Chips of progress

Semiconductors are among a handful of industries that look ripe for long-term investment amid shifting trade patterns and growing geopolitical challenges. With governments the world over racing to build necessary infrastructure to capitalize on rapidly growing demand in an increasingly digitalized world, the industry is projected to clock a compound annual growth rate (CAGR) of ~8.1% over 2024-2030.

Several factors support growth of the industry. These include:

• Strong fundamentals
  
  The global chip market is going through a major shift, driven by long-term demand, shifting deal trends and growing geopolitical challenges. Global demand for chip sales, which grew at 6.8% CAGR over 2001-2024 to $627.6 billion, is projected to grow at an accelerated 8.1% CAGR through 2030, as per McKinsey & Company. Rising demand from artificial intelligence (AI), internet of things (IoT), electric vehicles (EVs) and 5G segments ensures continued momentum. The  large-scale demand can be gauged from continuing strong numbers of publicly listed chip companies. Also, valuation multiples have stabilized after peaking in 2020. Hence, there is room for further upside, based on consensus estimates.
  
  
• Smaller deals gaining traction in private markets
  
  With larger mergers and acquisitions (M&A) facing regulatory scrutiny, corporate interest is shifting to smaller, more manageable deals, thereby offering exit opportunities for private equity (PE) and venture capital (VC). Segments such as automotive and industrial chips, which have more predictable revenue and less speculative research and development (R&D), are attracting more attention from PE firms of late.