AI will remain a growth driver for the semiconductor industry in 2025, but US policy may bring surprises

In 2025, as in the past, AI will continue to drive the growth of the semiconductor industry, driving already high demand for chip production. However, with Donald Trump’s return to the US presidency, there will be potential market uncertainty as his administration’s policies may lead to inflation and economic cooling, coinciding with a projected downturn in the semiconductor market cycle, they warn. in DIGITIMES Research.

According to World Semiconductor Trade Statistics (WSTS), the global semiconductor market grew at an annualized rate of 19% in 2024 and could grow by 11.2% in 2025. AI remains a key driver of this growth. Meanwhile, the AI-related logic and memory chip sectors are forecast to post double-digit percentage growth, while other semiconductor segments are expected to see more modest single-digit growth.

AI servers are expected to post double-digit growth, while the smartphone and laptop segments are expected to see single-digit growth. The increasing popularity of generative AI will drive growth in the technology sector and strengthen the dynamics of the semiconductor industry. Industry leaders including TSMC and NVIDIA stand to benefit greatly from this trend as they are leading manufacturers of AI accelerators.

Semiconductor market growth forecast for 2023–2025 (%) (Image source: DIGITIMES)

Analysts at DIGITIMES Research noted that the cyclical patterns of the semiconductor industry remain evident in 2025. The industry’s previous expansion, from mid-2019 to mid-2021, lasted about 25 months, driven by increased demand for consumer electronics and PCs during the COVID-19 pandemic and companies’ efforts to replenish inventories.

The current recovery phase, which began in Q2 2023, is characterized by year-on-year growth in global semiconductor sales, driven by rising demand for AI computing fueled by the use of generative AI, as well as increased demand for memory chips and electronics, including smartphones and PC.

According to DIGITIMES Research, the demand for AI servers continues to grow, and the segment of AI chips for training and inference in the cloud is experiencing rapid growth. At the same time, AI workloads are making their way to the edge, fueling demand for consumer electronics such as smartphones and PCs.

Cyclical fluctuations of the semiconductor market in 2021–2024. (%)

TSMC is the main beneficiary of the growing demand for AI chips. Leading AI chip manufacturers NVIDIA, AMD, Qualcomm and MediaTek are projected to maintain strong growth in production of AI training accelerators and mobile SoC products this year.

Analysts noted that ongoing tensions between the United States and China create geopolitical risks that add uncertainty to the cyclical development model of the semiconductor industry. US sanctions have strengthened China’s desire to achieve self-sufficiency. However, over the past two to three years, global brands have significantly expanded lithography capacity in China, reaching a peak.

As DIGITIMES Research expects, the import substitution trend will continue in China in 2025. If anything, Chinese electronics makers are increasingly using locally produced components in an effort to minimize the impact of potential trade conflicts. It is noted that European vendors such as STMicroelectronics, NXP and Infineon are showing growing interest in wafer manufacturing at Chinese factories, which benefits key market players, including SMIC and Shanghai Huahong Group. All this will lead in 2025 to deepening the localization of semiconductor production in China.