In recent years, the semiconductor industry has been undergoing a transformative phase, significantly influenced by the rise of artificial intelligence (AI). As AI technologies proliferate, they are not only reshaping the landscape of consumer electronics but also extending conventional technology cycles—providing a much-needed stimulus for global semiconductor sales.

According to a report from the World Semiconductor Trade Statistics (WSTS), the global semiconductor sales are set to reach an impressive $627.6 billion in 2024, marking an increase of 19.1% compared to the previous yearFollowing this brisk growth, an anticipated slowdown in market expansion is projected for 2025, with growth expected to taper off to 11.2%.

Senior Analyst Li Xuan from Haitong Securities explained that while semiconductor cycles share some similarities, each cycle features distinct characteristics driven by varying key factors in the downstream marketsThe ongoing cycle's unique aspect is driven by the promise of AI products, which are expected to have sustained successes and implementations in various applications.

A recent report from the International Data Corporation (IDC) reinforces this view, indicating a continuous surge in demand for AI and high-performance computing (HPC). The semiconductor market is expected to experience over 15% growth by 2025, fueled by upgrades across various primary application markets, from cloud data centers to targeted industry sectors.

Looking ahead, Li has emphasized the importance of remaining vigilant towards the profitability elasticity arising from the industry's recovery and the overarching trend of AI productsWith AI becoming increasingly integrated into consumer gadgets—including smartphones, laptops, and wearables—there is a growing expectation that semiconductor demand will see a sustained resurgence driven by these technological upgrades.

However, it's noteworthy that the global semiconductor market is showing signs of deceleration

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WSTS data indicates that sales for the fourth quarter of 2024 are projected at $170.9 billion, reflecting a year-on-year increase of 17.1% and a sequential growth of 3.0%. In contrast, sales figures from December of last year fell flat at $57 billion, showing a quarterly drop of 1.2%.

From the perspective of individual corporate performances, signals of weakening demand are emergingReports from NXP Semiconductors indicate a potential 10% drop in first-quarter revenue due to continued weak demand for automotive and industrial chipsSimilarly, industry giant Samsung Electronics has reported a near 30% decline in operating profit for the fourth quarter of 2024, attributed to market softness and rising expendituresTexas Instruments and STMicroelectronics have also issued concerning forecasts for the first quarter, failing to meet analyst expectations and even considering major layoffs in light of rising operational costs.

Betty Wang, Chief Economist of Oxford Economics, remarked on the observable disconnect between the dollar value and volume growth of the Asia Chip Export Index (CEI), highlighting a pattern typically associated with cyclical slowdownsHistorical data suggests that a divergence in these metrics often precedes a downturn, and this trend has persisted over the last few months.

“Therefore, we maintain our expectations for a slowdown in semiconductor salesRecent global data suggests a peak has been surpassed, with annual growth rates falling from the highs of previous years,” Wang commented.

Despite the prevailing slowdown, Wang remains optimistic, predicting that semiconductor sales will still see double-digit growth by 2025, indicating that Asian electronics exports will continue to thriveThe continued rapid adoption of AI technologies across various consumer and commercial applications could also maintain a positive trajectory for the global tech cycle.

Furthermore, Wang pointed out that the competitive expansion of AI applications global-wide has the potential to prolong traditional technology cycles, enhancing its positive spillover effects and continuously driving growth in Asian exports.

A recent national survey in the U.S. indicates that the rise of AI is accelerating faster than the adoption of personal computers and the internet

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Research from McKinsey has projected substantial growth in AI computing and chip demand, forecasting an explosive increase by 2030 due to the massive escalation in required processing capabilities for data centers and smartphonesWith demand for AI-related semiconductors rising sharply, Li Xuan emphasized that AI will be the core growth driver for chip demand moving forward.

Gartner's latest predictions suggest a continuation of this trend, estimating a 14% growth in global semiconductor revenue by 2025. They observe that in the short term, the memory market alongside Graphics Processing Units (GPUs) will be crucial in driving this revenue growth, propelled by the overwhelming demand for AI-related semiconductors and a resurgence in electronics productionNonetheless, demand in the automotive and industrial sectors remains tepid.

Samsung Electronics is also adapting to the shifting landscape, acknowledging potential limitations in earnings due to weakened semiconductor demand yet striving to leverage AI smartphones and other premium devices to spur growth.

According to Dexter Thillien, chief analyst in the technology and telecommunications division of the Economist Intelligence Unit, AI has emerged as a critical driver for chip companies, especially amid a sluggish consumer electronics sector.

“We expect AI to remain a key driver this year, but it’s important to note that not all chip companies will benefit equally,” he statedIn this context, Nvidia stands out as a major beneficiary in chip design, whereas TSMC leads in chip manufacturing, while Samsung and Intel are projected to lag behind.

The ongoing surge of AI in various technology sectors not only promises to invigorate the semiconductor industry but also serves as a powerful emblem of transformation across global marketsThis convergence of AI advancements and semiconductor innovation heralds a new era where technology and economy interlink more intricately than ever before, thereby capturing the ongoing evolution of technological ecosystems in this rapidly changing world.

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