Will 2025 be tough for the global chip market? Reports cite weak AI demand, reflecting on mixed revenue anticipations of big market players in Q424 in smartphone and automotive sectors.
The global chip market is projected to grow by 19% at the end of 2024, followed by a slower 6% growth in 2025. According to a Semiconductor Intelligence (SC-IQ) report, despite a short-term optimism, this forecast reflects a cautious outlook for 2025, citing a slowdown in artificial intelligence (AI) demand and overall market weakness.
In the third quarter of 2024, the global chip market was valued at $166 billion, representing a 23.2% year-on-year (YoY) increase, according to the World Semiconductor Trade Statistics (WSTS). However, SC-IQ calculates a more modest 3% growth for the fourth quarter of 2024, based on guidance from major chip companies.
The forecast highlights a divide between AI-driven growth, led by Nvidia, and slower performance in the automotive and industrial sectors, impacted by geopolitical tensions.
Despite Nvidia’s dominance in 3Q24 with $35.1 billion in revenue, primarily from AI GPUs, the report highlighted potential challenges ahead. This includes the risk of double-counting from Nvidia’s memory purchases from suppliers like SK Hynix, Micron Technology, and Samsung. However, Nvidia would still lead the chip market even after subtracting these memory purchases.
Meanwhile, Intel’s decline continues, as the company, once the largest chip vendor, dropped to fourth place in 3Q24. SK Hynix, a Korean memory company, is expected to surpass Intel in 4Q24.
The outlook for 4Q24 reveals contrasting trends. The AI-driven data centre market is expected to boost revenue for companies like Nvidia, Micron, and AMD. Although Samsung Semiconductor and SK Hynix did not provide specific revenue guidance for 4Q24, both highlighted strong AI server demand.
Conversely, firms reliant on the automotive sector anticipate a weak 4Q24. Infineon Technologies, Texas Instruments, NXP Semiconductors, and Renesas Electronics expect revenue declines due to a sluggish automotive market and inventory reductions. STMicroelectronics expects a modest 2.1% revenue increase despite similar challenges.
On the other hand, smartphone-dependent companies show mixed expectations, with Qualcomm forecasting a 7.2% increase while MediaTek anticipates a 1.0% decline. The weighted average guidance for 4Q24 indicates a 3% increase, with wide variations: Micron projects a 12% rise, while Infineon and Renesas expect declines of 18% and 19%, respectively.
Looking ahead to 2025, the outlook remains varied. AI is expected to drive server growth in 2024, contributing to 42% growth in server revenue, according to IDC. However, server growth in 2025 is anticipated to slow significantly to 11%. Smartphones and PCs, which recovered in 2024 after declines in 2023, are projected to see modest growth in the low single digits in 2025. After a strong 10% growth in light vehicle production in 2023, driven by post-pandemic recovery, S&P Global Mobility forecasts a 2.1% YoY decline in 2024, with a slight recovery of 1.8% YoY growth expected in 2025.
The memory market’s influence is also a key factor to consider. According to WSTS‘ June 2024 prediction, the semiconductor market is expected to grow by 16%, with memory experiencing a 77% growth, while non-memory segments are projected to increase by just 2.6%. Much of the memory growth in 2024 has been driven by price hikes, likely to slow down in 2025.
Recent anticipations for the semiconductor market in 2024 and 2025 show a range of predictions. For 2024, estimates converge between Future Horizons’ 15% and SC-IQ’s 19%. As for 2025, the predictions diverge.
RCD Strategic Advisors and Gartner expect a slight slowdown, with growth at 16% and 13.8%, respectively. However, SC-IQ predicts a more significant downturn, projecting only 6% growth, while Future Horizons estimates an 8% increase.
