Trump 2.0 economics turns Future Horizons bearish
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Under the onslaught of tariff uncertainty Malcolm Penn, founder and chief analyst with Future Horizons, has returned his forecast for 2025 global chip market growth to 8 percent plus or minus 3 percent.
In January Future Horizons had considered that the global chip market was coming into 2025 hot and Penn pushed his forecast up to 15 percent plus or minus 4 percent. Several months into Donald Trump’s second presidency Penn has now put his 2025 forecast back to where it was – 8 percent plus or minus 3 percent.
Future Horizons lifts 2025 forecast for a ‘fragile’ chip market
And the negative impact of Trump 2.0 economics is coming on top of a chip market that has been generally weak with AI as the one growth market sector.
Having dropped his forecast for 2025 Penn said that best case is that market weakness will linger giving rise to low growth in 2026, Penn said. “The global chip market could be flat or grow by just 1 or 2 percent,” he said. That is if tariff wars and and geopolitical uncertainty do not trigger a global recession. “It’s on a knife-edge right now,” he added.
Throughout his career as an independent analyst Penn has based his forecasts on the juxtaposition of four main drivers of chip market value; the general global economy, chip manufacturing capacity, units being shipped and and the average selling prices (ASPs).
Since his January webinar, the economic outlook and low unit shipments have got worse, capital spending on chip manufacturing capacity is only just starting to abate. The only slightly positive sign is that ASPs largely driven by logic and memory for AI have started to dip slightly.
The chip market is still being driven by average selling prices (ASPs) remaining above the long-term trend but with a significant absence of units shipped, Penn explained. Unit demand remains weak and the uncertainty level is now much higher than it was in January 2025, Penn said.
It is an illusion that AI demand can compensate for weakness across automotive, industy and telecoms, he said. “AI demand is in the data center and not in applications.”
While President Trump’s on-then-off-again tariffs are unlikely to be implemented at the top levels, Penn said, they have created an uncertain environment that has struck at consumer confidence. Another economic sign is that inflation around the world is well above 2 percent and trending higher. The result is that consumers become fearful about what they can afford and whether they will have a job and delay purchasing.
“You can’t claim a market recovery until unit shipments resume growth,” said Penn in a webinar presentation. Meanwhile unit shipments are down at 6.8 billion units per week about 16 percent below trend and 23 percent below the 8.2 billion units per week peak seen during the covid boom, he said
As a result, there continues to be lingering inventory in many product markets that could take another four quarters to burn off, and that is assuming Chinese don’t flood western markets with mature node chips.
Penn concluded that excess manufacturing capacity will plague the semiconductor industry throughout 2025 and 2026 and the next growth cycle cannot start before 2027.
Things could get worse if China begins to flood the market with chips resulting from its several years of capital expenditure, if there is slowdown in AI infrastructure demand or if there is global recession or other major global event.
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