms are also diversifying their offerings; with the introduction of advanced packaging products like the XDFOI® Chiplet series that emphasize density and heterogeneous integration, JCET remains at the forefront of technology innovation, pushing the envelope in semiconductor storage solutions, while also improving power density and thermal management efficiency.

As demand for advanced packaging capabilities surges due to the growth of AI chips, capacity constraints are emerging as a significant hurdle for timely shipments

Major players like TSMC, ASE, and Anke Technology are increasingly vocal about tight advanced packaging capacities, while simultaneously witnessing a remarkable influx of orders.

Ultimately, as the automotive electronics industry undergoes a transformation, firms like JCET have initiated developing high-production plants specifically for automotive-grade chips in strategic locales, establishing an advanced packaging base in the Shanghai Lin-gang Special AreaWith similar momentum, Huatian is realizing enhanced production scales across automotive electronics, driving proactive projects that fulfill high-volume requirements while embarking on paths of innovation and reliability.

The current landscape reflects an industry recognizing and capitalizing on promising shifts, cementing its resolve to adjust to rapid technological advancements, embracing change as a means to foster growth and drive the future of semiconductor technology forward.