By Jonathan Cassell
Bifurcation was the word of the year for the semiconductor industry in 2024, as demand soared for AI-related memory chips but remained weak for other application markets and devices. Early indications suggest that 2025 will bring a similar divergence in market trends, with booming memory demand set to remain the market’s dominant dynamic despite a sales recovery in other electronic segments.
For buyers, this means the challenging purchasing conditions for high-bandwidth memory (HBM) and other devices impacted by the AI boom are set to persist at least through Q3 2024, according to Supplyframe Commodity IQ.
After rising in the 20% range in 2024, global semiconductor market revenue is set to increase in the mid-teens in 2025. Leading market watchers forecast growth from 11% to 15% in 2025.
This growth scenario assumes that the generative AI boom will continue in 2025. Concerns over the longevity of the AI craze have arisen amid news that some hyperscalers may slow their spending. However, current forecasts suggest that AI-driven sales will continue to propel the chip market, albeit at a slower pace.
In 2024, global memory chip revenue is set to surge by more than 45%, according to market researchers, driving the expansion of the overall semiconductor market. For 2025, memory growth is expected to decelerate but will still expand at an impressive rate of about 25%, outstripping the expansion of the overall chip market.
For buyers, this phenomenon has spurred divergent purchasing conditions in 2024. Supply chain risk, availability and pricing trends are relatively sanguine for most components. However, the situation for HBM and certain other memories is characterized by inflated prices, interminable lead times and cutthroat competition for available supplies.
The average selling price of HBM has inflated to four or five times the level of the DDR4 and DDR5 DRAMs commonly used in data center servers.
Conditions aren’t expected to improve much in 2025, with the Commodity IQ Market Dynamics Forecast predicting continued struggles with demand, costs and delivery lags until at least Q3.
While memory makers are increasing their capital spending in 2024 and 2025, the rate of increase and the nature of the expenditures are not likely to mitigate the HBM supply shortfall. The big three memory makers, Samsung, SK Hynix and Micron, are projected to increase their collective capital spending by 6% in 2024, following a 9% decline in 2023. The memory triumvirate plans to boost expenditures by another 11% in 2025. These investments are lagging behind the expected demand growth.
Moreover, the leading memory makers are focusing their spending on developing the technology required to produce more advanced versions of HBM rather than increasing their manufacturing capacity for commodity DRAM. As a result, tight supply conditions are likely to persist.
Demand for various end markets, including PCs, smartphones and consumer electronics devices, is expected to recover in 2025. This phenomenon is likely to result in a stabilization of price and lead time conditions for a wide variety of components.
For buyers, the continued AI boom means 2025 will be another year of supply-chain bifurcation, with generally stable purchasing conditions for most parts overshadowed by the significant challenges associated with memory.
Jonathan Cassell is the lead analyst for Supplyframe Commodity IQ.