With billions of these electronics in everyday use, they’ve become almost unavoidable at this point.
You could make a strong argument that semiconductors are one of the more underrated parts of modern technology. They’re unsung heroes if you ask me.
From the smartphone or computer you’re reading this on to the seemingly endless cars on the road to the millions of video game consoles, semiconductors are in virtually every new-age electronic device. You can think of them as the brain or backbone for these electronics.
Although semiconductors may be everywhere, one particular market drives most of their sales: smartphones.
Image source: Statista.
So, why are smartphones leading the way?
Smartphones and other communication devices account for most semiconductor sales because of their volume. It’s rare nowadays to see someone using a non-smartphone cellphone, and all those devices contain semiconductors. In 2023 alone, over one billion smartphones were shipped globally, and around 70% of the world’s population used smartphones.
This reliance on smartphones is a gift and a curse for semiconductor companies. On the one hand, the smartphone market will continue to be broad and serve billions of people. On the other hand, it’s also known to be cyclical. Take the past two years, for example, when smartphone sales slumped globally. This had a painful effect on many semiconductor companies’ revenue.
Some of the world’s top semiconductor companies, such as Taiwan Semiconductor Manufacturing Company, Intel (INTC -26.06%), and Qualcomm, saw revenue drops from mid-2022 through mid-2023, largely due to the slowdown in smartphone sales.
In the near term, artificial intelligence-related demand should help relieve some of the pressure on smartphones regarding semiconductor sales. However, the long-term effects of that remain to be seen, and smartphones will continue to be a core part of semiconductor companies’ business.
Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Qualcomm and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
