Taiwan-based IC design houses are optimistic about demand from a new surge of PC replacements anticipated for 2024, driven by replacements for PCs bought during the pandemic and Microsoft's platform upgrade.
Prospects for the second half of 2023 are bleak, with practically all applications showing no clear growth momentum, according to IC design houses. Not only is end demand for consumer applications unclear but pull-in momentum typically seen during the peak season has been eroded, mainly due to factors such as customers being conservative and excessive inventory replenishment efforts in the second quarter.
Non-consumer applications are also flat. Applications such as automotive, network, and AI, have yet to see demand match market expectations. As such, most industry players do not expect growth to return until 2024.
Industry players are most looking forward to the wave of PC replacements in 2024, also being referred to as a PC upgrade wave. It has been around three years since the large wave of PC purchases during the pandemic, which is considered the normal replacement cycle.
Additionally, Microsoft's upcoming forced Windows platform update is expected to be an important driver for replacements next year. Windows 10, which currently dominates the mainstream market, completed its final update in June. Microsoft will end support for Windows 10 on October 14, 2025.
What this means for PCs is that prior to the fourth quarter of 2025 brands will launch new PCs with improved specs in response to the platform upgrade to stimulate replacement purchases, which is good news for IC demand.
IC design houses are still not quite sure when exactly this PC replacement wave will start, but most believe customers will begin pull-ins in 2024, otherwise, they may not be able to keep up with Microsoft's upgrade schedule.
Based on the existing on-hand projects IC design houses currently have, the number of new PCs that will launch during the second-half peak season of 2024 will far outnumber that of the same period this year—there will also be a clear growth in specifications, which is highly related to the edge AI and AI PC trends.
Taiwanese IC design houses admitted that most AI functions are more closely related to processor platforms and memory. Peripheral ICs, which Taiwanese companies specialize in, are not the main beneficiaries of AI, according to Taiwanese IC designers, but all customers are looking to improve user experiences by adding AI-related functions to help increase the overall attractiveness of PCs.
This wave of replacements is not only expected to drive demand recovery of consumer PC products but more importantly commercial products. After the outbreak of the pandemic, commercial products played a major role in IC design companies' operations; however, demand has been sluggish for the last year, due to growing market saturation and enterprise customers reducing purchases because of economic factors.
If the commercial market is able to recover with this next wave of replacements, IC design houses will see a significant injection. Especially with Microsoft's focus on AI, including its Copilot AI application, which is aimed at fulfilling commercial needs, the growth potential is worth looking forward to.
Still, the biggest variable is the economic environment. Even though inventory corrections are coming to an end and the market is entering its traditional peak season, if the economic environment remains poor, demand momentum during the peak season will be limited. Whether or not the global economy can recover and return to a more "normal" state in 2024 is still too far away and unknown for IC design houses to predict. For now, all they can do is prepare and hold on to the hope that the wave of PC replacements will come as expected.
Article translated by Eifeh Strom
