Prediction and Trend of Semiconductor Market Outlook for 2025
The electronics industry has been a rapidly tumultuous year of transition in its push toward recovery and stabilization. Edgewater Research offered a tentative outlook regarding the overall active and passive component market sectors for the beginning of 2024. Research found that demand across the market would likely remain flat for most industries, especially those in consumer electronics, which saw some of the more significant drops as the world began reopening after COVID-19 pandemic.
This transitional year evolving space, driven by innovation, technological advances, and shifting market dynamics. Areas of growth were primarily found within artificial intelligence (AI), high-performance computing, automotive, aerospace, and defense markets. Demand has remained high in these areas, contributing to some bottlenecks and short-term shortages. Generative AI has been, and will continue to be the trend-setter in the coming years. Likewise, the debut of AI-enabled smartphones, PCs, and other devices will spark renewed interest among consumers, contributing to growing.
However, this interest won’t be significant enough to draw the industry out of its slow recovery faster.
As we approach 2025, manufacturers and supply chain professionals are preparing for significant changes in the way electronic components are sourced, managed, and delivered. To stay competitive and efficient, it’s crucial for supply chain managers to keep an eye on the trends that will define the future. In this blog post, we will explore some of the key trends which can help us go through new period more smoothly.
1.Weak Spot Market for Memory Components will Continue into 2H25
2.Artificial Intelligence Fueled Shortages May Appear if Demand Skyrockets
Automation will continue to play a major role in supply chain management in 2025, with artificial intelligence (AI), machine learning, and robotics driving greater efficiencies in operations. For manufacturers, automation offers the opportunity to streamline inventory management, improve forecasting, and enhance productivity.
3.Geopolitics Will Continue to Shape the Supply Chain
What does this mean for the 2025 semiconductor market? Here are a few things to consider for the following year.
• Shortages Inbound: Artificial intelligence and high-performance computing will continue to see high demand. However, production capacity could become strained due to geopolitical events, lack of competition, natural disasters, and the ongoing labor shortage.
• Shifting Priorities by Fabs: AI and hyper-scale cloud computing will contribute to fabs' changing priorities and strategies, impacting certain component sourcing over the next few years.
• Price Increases: Altera, ADI, and Marvell Technology have announced their decision to increase prices on FPGA and optical communication products respectively due to market pressure and the increased demand for accelerated computing by AI trends.
• Layoffs Leading to Instability: There is growing concern that large, franchised distributors could be laying off large numbers of tenured personnel, contributing to instability between supplier and buyer relationships.
• Economic Recovery: The global economy will see greater stabilization, contributing to a return to normal consumer spending habits. This will help digest the remaining excess stock and improve spot prices.
• Industry Growth in Specific Sectors: With the proliferation of AI and high-performance computing, along with the global state of geopolitics, several industries are likely to benefit over 2025, including power grids, data centers, automotive, aerospace, defense, networking, and the Internet of Things (IoT).
• Legacy Components Will be Harder to Source: With the popularity of AI, prioritization of lucrative lines during the pandemic, and rising tensions between the U.S. and China, legacy components over 65nm will be more challenging to source. There will be a significant supply/demand imbalance coming for legacy parts. Mature nods, 28nm or higher, and advanced nods, lower than 11nm, will be easier to source as availability opens up with new fabs coming online.
• Increased Instant Obsolescence: Many organizations may start cutting historical lines, contributing to cases of instance obsolescence, as layoffs occur. Today, 30% of all obsolete components enter obsolescence instantly, heightening the challenges of component unavailability.
It will be pertinent to watch the market for the possible impact these shifts could have on popular brands. The AI boom will likely contribute to increasing price trends and lead time delays for some components, especially with rising geopolitical tensions due to the U.S.-China trade war. To stay abreast of these shifts, here is a list of some of the most popular brands and their associated products that procurement teams should pay particular attention to.
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