As the semiconductor industry moves into the last month of 2024, industry pundits are looking back and then looking forward to seeing what they missed in 2024 and preparing their assumptions for 2025. This post looks at what they are predicting to bring you the 3D InCites Semiconductor Industry Forecast.
In 2024, one of the consensus assumptions was that the second half would be strong, growing the industry out of the 2023 doldrums. AI PCs and mobile phones were expected to be key drivers, and the automotive market was expected to see continued growth. According to Trend Force, the PC and mobile demand didn’t materialize. To confirm that, all you have to do in the U.S. is to look at the 0% financing for automobiles; and in Europe, the news of VW possibly shuttering plants to see that the automotive industry is in a slump.
Artificial intelligence (AI) was the bright spot for 2024, with the insatiable demand for accelerator chips and the associated high bandwidth memory (HBM) nearly doubling 2024 revenue for Micron, SK Hynix, Samsung, and Nvidia. From a chip manufacturing perspective, TSMC looks like it will grow by about 30% in 2024 on the strength of AI, networking, leading-edge manufacturing, and advanced packaging. On the packaging side, ASE will see single-digit growth in 2024, reflecting the growth of the larger market.
The one other bright spot on the fabless side is Qualcomm, where growth is up 10% year over year associated with new phones and AI PC launches. Where the industry stumbled was in the automotive industrial space, growth for that sector is negative for 2024. Inventory at customers and distributors resulting from significant double ordering has caused that segment to go from undersupply to an oversupply hangover that looks to last through 2025. The WSTS spring forecast for the 2024 chip industry was 16% growth year over year. The fall forecast came in at 19%, $626.87 billion beating their spring estimates of $611.23 billion, mostly on the strength of AI.
Semiconductor Equipment Forecast
The semiconductor equipment side looks like it will wind up with 8% to 10% growth in 2024, depending upon the strength of Q4. Logic and foundry were the key drivers, with a bit of DRAM thrown into the mix as HBM manufacturing required additional process equipment. Packaging equipment sales helped drive the market as the advanced packaging needed for HBM and CoWoS grew substantially.
China sales may have kept the equipment industry afloat in 2024 as the percentage of sales to China ranged from the mid 30% to the high 40% for the major semiconductor equipment manufacturers. Depending on how sanctions on China play out, most equipment companies are looking at China revenues to drop into the 20-30% range for 2025. SEMI had forecast $109 billion for 2024 and the market could reach slightly above $115 billion in 2024 on the strength of China, and advanced packaging growth.
2025 has the potential to be a bit more convoluted. Capex for AI is expected to exceed 2024’s number, which should be close to $250 billion. However, the new U.S. government administration has promised to increase tariffs on chips not manufactured in the United States. This will have an impact on Nvidia, Apple, AMD, and possibly even Intel, raising the cost of chips. The question is, will this slow down the semiconductor industry as companies slow purchases of chips, which have become more expensive or will they continue to drive forward with the 100k chip server farms?
The former chairman of TSMC, Mark Liu, has downplayed the potential impact of tariffs on Taiwan, stating, “Taiwan primarily produces intermediate goods, so the effect will be minimal. “Addressing concerns about shifts in Taiwan’s semiconductor industry under (President-elect) Trump’s trade policies, Liu added, “There won’t be significant changes.”
TrendForce is expecting laptop sales to grow by 4.9% in 2025. The growth will not be driven specifically by AI PCs, but by the need for businesses to update due to Windows 10 end of life to help improve security. As a result, AI PCs get to come along for the upgrade.
There is the familiar ring of the expectation that non-AI applications will start to pick up in the second half of 2025. If this happens, it will be good news for Intel, Samsung, and the equipment companies, who are all waiting for demand to improve. This means fabs will be completed and equipment will be installed. However, the companies that supply chips to the automotive and industrial sectors are taking a more pragmatic outlook and are forecasting a flat to slightly lower growth year in 2025, and as a result lower capex. The fall forecast of the WSTS reflects this view, with an 11.2% growth forecast for 2025 driven primarily by advanced logic and memory.
On the equipment side, ASML, which is one of the few companies with longer-term visibility, is projecting 21% growth for lithography. After a subdued 2024 for ASML due to pushouts, the company is expecting its customers to start filling fabs. Follow-on businesses such as track, etch, and CVD may not see as strong growth, but there is certainly upside potential.
SEMI’s SEMICON West forecast projects 17% growth for 2025. This feels a bit strong, especially since the chip forecast was downgraded slightly for 2025. SEMI will be rolling out its latest equipment forecast at SEMICON Japan, which will coincide with the publication of this article, but I would expect a number in the low teens. The drivers will be advanced packaging, advanced logic, and memory driven by AI.
While 2024 has been a split year from an industry perspective, with AI and China dominating revenues, 2025 will likely be a year that has a bit more balance. AI will continue to dominate, and equipment sales to China will decline. Advanced packaging and advanced logic will be key drivers with support from HBM. DDR DRAM and NAND flash will see some benefit from the PC refresh. Power, automotive, and industrial are looking like they will see growth in the second half as inventories are corrected. Here is to hoping 2025 brings that balanced growth.
