Insight Bite

The semiconductor market upswing is expected to continue, with new analysis predicting growing demand until the middle of 2022.

Analyst firm International Data Corp. (IDC) expects the global semiconductor market to grow by over 17 percent in 2021, up from 10.8 percent in 2020. The market is eventually expected to hit $600 billion in 2025, representing a CAGR of 5.3%, higher than the historical norm of 3-4%.

The biggest surge is in 5G semiconductor revenues, which are expected to increase by 128% as total mobile phone semiconductors grow by 28.5%.

Elsewhere, continued demand for cutting edge consumer goods is expected to drive the bulk of growth. The game console market is expected to grow 4%, while the smart home sector adds 20%, and wearables 21%. Notebooks, servers, and Wi-Fi access points are among the other booming markets responsible for growing demand.

Automotive semiconductor revenues are expected to increase by 22.8% as shortages ease, relieving the world’s automakers which are estimated to lose $210bn in revenue this year due to supply disruption.

Elsewhere, another factor bolstering industry revenue growth is the increase in semiconductor wafer prices. Wafer foundries have increased prices, and removed volume-customer discount programs in the first half of 2021 on rising demand from OEM manufacturers.

By the middle of 2022, new fabs are expected to come online and help normalize the market by addressing the imbalance of supply and demand: TSMC, Samsung, GlobalFoundries and Intel have all announced plans to increase production, and fabs are being built around the world in anticipation of rising long-term demand.

If the pendulum swings the other way however, and the currently high levels of demand do not continue, then IDC suggests we could see a potential glut in 2023 as the semiconductor industry finds itself with unneeded capacity.