The global semiconductor market will be impacted by new and intriguing trends that arose last year as a result of significant shifts in the industry in the United States and China. This will most likely occur in 2025. The competition between the two countries for market dominance will intensify, fueled by the ambiguous developments in China’s domestic semiconductor market and Trump’s severe anti-China policies.
The U.S. semiconductor market tops that of China
The U.S. semiconductor market passed mainland China’s for the first time in 16 years in the third quarter of 2024, marking the world’s largest national market for these products since China overtook the U.S. in 2007. This is the most significant and illustrative trend. Industry analysts predict that this situation will continue until 2024, and even beyond.
Up until 2008, Japan, the world’s largest producer of electronic products, was considered the world’s largest semiconductor market. In 2009, China beat both the United States and Japan to become the world’s largest semiconductor market, a position it maintained for a total of 15 years, until 2023. China’s global share of the semiconductor market increased considerably during this period, reaching a peak of 35.1% in 2019, as the country’s manufacturing and electronic information industries expanded.
The Revival of the U.S. Electronics Industry: Key Factors
The American electronics industry has been significantly revitalized by several factors, with the following being the most significant:
The development of high-performance computing and artificial intelligence in the United States has resulted in a significant increase in demand for corresponding semiconductor products, including GPUs and other specialized integrated circuits (ICs), which has prompted significant industry investments.
The current state of affairs in the United States is indicative of a broader global trend. As it was last year, the main things that will drive the growth of the global semiconductor market in 2025 will be the creation of artificial intelligence systems, the storage of data, and the fast rise in demand for high-bandwidth memory processors. The United States and China are engaged in a competition for global leadership in this sector.
The normal development of China’s semiconductor and AI industries is impeded by the continuous and escalating restrictions imposed by Washington on export-import operations in the semiconductor industry between American and Chinese manufacturers.
The United States has increased its sanctions against China in the semiconductor sector
In early 2022, the United States implemented its third round of technology sanctions against China, which ended in December 2024. The objective was to further restrict Chinese companies’ access to components for the production of advanced ICs. The supply of equipment and software for IC design and manufacturing is subject to increased export restrictions as a result of the new sanctions.
Furthermore, the list of Chinese companies that will be subject to stricter export license issuance and revocation mechanisms to regulate their access to American technology has been expanded. The transfer of equipment to designated Chinese companies, regardless of whether it was manufactured by an American company or contains at least one microchip of U.S. origin, will be regarded as a violation of export restrictions from this point forward.
According to certain U.S. experts, Washington’s decision to restrict China’s access to only advanced technologies while disregarding Chinese companies’ proficiency in “mature” IC manufacturing processes is an error. The equipment required for these processes can still be primarily acquired by Chinese companies, as it has already been utilized to produce ICs for AI applications at advanced 7nm and 5nm technology nodes. Using more costly next-generation equipment from the Dutch company ASML, U.S., South Korean, and Taiwanese competitors manufacture ICs at these nodes. However, this equipment is prohibited from being sold to China.
China’s Semiconductor Industry Adjusts to New Challenges
Various factors are influencing the formulation of a new development paradigm for the semiconductor industry in China, suggesting a substantial transformation rather than a crisis. Moving money around and making the best use of workers, along with improving production structures for a wide range of products and styles, are all things that are happening right now in this sector. This optimization is characterized by a number of significant trends.
In 2024, the semiconductor industry experienced a significant decrease in its overall financing volume, predominantly as a result of the diversion of funding from chip manufacturing to the production of semiconductor equipment. Compared to 2023, the investment in the production of integrated circuits (ICs) decreased by 32.4%. Because of this trend, Chinese investors are becoming more interested in the semiconductor equipment sector. This includes important tools for making integrated circuits (ICs), like lithography machines and etching machines. This change shows that China’s leaders have a clear idea of how important it is to be technologically independent from the West. One way they plan to do this is by replacing imported advanced equipment used to make semiconductors.
The semiconductor industry’s critical position in the supply chain guarantees that IC design continues to be a significant area of investment. The persistent demand for a variety of semiconductor types in a variety of application markets bolsters this ongoing investment.
The semiconductor industry’s artificial intelligence (AI) segment is anticipated to be the most lucrative investment sector in the years ahead, as it is currently experiencing accelerated expansion. There are many chances for semiconductor companies to invest in new technologies, like high-performance networking processors, advanced storage solutions, and computing architectures. This is because AI hardware is becoming more popular, and this is happening in many fields.
The semiconductor industry has experienced a decline in profit margins over the past two years as a result of increased global competition and geopolitical factors. This has resulted in changes to salary structures and workforce specialization. Despite the general decline in average salaries from 2023 to 2024, the demand for experienced professionals in the fields of silicon wafer production and semiconductor equipment has resulted in an increase in the salaries of process engineers. This trend is consistent with China’s efforts to enhance the domestic production of semiconductor equipment.
The new development model of China’s microelectronics industry is significantly dependent on active state support that is directed toward technological innovation and industrial modernization. Since last year, the State Council of China has bolstered the semiconductor sector by implementing a variety of benefits. These include the establishment of industrial parks, direct government subsidies for research and development, and tax incentives that are intended to encourage investment, particularly among smaller and emerging businesses.
The Future of the Semiconductor Market in China
The immense market demand will continue to stimulate China’s microelectronics industry. This is evident. In order to sustain its long-term growth, China is actively optimizing its semiconductor industry, redirecting investments, and emphasizing self-sufficiency, despite U.S. sanctions and the pressures of global competition.