Future Horizons lifts 2025 forecast for a ‘fragile’ chip market

Malcolm Penn, founder and chief analyst with Future Horizons, has raised his forecast for global chip market growth in 2025 to 15 percent, plus or minus 4 percent.

This is a jump from Penn’s prediction made in September 2024 of a market up by 8 percent plus or minus 3 percent. It comes despite Penn’s assessment that 2025 will be a challenging year and that the recovery base is “fragile”.

Back in September Penn’s reasoning was that there would be continuing weakness in markets such as automotive and industrial and a softening of prices in memory together with a potential oversupply of mature process manufacturing.

Penn has been a sceptic of the latest recovery arguing that it is based on average selling prices (ASPs) amidst flat unit sales. He has also been a sceptic of how long an AI boom can be sustained that is not obviously generating funds through product sales. Nonetheless he sees the present situation continuing into 2025.

The chip market in 2024 is coming in hotter than Penn predicted at between US$625 billion and US$630 billion. This is looking like 20 percent year-on-year growth rather than the 15 percent Penn had predicted, which itself was an uplift from 4.9 percent made in May 2024.

Speaking of 2024 in a webinar presentation Penn said: “We didn’t call the ASP strength lasting the whole year. The AI growth we under-called.”

For 2025 Penn said that the IMF’s GDP is holding steady but underwhelming at 3.2 percent and this, together with ASPs starting to dip and no signs of unit growth, is not a good indicator. On top there is turbulent geopolitical situation and an incoming US president.

Penn said that three of his notorious four horsemen of the semiconductor apocalypse are stuck on red and the last – fab capacity utilisation – is blinking amber.

Nonetheless Penn has broken away from the bearish Bill Jewell at Semiconductor Intelligence (SC-IQ) who recently forecast just 6 percent chip market growth in 2025.

Penn, by raising his forecast to 15 percent, has joined such bears as Gartner and leaped higher than WSTS which forecast 2025 chip market growth of 11.2 percent in December 2024.