The global semiconductor market is expected to expand at least 11 percent annually to US$890 billion next year, as significant artificial intelligence (AI) infrastructure investments continue to drive demand for AI accelerators, power management chips and other chips for AI devices, International Data Corp (IDC) said yesterday.
There is a slim chance that the AI bubble would burst next year, as the world’s major cloud service providers (CSP) plan to continue spending heftily on AI infrastructure buildup over the next two years, IDC senior semiconductor research manager Galen Zeng (曾冠瑋) said yesterday.
“The risk of seeing that occur in 2026 is very low,” Zeng said. “The AI infrastructure deployment is limited by energy availability.”
Photo: Lisa Wang, Taipei Times
The CSP companies would factor in the availability of energy resources before making orders, Zeng said, adding that they would not squander the outlay only on chips.
Foundry service providers are expected to grow 20 percent year-on-year next year, outpacing the overall semiconductor industry and becoming one of the biggest beneficiaries of the AI boom, he said.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest chip foundry and a major chip supplier to Nvidia Corp, is projected to expand its revenue by 22 percent to 26 percent next year, Zeng said.
To cope with strong AI chip demand, TSMC is also expected to boost its capital expenditure to between US$48 billion and US$50 billion next year, primarily focused on boosting 3-nanometer, 2-nanometer and advanced chip packaging capacities, in Taiwan and in the US, he said.
That would represent a 20 percent increase from TSMC’s capital expenditure budget this year of between US$40 billion and US$42 billion.
To mitigate supply constraints, TSMC would also likely dramatically expand its advanced chip-on-wafer-on-substrate (CoWoS) capacity by more than 66 percent next year to 1.1 million wafers a year from 660,000 wafers this year, IDC said.
However, that would not fully resolve the supply scarcity, as more than half of the CoWoS capacity is expected to be consumed by Nvidia, it said.
IDC said it expects mounting geopolitical risks to drive a major landscape change in the foundry segment, with China overtaking Taiwan as the world’s biggest foundry service provider by 2029.
China could expand its foundry market share to 37 percent by that time, benefiting from the Chinese government’s heavy subsidies for the chip industry, which aims to increase semiconductor sufficiency, Zeng said, adding that he estimates Chinese chipmakers to see a compound annual growth rate of 9.8 percent in capacity during the 2025-2029 period, mostly in mature process technologies.
Taiwan is expected to seize a 35 percent market share, with a capacity increase of 2.8 percent, as local chipmakers are diversifying their production overseas in the US, Japan and Europe, IDC said.
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