By 2025, artificial intelligence (AI) will be at the core of the complex of integrated circuits (ICs) to meet the needs of a wide range of markets, including data centers, personal computers (PCs), smartphones, and the automotive industry. It is expected that the logic chip market will usher in a double increase in production and price, and AI will also become an important driving force in the storage market. Especially in AI applications in data centers, the demand for high-bandwidth memory (HBM) and solid-state drives (SSDs) will rise dramatically. In addition, AI in edge computing will also drive revenue growth for connectivity modules such as 5G and Wi-Fi 7. Despite the continuous development of AI on edge devices, most AI applications still rely on data center computing, making the cost-effectiveness of data center AI accelerators even more important than just a performance pursuit. More energy-efficient devices could eat into NVIDIA's market share.
The process of autonomy of China's semiconductor industry
Although China is facing a series of sanctions and tariff pressures, these challenges have also promoted China's autonomy in the semiconductor field. By 2025, China will make greater progress in its semiconductor manufacturing and tooling ecosystem, although it will still rely on external equipment suppliers for several key process steps. It is expected that China's demand for devices will continue to grow, especially in the fields of smartphones, automobiles, and AI, and gradually form an independent semiconductor ecosystem.
Semiconductor manufacturing will transition to high-end technology
In 2025, semiconductor manufacturing will usher in an important turning point, with Intel and Samsung expected to catch up with TSMC and compete fiercely on the most advanced technologies. Capital expenditure (CAPEX) is expected to rise significantly as manufacturing capacity increases, especially thanks to increased demand and government incentives. This growth is focused on cutting-edge technologies such as high numerical aperture (High-NA) lithography, advanced packaging, and high-precision test solutions, which are critical for manufacturing more complex, higher-density integrated circuits. At the same time, capital expenditures for memory manufacturing will focus on the expansion of high-bandwidth memory (HBM) capacity.
End-market demand: uneven growth
While data center growth will continue, investment will be focused on AI accelerators and required memory, while other data center equipment will grow more slowly. As edge AI becomes more popular, the upgrade cycle for smartphones, PCs, and smart home devices is expected to accelerate. The smartphone market is polarized, with demand for high-end and low-end devices rising, while the mid-range smartphone and tablet market is under pressure. Despite the increasing demand for semiconductors in the automotive industry, particularly driven by demand for Level 2 autonomous driving and more advanced 3D sensors and 5G connectivity, the overall automotive industry remains sluggish.
Figure: How will the chip industry develop in 2025?
Key risks in 2025
Although AI is widely considered to be the core of future growth, there are still some uncertainties, especially whether AI applications can actually drive the replacement cycle of consumer electronics. With consumer savings accumulated during the pandemic largely depleted, the process of economic recovery could affect the overall performance of the consumer market. In addition, trade barriers and protectionism may intensify, affecting the stability of the global semiconductor industry chain, and the escalation of climate disasters and global political conflicts may also bring new risks to the supply chain.
Sector outlook: AI, advanced packaging, and the automotive industry
1. Advanced packaging: As AI is driven, semiconductor design and manufacturing processes will become more reliant on advanced packaging technologies. Larger substrates, more complex layers, and input/output interfaces (I/O) will become the norm, while new technologies such as panel-level packaging and glass substrates are gaining traction, although there are still some challenges in the production process.
2. AI Hardware Infrastructure: AI technology will continue to dominate in 2025, driving the growth of the hardware market. Major manufacturers will continue to invest more in AI accelerators, chips, and related equipment. However, there may also be some cases of "falling" among startups and competitors, and the market will witness continued competition and technological innovation.
3. Automotive semiconductors: The global automotive semiconductor market is expected to continue to grow by 2025 and is expected to reach $85 billion. However, as the semiconductor supply chain is still digesting excess inventory, semiconductor supplier revenue growth in the automotive industry is likely to lag behind overall growth.
4. Consumer electronics and mobile phones: The global smartphone market will grow by 3% to 1.24 billion units by 2025. Apple has succeeded in stabilizing sales by slashing prices, especially in the Chinese market, and this trend is expected to continue into 2025.
5. Computing devices: By 2025, AI will no longer be confined to data centers. From expensive AI accelerators to cheaper on-premise computing devices, AI will be ubiquitous in a wide range of devices. While the data center server market will continue to grow, the application of AI accelerators will gradually shift to customized devices, especially the self-developed chips of cloud computing giants.
6. Connectivity and wireless communications: RF and microwave semiconductors will play an important role in wireless systems, especially in global navigation, radar, RFID, and communication technologies such as 5G and Wi-Fi, which will explode with the popularity of smart devices.
Summary
In 2025, AI will continue to drive technological innovation and market change in the semiconductor industry. Whether it is in chip design, manufacturing process, or terminal application, the wide application of AI will bring new opportunities and challenges to the industry. From the breakthrough of high-end semiconductor technology to the acceleration of China's independent process, 2025 will be an important year for the semiconductor industry to intensify competition and technological innovation to emerge.
