Semiconductor. Representational image. Photo courtesy: Unsplash

To keep pace with unremitting growth in demand for chips, the global semiconductor manufacturing industry is expected to increase capacity by 6 percent in 2024 and post a 7 percent gain in 2025, reaching a record capacity high of 33.7 million wafers per month, said a report by SEMI, an industry association comprising companies involved in the electronics design and manufacturing supply.

Semiconductor. Representational image. Photo courtesy: Unsplash

The report, published on June 18, said leading-edge capacity for 5nm nodes and under is expected to grow 13 percent in 2024, chiefly driven by generative artificial intelligence (AI) for data center training, inference, and leading-edge devices. To increase processing power efficiency, chipmakers including Intel, Samsung, and TSMC are poised to start production of 2nm Gate-All-Around (GAA) chips, boosting total leading-edge capacity growth by 17 percent in 2025.

“The proliferation of AI processing, from cloud computing to edge devices, is fueling the race to develop high-performance chips and driving a robust expansion of global semiconductor manufacturing capacity,” said Ajit Manocha, SEMI President and CEO. “This creates a virtuous cycle: AI will drive the growth of semiconductor content across a diverse range of applications, which in turn encourages further investment.”

Capacity expansion by region

Chinese chipmakers are expected to maintain double-digit capacity growth, registering a 14 percent increase to 10.1 million wpm in 2025—nearly a third of the industry’s total—after logging a 15 percent rise to 8.85 million wpm in 2024, it said.

Despite the potential risks of an overshoot, the region continues aggressive investment in its capacity expansion, in part to mitigate the impact of recent export controls. Major foundry suppliers, including Huahong Group, Nexchip, Sien Integrated and SMIC and DRAM maker CXMT, are investing heavily to grow the region’s semiconductor manufacturing capacity.

Growth forecast by SEMI. Photo courtesy: semi.org
Growth forecast by SEMI. Photo courtesy: semi.org

Most of the other major chipmaking regions are expected to see capacity growth of no more than 5 percent in 2025. Taiwan is forecast to rank second in capacity in 2025 at 5.8 million wpm, a 4 percent growth rate, while South Korea is projected to take the third spot next year, expanding capacity 7 percent to 5.4 million wpm after surpassing the 5 million wpm mark for the first time in 2024. Japan, the Americas, Europe & Mideast, and Southeast Asia are expected to grow semiconductor manufacturing capacity 4.7 million wpm (3 percent Year-on-Year), 3.2 million wpm (5 percent YoY), 2.7 million wpm (4 percent YoY), and 1.8 million wpm (4 percent YoY), respectively.

Capacity expansion by segment

Fueled largely by Intel’s establishment of its foundry business and China’s capacity expansion, the foundry segment is projected to increase capacity by 11 percent in 2024 and 10 percent in 2025, reaching 12.7 million wpm by 2026.

Rapid adoption of high bandwidth memory (HBM) to meet rising demand for faster processors required by AI servers is powering unprecedented capacity growth in the memory sector. Exploding AI adoption has driven increasing demand for denser HBM stacks, with each stack now integrating 8 to 12 dice. In response, leading DRAM makers are increasing investment in HBM/DRAM. DRAM capacity is expected to increase by 9 percent in both 2024 and 2025. By contrast, the 3D NAND market recovery remains slow, with no growth in capacity forecast for 2024 and a 5 percent increase expected in 2025.

The rise of AI applications in edge devices is expected to increase DRAM content in mainstream smartphones from 8GB to 12GB, while laptops using AI assistants will need at least 16GB of DRAM. The expansion of AI to edge devices will also stoke demand for DRAM.