AI demand is driving market, uncertainty lies ahead, says SEMI

Market news | May 22, 2025

By Peter Clarke

AI sensors semiconductor Analog silicon Materials & processes

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The electronics and chip markets in 1Q25 markets followed typical seasonality according to SEMI but the industry body has warned of atypical market shifts due to tariff uncertainty.

The market for electronics goods declined 16 percent sequentially in 1Q25 and was flat compared with the same quarter a year before, SEMI said referencing data gathered for it by TechInsights.

At the same time chip sales shrank by 2 percent sequentially but showed a strong 23 percent y-o-y increase. This reflects investment in AI and high-performance computing, but is probably more indicative of high average selling prices (ASPs) for AI processors and relevant memories than increased unit shipments, the industry body said.

Global IC sales by quarter 2Q23 to 2Q25. Source: SEMI and TechInsights

But demand is clearly expected according to SEMI’s take on semiconductor capital expenditure. Not surprisingly capex declined 7 percent q-on-q but it went up 27 percent compared with a year before. This is being spent to increase manufacturing capacity for leading-edge logic, for high-bandwidth memory (HBM) and advanced packaging in support of AI.

Global capex and installed fab capacity by quarter 2Q23 to 2Q25. Source SEMI and TechInsights.

Memory-related capex soared 57 percent y-on-y in 1Q25, while non-memory capex expanded by 15 percent y-on-y.

Wafer fab equipment (WFE) spending rose 19 percent y-on-y in 1Q25 and is projected to increase another 12 percent in Q2. Test equipment billings were up 56 percent year-over-year in 1Q25 Q1 and are expected to grow by 53 percent in Q2.

The global installed wafer fab capacity was reckoned to be 42.5 million wafers per quarter (300mm-diameter wafer equivalents) at the end of 1Q25 up 7 percent on an annual basis.

“While the first quarter of 2025 did not see a direct impact from new tariffs on electronics and IC sales, the uncertainty around global trade policies is prompting some companies to accelerate shipments and others to pause investments,” said Clark Tseng, senior director of market intelligence at SEMI, in a statement. “This push-pull dynamic could lead to atypical seasonality for the remainder of the year as the industry adapts to shifting supply chain and tariff landscapes.”