The current global chip market recovery is delicate and flimsy and built on narrow foundations and mass AI hysteria, says Malcolm Penn, Future Horizons Founder.
He has tempered his initial 15% growth forecast for the 2025 chip market issued in January down to 8%, plus or minus 3%. Following a slippage of 2.8% in Q1, he sees growth of 1.4% in Q2, and 2.5% in Q3, followed by a 3% downturn in Q4
“You look at the headlines and your heart says it’s a boom, then you look at the data and it tells you the market is pretty much in recession,” says Penn.
“Monthly annualised growth rates are trending down, excess capacity will plague the industry throughout 2025, the threat from China to flood the global market with mature nod technology is real and the increasingly closed China market is forcing western chip makes to reopen their China-based fabs to ensure access.”
Penn walks through his market fundamentals and still finds them extremely weak.
“Global GDP growth has been downgrade to 2.8% from 3.3%, IC unit demand is still low with no recovery in sight. Unit shipments of 6.8 billion per week is 16% below the long-term trend and it will be at least four more quarters before it gets back to trend,” asserts Penn. “Without increased unit demand there can be no long-term market recovery.”
“Average selling prices (ASPs) which have been driving the market growth are now weakening except in logic,” Penn continues, and he worries about excess capacity driven by Capex overspend.
His no more optimistic about growth prospects in 2026. In what he acknowledges is “a very unsophisticated guess” he currently predicts just 1% growth in 2026.
He warns: “This could easily go into negative territory if AI demand collapses or slows and or Trump 2.0 tariffs tip the global economy into recession.
He sees no real growth until 2027, and says, “the next supercycle isn’t coming before 2029,” and that depends on China and the rest of the world pulling in its horns on capacity.
