Mixed outlook for semis in 2025

WSTS reported third-quarter 2024 semiconductor market revenue of $166 billion, up 10.7% on Q2.

3Q 2024 growth was the highest quarter-to-quarter growth since 11.6% in 3Q 2016, eight years ago. 3Q 2024 growth versus a year ago was 23.2%, the highest year-to-year growth since 28.3% in 4Q 2021.

Nvidia remained the largest semiconductor company in 3Q 2024 with $35.1 billion in revenue due to its strength in AI GPUs. Nvidia sells its AI GPUs as modules which include memory supplied by SK Hynix, Micron Technology, and Samsung as well as other components supplied by outside vendors.

Thus, Nvidia’s semiconductor revenue from its own devices is less than its total revenue. However, Nvidia would still be the largest semiconductor company even if externally purchased components were excluded.

Samsung Semiconductor was second at $22.0 billion with memory for AI servers cited as a major revenue driver.

Broadcom remained third with its guidance for 3Q 2024 at $14.0 billion. Broadcom highlighted its AI semiconductors as a growth driver. Intel and SK Hynix rounded out the top five.

The third quarter of 2024 was robust for most major semiconductor companies. The memory companies SK Hynix, Micron Technology, and Kioxia all reported double-digit revenue growth in 3Q 2024 versus 2Q 2024. Nvidia and AMD each reported 17% growth due to AI data center demand.

The only company showing declining revenue was Renesas Electronics, down 3.8% due to a weak automotive market and inventory reductions.

The weighted average revenue growth for 3Q 2024 versus 2Q 2024 for the sixteen companies was 10%.

The outlook for 4Q 2024 shows diverging trends. The data center market, driven by AI, is expected to lead to substantial revenue growth for Nvidia, Micron, and AMD. Samsung Semiconductor and SK Hynix did not provide specific 4Q 2024 revenue guidance, but both cited AI server demand as strong.

Companies which are dependent on the automotive industry expect a weak 4Q 2024. Infineon Technologies, Texas Instruments, NXP Semiconductors, and Renesas Electronics all guided for revenue declines in 4Q 2024 based on a weak automotive market and inventory reductions. STMicroelectronics also cited these factors but expects a 2.1% revenue increase.

The companies heavily dependent on smartphones have differing revenue expectations, with Qualcomm guiding up 7.2% and MediaTek guiding down 1.0%. The weighted average guidance for 4Q 2024 versus 3Q 2024 is a 3% increase.

However, the individual company guidance varies widely, from plus 12% from Micron to an 18% decline from Infineon and a 19% decline from Renesas.

As is the case with 4Q 2024 guidance, the outlook for year 2025 is mixed. AI will drive 2024 server growth in dollars to 42%, according to IDC. 2025 server growth will still be a strong 11% but it will be a significant deceleration from 2024.

Smartphones and PCs each recovered to growth in 2024 from 2023 declines. IDC expects 2025 modest growth of smartphones and PCs in the low single-digits.

Light vehicle production was a robust 10% in 2023 due to the post-pandemic recovery. S&P Global Mobility shows a 2.1% decline in production in 2024. Production is expected to recover slightly to a 1.8% growth in 2025.

The impact of the memory market also needs to be considered. WSTS’ June 2024 forecast called for 16% semiconductor market growth, with memory growing 77% and non-memory only growing 2.6%. Much of the memory growth in 2024 has been driven by price increases which are certain to slow in 2025.

The chart below shows recent forecasts for the semiconductor market in 2024 and 2025. 2024 forecasts are converging in the range of 15% from Future Horizons to 19%  at Semiconductor Intelligence (SC-IQ).

2025 forecasts are in two camps. RCD Strategic Advisors and Gartner project slightly slower growth than 2024 at 16% and 13.8%, respectively.

Semiconductor Intelligence expects significantly slower growth at only 6% in 2025. Future Horizons also sees slower growth at 8%.

SI’s 2025 assumptions are:

• Continued growth in AI, though decelerating

• Healthy memory demand due to AI, but prices moderating

• Mediocre growth for PCs and smartphones

• Relatively weak automotive market

• Potential higher tariffs (particularly in the U.S.) affecting consumer demand