Semiconductors in 2025: Perspectives from Electronica 2024 in Munich
21 November 2024
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According to the major semiconductor manufacturers, 2025 is expected to be another very uncertain year, perhaps still a transitional year at least for the first quarter, so much so that the largest manufacturers are shutting down some production lines— not only new ones but also historical ones— to focus on others with greater sales potential. This is not only due to the lack of current demand but also to the uncertainty caused by the lack of budgets and forecasts for 2025.
At Electronic Partner, we have already seen this trend in recent times with most enquiries focusing on items that are not readily available through traditional channels.
The year 2024 could be defined as the first real transition year after the post-COVID-19 boom. At the end of 2023, many experts were predicting that 2024 would be characterized by overstocking. Missed sales expectations led not only suppliers but also customers to offload their stock at much lower prices. Many expect this trend to continue until at least the first half of 2025.
Edgewater Research’s analysis indicated that demand would remain flat throughout the year, particularly for consumer electronics companies and for equipment and machinery requiring large capital outlays (the latter due to excessive interest rates when borrowing to purchase an asset).
The only sector that continued to grow throughout the year was AI, which will continue to grow in the coming years.
Think of the US company Nvidia, which is expected to record growth of 82% with revenues that could reach $33 billion.
Sectors that are expected to continue to perform are:
It will be worth monitoring market trends over the coming quarter to assess the impact of these changes on manufacturers. The boom in artificial intelligence is likely to contribute to rising prices and delays in the delivery of certain components, especially as geopolitical tensions rise due to the trade war between the United States and China.
More and more companies are specializing in the production of GPUs for AI. This is expected to grow by 27% by 2024, to a total value of $ 51 billion. According to global research firm Gartner, the lack of competition in the GPU industry, with most of the demand going to Nvidia, will continue until competition increases.
According to Bain & Company, data center capital expenditure will grow only 36% year-on-year in 2024, driven by artificial intelligence and accelerated computing. If data center demand for current-generation GPUs doubles by 2026, suppliers will need to increase production by 30% or more.
Rising geopolitical tensions and adverse weather conditions could further complicate the situation and impact the fragile supply chain.
The keyword is diversification, the supply network must be increasingly diverse, not only sourcing from a specific supplier but also looking for alternative supply channels that can be used in the event of a supply crisis. According to best practice, it is preferable to favor companies closer to home (a concept known as friendshoring and nearshoring), a practice that has become essential to secure supply in the face of ongoing geopolitical tensions.
To avert these potential supply shortages, Electronic Partner sources from a diverse network of pre-selected suppliers and uses external test houses to test every item to ensure quality and safety for the end user.
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