WSTS reports that the global semiconductor market size in the fourth quarter of 2024 is $170.9 billion, up 17% from the same period last year and up 3% from the third quarter of 2024. The full-year market size in 2024 is $628 billion, up 19.1% from 2023.

Semiconductor Intelligence gives out virtual awards for the most accurate semiconductor market forecasts of the year. The criteria for selection are public forecasts published in October of the previous year and WSTS January forecasts published in early March. For 2024, we have a tie. IDC in November 2023 forecasted a 20.2% growth rate for 2024. Our Semiconductor Intelligence forecast in February 2024 was 18.0%. Therefore, the final growth rate of 19.1% for 2024 falls somewhere in between. Other forecasts made during this period ranged from 5% to 16%.

The Q4 2024 revenue reports of 16 major semiconductor companies vary widely. Nine companies reported an increase in revenues in Q4 2024 compared to Q3 2024. Three companies (SK Hynix, Qualcomm, and AMD) reported double-digit growth. Seven companies reported a decline in revenue, with Infineon Technologies and Renesas Electronics reporting double-digit declines.

Companies providing guidance for Q1 2025 revenue mostly expect a decline from Q4 2024. MediaTek, Infineon, ADI, and Renesas expect growth in the low to mid-single digits. The other eight companies providing guidance expect revenue declines, ranging from negative 2.4% for Texas Instruments to negative 27% for Kioxia. Factors contributing to the revenue decline include seasonality, excess inventory, weak demand, reduced production, and economic uncertainty. The weighted average revenue change for Q1 2025 versus Q4 2024 for the twelve companies providing guidance is a decline of 9%. Over the past decade, the semiconductor market has declined nine times in the first quarter versus the fourth quarter, with declines ranging from negative 14.7% to negative 0.5% and an average of negative 5%. The only Q1 growth during this period was a 3.8% increase in Q1 2021 during the recovery from the 2020 pandemic. Therefore, the revenue expectations for Q1 2025 appear to be worse than the typical seasonal scenario.

Given the expected slow start to the year, what is the outlook for the full-year semiconductor market in 2025? Forecasts published in the past three months range from 7.0% from our Semiconductor Intelligence to 15% from IDC and Future Horizons. Our 7% forecast is an outlier, with other forecasts ranging from 11% to 15%.

As shown in our December 2024 newsletter, AI servers drive most of the semiconductor market growth in 2024. They should remain strong in 2025, but at a significantly lower rate.

Key market drivers such as smartphones, PCs, automotive, and industrial remain weak.

The global economy is uncertain in 2025, with the United States threatening to increase import tariffs and other countries promising retaliatory tariffs. Higher tariffs will increase consumer costs, potentially leading to lower demand and/or higher inflation.

Forecast for wafer foundry

The semiconductor foundry industry is forecast to grow 20% in 2025, according to market research firm Counterpoint Research. This is driven primarily by TSMC and smaller rivals riding the AI wave.

This growth forecast will slow slightly compared to 2024. The semiconductor foundry industry is expected to grow 22% in 2024, shaking off a slump in 2023, according to Counterpoint.

The expansion of artificial intelligence in data centers and edge computing is driving demand for semiconductor chips using cutting-edge nodes. TSMC has seized this opportunity by combining its 5/4nm and 3nm chips with advanced packaging technologies such as its self-developed "CoWoS (chip on wafer substrate)".

Counterpoint analyst Adam Chang said: "We forecast that overall foundry capacity utilization will reach about 80% by 2025, and the utilization of cutting-edge nodes is expected to remain above mature nodes. As China strives to strengthen its domestic semiconductor manufacturing industry, we see greater demand for mature node foundries in China than in other countries."

Zhang said that TSMC's most advanced nodes (5/4nm and 3nm) are expected to operate at more than 90% in 2025. This is due to continued demand for high-end smartphones and orders from hyperscalers such as Amazon and Microsoft. TSMC predicted in its quarterly earnings report released in January that its sales will grow 26% by 2025.

"In the semiconductor industry, utilization is a key indicator of profitability. The recovery of mature nodes (defined as 28/22nm and earlier) has been relatively slow due to overall weak end-user demand in sectors such as consumer electronics, communication equipment, automotive and industrial," Zhang said.

"Foundries with strong SOI (silicon-on-insulator) production capabilities, such as GlobalFoundries, Tower Semiconductor and TSMC, can benefit from the expanding silicon photonics market, which is smaller than mainstream semiconductor demand. Given its strengths in leading-edge nodes and advanced packaging, TSMC is likely to remain a key beneficiary of cloud AI demand," Zhang said.

"Co-packaged optics (CPO) is another key technology to watch, which has the potential to become a major driver of silicon photonics in hyperscale data centers," Zhang added. "The adoption of CPO is still in its early stages; both TSMC executives and NVIDIA CEO Jensen Huang have said that widespread adoption of CPO is still years away, with a significant contribution to revenue expected starting in 2026-2027."

TSMC isn't the only foundry focusing on advanced packaging.

Intel has also made progress, especially its 2.nD packaging technology "EMIB (Embedded Multi-die Interconnect Bridge)" and 3D packaging technology "Foveros". Foveros is mainly used in Intel products based on chip architecture, such as Meteor Lake.

Zhang said: "Given the increasing complexity of semiconductor design, Intel expects to continue to invest in advanced packaging R&D to support its own product roadmap and attract external customers."

According to Counterpoint's forecast, inventory adjustments in automotive semiconductors are expected to continue in the first half of 2025, slowing the recovery. High inventory levels of global vertically integrated equipment manufacturers such as Infineon Technologies and NXP Semiconductors may lead to reduced orders from mature node foundries, further reducing the utilization of mature nodes.

"While trends such as electric vehicles and advanced driver assistance systems have indeed driven an increase in the number of semiconductors per vehicle, the automotive semiconductor market is currently undergoing a correction. The automotive market has been struggling for several quarters, and rising interest rates have further weakened demand, especially because the automotive market is an industry sensitive to macroeconomic conditions," Zhang said.

According to Counterpoint, the foundry industry is expected to continue to grow after 2025, but its compound annual growth rate (CAGR) is expected to slow to 13-15% between 2025 and 2028.

Counterpoint Report

Counterpoint pointed out in the report: "Advances in advanced nodes above 3/2nm and the accelerated adoption of advanced packaging technologies such as CoWoS and 3D integration will support the long-term expansion of the foundry market. These innovations, driven by the growing demand for high-performance computing (HPC) and AI applications, will continue to be the growth engine of the industry in the next three to five years. TSMC is expected to maintain its leadership in shaping industry trends and make full use of its technological advantages." TSMC accounts for more than 60% of the overall foundry business, followed by Samsung Electronics (hereinafter referred to as Samsung) and Intel. TSMC's capital expenditure in 2024 is expected to be approximately US$29.8 billion, but will increase to between US$38 billion and US$42 billion in 2025. Foundries are likely to continue to be the main buyers of semiconductor equipment, according to SEMI, a semiconductor industry trade organization. It is expected that the annual production capacity in the foundry field will increase by 10.9% in 2025 from the previous year, and the wafer production capacity is expected to reach 12.6 million wafers/month in 2025 from 11.3 million wafers/month in 2024.

SEMI Predictions

SEMI expects the memory industry growth rate to slow further from 3.5% in 2024 to 2.9% in 2025. Generative AI demand is strong, and the memory market is also undergoing major changes. Demand for high-bandwidth memory (HBM) is growing rapidly, and its growth trend is different from that of DRAM and NAND flash memory.

In 2024, SK Hynix's annual operating profit exceeded Samsung for the first time, thanks to strong sales of advanced memory chips such as HBM. SK Hynix is the only company that supplies HBM to NVIDIA. Memory competitors Samsung and Micron Technology are also working to bring HBM to market.

Source: Content compiled from semiwiki

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