Hop on the gravy train because the global semiconductor market is poised to reach $1 trillion this year, driven by artificial intelligence, cloud infrastructure, and advanced consumer electronics.
The World Semiconductor Trade Statistics (WSTS) organisation projects the worldwide semiconductor market to expand by 11.2% in 2025, reaching a total value of US$700.9 billion ($1.06 trillion).
Following a strong rebound in 2024, the WSTS confirms its outlook for sustained industry growth.
The expansion is primarily driven by continued strength in the ‘logic’ and ‘memory’ segments – both expected to post robust double-digit increases, with segments like ‘sensors’ and ‘analog’ anticipated to contribute positively, albeit with more moderate growth.
The World Semiconductor Trade Statistics was established in 1986 as a non-profit organisation of semiconductor product companies and is the industry’s only source for monthly industry shipment statistics.
“Regionally, the Americas and Asia Pacific are set to lead the growth, with anticipated growth rates of 18% and 9.8%, respectively. In contrast, Europe and Japan are expected to show moderate growth,” WSTS reports.
“Looking ahead, WSTS projects the global semiconductor market to grow by 8.5% in 2026, reaching US$760.7 billion. Growth will be broad-based across regions and product categories.
“Memory is forecasted to lead growth again, with contributions from Logic and Analog as well. Regionally, all major markets are expected to expand, with the Americas and Asia Pacific continuing to lead the growth, while Europe and Japan are expected to strengthen.”
Fortune Business Insights says Asia Pacific held a market share of 50.94% in 2024. Additionally, the US market is expected to increase significantly, reaching an estimated value of US$258.30 billion in 2032.
Wafer thin or fully functional?
The first commercial applications for semiconductor chips were pocket calculators, which became widely available to consumers in the 1970s.
In 1989, Intel (NASDAQ:INTC), which is touted as the second largest player in the industry, introduced the first semiconductors to exceed a million transistors.
Current market leader TSMC (NYSE:TSM), which actually created the semiconductor Dedicated IC Foundry business model, has more than a third of global market share.
Some 36 years after Intel’s one million transistors advancement, the largest chips today contain more than 50 billion transistors, in a trend known as Moore’s law. This law is an observation made by Gordon Moore in 1965 that the number of transistors on a silicon chip doubles roughly every two years.
The principle implies that while the performance and capabilities of computers grow exponentially, their costs decrease dramatically, which in turn is driving advancements in technology and computing power. Think about the advent of artificial intelligence.
What are semiconductors?
Semiconductors are how electronic devices such as smartphones and laptops process, store, and receive information. Memory chips store data and software as binary code, digital chips manipulate the data based on the software instructions, and wireless chips receive data from high-frequency radio transmitters and convert them into electrical signals.
Basically, these different chips work together under the control of software. And while various software applications perform very different tasks, they all work by switching the transistors that control the current.
In general terms, the vast majority of semiconductors is a thin slice of silicon called a wafer. It conducts electricity much better than an insulator such as glass, but not as well as metals like copper or aluminum.
These thin slices of silicon have complex components laid out on them in specific patterns, which in turn control the flow of current using electrical switches (transistors) much in the same way electrical currents are in one’s home by flipping a switch to turn the light on.
Semiconductor switches are entirely electrical, which means there are no mechanical components to flip and the chips contain tens of billions of switches, in an area the size of a fingernail.
Silicon wafers are not the only kind of capacity to track. Advanced packaging is reportedly growing even faster and some market analysts believe that TSMC’s chip-on-wafer-on-substrate (CoWoS) 2.5D advanced packaging production capacity could go from 35,000 wafers per month in 2024 to reach 70,000 wpm (100% year-on-year) in 2025 and further by 30% year-over-year to 90,000 wafers per month by end of 2026.
Silicon valley
Ironically, while the transistor and semiconductor chip were invented in the US – in Texas of all places – the country has largely been left off the gravy train as there are no state-of-the-art semiconductor foundries currently on American soil.
However, the US has passed the CHIPS Act, in which Congress has provided incentives and opportunities for next-generation semiconductors to be manufactured in America.
Across the board, chip sales are set to soar in 2025, led by generative AI and data centre build-outs, even as demand from PC and mobile markets may remain muted
According to Deloitte, the semiconductor industry had a robust 2024, with expected double-digit (19%) growth, and sales of US$627 billion for the year, which surpasses the earlier forecast of US$611 billion.
And 2025 could be even better, with predicted sales of US$697 billion, reaching a new all-time high, and well on track to reach the widely accepted aspirational goal of US$1 trillion in chip sales by 2030.
Deloitte notes this suggests the industry only needs to grow at a compound annual growth rate of 7.5% between 2025 and 2030.
This is all inline with the predictions of the figures forecasted by the World Semiconductor Trade Statistics.
“Assuming the industry continues to grow at that rate, it could reach US$2 trillion in 2040,” Deloitte reports in its 2025 Global Semiconductor Industry Outlook.
“The stock market is often a leading indicator of industry performance: As of mid-December 2024, the combined market capitalisation of the top 10 global chip companies was US$6.5 trillion – up 93% from US$3.4 trillion in mid-December 2023 and 235% higher than the US$1.9 trillion seen in mid-November 2022.
“Assuming the industry continues to grow at that rate, it could reach US$2 trillion in 2040”
“That said, it is worth noting that “average” chip stock performance in the last two years has been a ‘tale of two markets’: Companies involved in the generative AI chip market outperformed that average, while companies without that exposure (automotive, computer, smartphone, and communications semiconductor companies, for example) underperformed.”
Fortune Business Insights is more bullish and believes the global semiconductor market size will grow from US$755.28 billion in 2025 to US$2 trillion by 2032, exhibiting a CAGR of 15.4% during the forecast period (2025-2032).
Chips ahoy!
As mentioned, the driver of industry sales has been the demand for gen AI chips – a mix of CPUs, GPUs, data centre communications chips, memory, power chips, and more.
Deloitte’s 2024 TMT Predictions report predicted that those gen AI chips collectively would be worth more than US$50 billion, which this firm now says was a much too conservative forecast. This is because the market was likely worth over US$125 billion in 2024 – and represented over 20% of total chip sales for the year.
“At the time of publication, we predict that gen AI chips will be over US$150 billion in 2025,” Deloitte reports.
“Further, Lisa Su, Chief Executive Officer at AMD, moved her estimate for the total addressable market for AI accelerator chips up to US$500 billion in 2028 – a number larger than sales for the entire chip industry in 2023.”
KPMG and the Global Semiconductor Alliance conducted its 20th annual global semiconductor industry survey in Q4 2024. The survey captured insights from 156 semiconductor executives about their outlook for the industry in 2025 and beyond.
More than 50% of the respondents were from companies with US$1 billion or more in annual revenue.
The KPMG Semiconductor Industry Confidence Index score is 59 for this year – a value above 50 indicates a more positive outlook than negative.
This is higher than 2024 (54) due to increased confidence across all factors. These include company revenue growth, profitability growth, workforce growth, research and development (R&D) spending, and capital expenditures.
Some 86% of respondents project their company’s revenue will grow over the coming year, which is on par with last year’s 83%. Even more encouraging is that almost half (46%) expect revenue to grow more than 10%.
Executives are also enthusiastic about industry revenue growth in 2025 as 92% forecast the industry’s revenue will grow in the coming year. One-third (36%) predict industry revenue growth of more than 10%.
How Chang changed the world
One company expected to continue enjoying revenue growth is TSMC, formerly known as Taiwan Semiconductor Manufacturing Company, which created the semiconductor Dedicated IC Foundry business model.
With a net worth estimated by Forbes to be US$5 billion, TSMC founder Morris Chang established Taiwan Semiconductor Manufacturing in 1987. In doing so, Chang changed the world today as we know it.
Before founding the company, he worked for 25 years at Texas Instruments (NASDAQ:TXN) and then joined the Taiwan research body that spun off TSMC.
TSMC is now one of the world’s largest manufacturers of semiconductors and has the lion’s share of the global chips market.
TSMC’s latest annual report shows in 2024 the company generated net income of US$36.52 billion on consolidated revenue of US$90.08 billion, which increased 35.9% and 30% respectively from the 2023 level of US$26.88 billion net income and US$69.30 billion consolidated revenue.
As such, the firm commands roughly 35% of the semiconductor market, according to Counterpoint Research.
TSMC is listed on the Taiwan Stock Exchange (TWSE) under ticker number 2330, and its American Depositary Shares (ADSs) are traded on the New York Stock Exchange (NYSE) under the symbol TSM.
Chang, who holds a Bachelor of Arts/Science, Massachusetts Institute of Technology; Master of Science, Massachusetts Institute of Technology; PhD, Stanford University, retired from TSMC’s Chairman’s post in 2018.
Yet the company continues to expand in his absence. Annual capacity of the manufacturing facilities managed by TSMC and its subsidiaries is roughly 17 million 12-inch equivalent wafers in 2024.
So immense has been its growth, TSMC is building a US$65 billion site with three chip plants in Phoenix, Arizona in the US. The first plant began production in 2024 and the second for more advanced chips is due to come onstream in 2028.
In 2023 TSMC announced its plan to build a factory in Dresden, Germany – its first in Europe. The company committed US$3.8 billion for a 70% stake in the joint venture. Construction began in 2024 and this facility will manufacture TSMC’s 28/22 nanometer planar CMOS and 16/12 nanometer FinFET process technologies.
In 2024, TSMC served about 530 customers and manufactured almost 12,000 products for various applications covering a variety of end markets including high performance computing, smartphones, the Internet of Things, automotive, and digital consumer electronics.
The company’s customers include Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), and Qualcomm (NASDAQ:QCOM), among others.
TSMC operates four 12-inch wafer GIGAFAB fabs, four 8-inch wafer fabs, and one 6-inch wafer fab – all in Taiwan. It also has two 12-inch wafer fabs at two wholly owned subsidiaries – TSMC Nanjing Company and TSMC Arizona Corporation; one 12-inch wafer fab at a TSMC’s majority-owned manufacturing subsidiary – Japan Advanced Semiconductor Manufacturing (JASM); and, two 8-inch wafer fabs at two wholly owned subsidiaries – TSMC Washington and TSMC China Company.
Outside of Taiwan, TSMC provides customer support, account management and engineering services through its offices in North America, Europe, China, Japan, and South Korea.
Counterpoint Research outlines Intel’s progress with its 18A chip as a competitor to TSMC and the Foveros packaging technologies, while Samsung continues to face yield problems with its chip manufacturing technologies.
Write to Adam Orlando at Mining.com.au
Images: Deloitte, Texas Instruments, WSTS & Unsplash
