Planning for the future: 2025 semiconductor market outlook

The global semiconductor market is on a historic trajectory, with revenue projected to exceed $1 trillion annually by 2030, according to Gartner’s Q1 2025 forecast. But this growth story isn’t just about scale. It’s driven by complexity.  

As AI adoption accelerates, electric vehicles become mainstream, and industrial systems move further toward the edge, demand for advanced silicon will redefine sourcing priorities across the value chain. After a soft landing in 2023, the chip market is now roaring back.  

Gartner forecasts double-digit revenue growth in 2025 and 2026—11.8% and 11.2% respectively. This projection signals a broad recovery for the sector despite the many challenges it faces. Volatile memory pricing, intensifying geopolitical risks, and sweeping U.S. tariffs all threaten to disrupt global trade routes.  

Given the current environment’s evolving nature, flexibility in sourcing is irreplaceable. Sourceability helps OEMs, CMs, and procurement leaders stay ahead of disruptions with data-driven insights and diversified supplier networks. Insights from Q1 will help supply leaders stay ahead of the curve as we move into the second half of the year.  

Semiconductor Growth Outlook

The chip sector is poised for vigorous growth in the months ahead. Gartner’s forecast shows global semiconductor revenue climbing from $598 billion in 2024 to $733 billion in 2026. Given a longer runway, the industry’s revenue is expected to top $924 billion by 2029. These figures mark a compound annual growth rate (CAGR) of 7.1%, which is a healthy signal of sustained demand across multiple verticals.  

But what exactly is driving the sector forward?  

AI and Hyperscale Data Center Demand

The most immediate lift comes from AI infrastructure buildouts, particularly in high performance data centers used in LLM training. Demand for GPUs, custom ASICs, and AI-optimized processors continues to outstrip supply, catalyzing growth in high-performance computing silicon. As artificial intelligence has infiltrated nearly every industry, demand isn’t expected to slow anytime soon. In the near-term, this segment is poised to be the chip industry’s largest growth and revenue driver.  

Edge AI and Industrial Automation

Longer-term, analysts foresee the center of gravity shifting toward the edge. Gartner projects robust growth in industrial automation, robotics, and distributed AI workloads that require intelligent edge devices. These applications demand a diverse range of semiconductors, placing new pressures on sourcing strategies.  

Automotive Electronics

The number of semiconductors per vehicle has been rising rapidly for several years, a trend that became evident during the pandemic-related chip shortages of 2020 and 2021 when auto production ground to a halt for many manufacturers. From $80.8 billion in 2024, the automotive semiconductor segment is expected to reach nearly $116 billion by 2029. Key drivers pushing this number up include electrification and autonomous driving platforms.  

Smartphones and PCs

While not a headline story, the consumer device segment is showing signs of stabilization after multiple uninspiring years. Gartner forecasts both smartphones and PCs returning to moderate growth as memory inventory balances out and refresh cycles pick up.  

Memory Market Insights

While overall semiconductor demand is strengthening, the memory market remains turbulent. With divergent pricing trends, persistent volatility, and growing pressure from AI, the memory segment will require careful attention.  

After bottoming out in 2024, Gartner sees DRAM prices stabilizing. The firm projects a 2.5% price increase in 2025, followed by a 5.5% rise in 2026. Explosive demand for high bandwidth memory (HBM) in AI accelerators is catalyzing this growth to the tune of a 21.7% CAGR from 2024 to 2028.  

However, with AI servers absorbing a disproportionate amount of the DRAM supply, conventional server DRAM is taking a back seat in the fab production queue. That prioritization is driving margins higher for DRAM vendors but tightening availability for buyers. Procurement leaders sourcing DRAM for non-AI applications should anticipate shorter pricing cycles and shallower corrections than in previous downturns.  

There could be a significant upset, however, after Samsung announced its decision to push its DDR4 products into end-of-life (EOL) through 2025. Already, Samsung has been canceling or adjusting pre-existing orders. Despite Micron’s position as a leader in the market, it will not have the capacity to fill the void left by Samsung. Constraints in DDR4 could rise through 2025, especially as smaller suppliers work to fill in the gaps.

The NAND market, by contrast, remains under significant pressure. Not buoyed by AI like the DRAM segment, NAND prices are expected to dip by 6.4% in 2025. Consumer demand, particularly from smartphones and PCs in the near term, isn’t enough of a sustaining force, and high fab costs continue to challenge NAND manufacturers. A meaningful recovery is not expected until mid-2026, when tighter supply and demand could return to profitability.

HBM as a Growth Driver and Bottleneck

HBM has quickly evolved from a niche technology to a central pillar of the AI hardware stack. Its ability to deliver massive memory bandwidth in a compact form factor makes it indispensable for AI accelerators, particularly those found in hyperscale data centers.  

As a result, the HBM market is experiencing exponential growth. Total sales are expected to more than double from $15.2 billion in 2024 to $32.6 billion in 2026. In the next year, HBM shipments are forecast to surge by 57% thanks to extraordinary demand from AI training workloads.  

This growth translates into sustained pricing power, with HBM commanding a premium nearly five times higher than traditional server DRAM. Average selling prices for these high-performance chips are expected to continue a modest upward trend in 2025. The shift toward more advanced HBM variants, particularly HBM3E and the upcoming HBM4 expected later this year, will drive prices per chip higher.  

However, this rapid growth comes with a supply-side bottleneck. Vendors are prioritizing technology transitions over raw capacity expansion, which will keep the market structurally under-supplied well into 2026.

Policy Disruption and Tariff Risk

If there’s one wildcard that could upend even the best-laid plans within the chip industry, it’s the rapidly shifting landscape of global trade policy and tariffs. Between February and May of this year, the U.S. administration has implemented a sweeping series of tariff actions, affecting a broad swath of critical goods.  

Semiconductors, auto parts, aluminum, and other critical materials from China, Canada, Mexico, and others now face tariffs ranging from 10% to 30%. China faces the steepest penalties, and some categories are threatened with tariffs as high as 145%—though this drastic rate has been rolled back while the countries negotiate a more substantial deal. The financial fallout is already rippling through the supply chain. More than $800 billion in imported goods are affected, according to estimates cited by Gartner.  

The uncertainty surrounding trade policy is now recognized as one of the top five emerging global risks, according to Gartner’s 1Q25 Emerging Risk Survey. That risk isn’t just on paper. Over 60% of manufacturers have already begun changing suppliers, while another 30% have taken a “wait-and-see” approach that may quickly become untenable.  

Beyond the direct impact on prices, new barriers to cross-border component trade will also result in logistical bottlenecks. Manufacturers should expect input material shortages and longer lead times. Identifying alternative suppliers may also become necessary to ensure continuity.  

For organizations vying to stay competitive, this environment demands more than reactive cost-cutting. It calls for a proactive, data-informed strategy. Tools like Sourceability’s Datalynq market intelligence platform help procurement teams track price and availability changes in real time and assess the impact of policy changes before they disrupt production lines.  

Looking Ahead

As supply chain disruptions become more frequent and less predictable, the semiconductor industry is moving beyond short-term fixes. The next wave of transformations will be structural, shaped by a broad push toward regionalization with deeper investments meant to ensure resilient capacity.  

Gartner expects nearshoring efforts across Asia, Europe, and the Americas to mature between 2027 and 2029. Leading manufacturers are investing heavily in regional foundries and outsourced assembly and test (OSAT) operations to insulate themselves from geopolitical instability and logistics risks.  

Meanwhile, future capacity planning reflects the industry’s ongoing shifts and demand for more advanced components. Global sub -5nm node production is ballooning, with both Gartner and SEMI projecting growth of roughly 13.5% by 2029. Meanwhile, 2nm capacity is forecast to explode in the same window at nearly 1600% growth.  

The Role of Digitalization and Visibility

As chipmakers prioritize cutting-edge process technologies for AI, automotive, and industrial applications, sourcing strategies must evolve accordingly. Procurement teams won’t be able to rely on regionalization alone. Resilience in the coming years will also require an investment in end-to-end supply chain visibility, traceability, and data collaboration to enable more informed decision-making.  

Gartner emphasizes that digital supply networks, built on real-time data sharing and predictive analytics, are now essential for managing sourcing risk, qualifying alternative suppliers, and reallocating demand in response to disruption. Sourceability’s experts and digital platform empower procurement teams to manage complex bills of materials, assess supplier risk, and stay compliant with evolving trade regulations.

The road ahead for the semiconductor industry is both promising and precarious as the sector charges toward historic revenue highs. Even so, surging demand creates obstacles of its own by putting extra stress on the supply base. Meanwhile, the broader supply chain environment, marked by volatile memory pricing and geopolitical fragmentation, is growing more complex by the day.  

What’s clear from Gartner’s Q1 update is that the chip industry is in an era of permanent disruption. Companies that succeed won’t be those with the most capacity or capital, but those who can pivot the fastest and make data-informed decisions before risks materialize.

Sourceability gives procurement leaders the tools and insights to stay ahead of disruption, whether you’re watching memory pricing shifts or trade policy changes. With global supplier networks and real-time analytics, our platform is built for agility and resilience.  

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