The global semiconductor market is set to be dominated by artificial intelligence (AI) in 2025, with surging demand from data centers offsetting sluggishness in other key sectors like electric vehicles and smartphones.
A Nikkei survey of 11 analysts revealed widespread bullish sentiment for AI chips, particularly graphics processing units (GPUs) and high-bandwidth memory (HBM). “The high level of AI data center investment by U.S. tech giants will drive the market,” said Yasuhiko Takeno, president of research company Global Net. Microsoft, for example, plans to invest $80 billion in AI data centers.
This AI-fueled growth is expected to boost the overall semiconductor market by 11% to $697.1 billion in 2025, according to World Semiconductor Trade Statistics.
However, the picture is less rosy for other sectors.
- EV Slowdown: Sluggish EV sales in Europe and the U.S. are impacting demand for automotive semiconductors. Several chipmakers, including Renesas Electronics and STMicroelectronics, have adjusted their production plans and revenue targets accordingly.
- Smartphone Stagnation: The smartphone market, a major consumer of semiconductors, is experiencing a slowdown. While demand for devices with AI capabilities, such as those from Apple, is expected to grow, overall recovery is anticipated to be short-lived.
- Oversupply Concerns: A surge in global semiconductor production capacity, driven by government incentives and geopolitical factors, could lead to oversupply in the latter half of the year.
China’s rapid advancement in semiconductor manufacturing poses a significant challenge. Driven by geopolitical tensions and a desire for self-sufficiency, Chinese companies are making strides in memory and other key areas. “Chinese companies are catching up technologically in memory and other areas,” said Takeru Hanaya of SMBC Nikko Securities.