Industry Outlook “AI Everywhere”: Will Europe’s Semiconductor Industry Catch the Next AI Wave?

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Europe’s semiconductor sector remains in an economic trough, yet a closer look at key market indicators reveals early signs of a potential turnaround. Analyst Marco Mezger from IDEA (International Distributors of Electronics Association) has reviewed the developments of Q1 2025 and stresses that Europe must not miss out on the momentum behind the “AI Everywhere” trend.

While the global semiconductor market continues to expand, largely driven by artificial intelligence, Europe’s chip industry remains cautious. AI is currently propelled by global leaders such as Nvidia, Taiwanese foundry TSMC, and major hyperscaler clients in the United States.

Analysts from IDC, McKinsey, and other research firms expect the semiconductor market to surpass USD 1 trillion in annual revenue by 2035 and to double again to USD 2 trillion just a decade later.

 Markets in the U.S. and Asia are already booming. But how can Europe secure a meaningful role in this transformation? Industry expert Marco Mezger of IDEA (International Distributors of Electronics Association) sees early signs of recovery and highlights the opportunities arising from the shift toward AI-integrated applications across industries.

Weak Performance, but Signs of Stabilization

According to DMASS, European semiconductor distribution revenue declined by approximately 20% in Q1 2025 compared to the previous year. Germany and Italy reported even sharper declines of 27%. Nearly all product categories—including analog, power, and microcontrollers—experienced double-digit losses.

Memory, Mezger’s core area of expertise, also declined by 22%, although this figure conceals a more complex picture. Global demand for High Bandwidth Memory (HBM) is rising sharply due to AI-driven workloads, but Europe has yet to benefit meaningfully from this trend.

Still, one metric signals potential stabilization: the book-to-bill ratio, which compares incoming orders to actual sales. A value below 1.0 suggests contraction; above 1.0 indicates expansion. In Germany—Europe’s largest semiconductor market—the ratio stood at 0.98 in Q1 2025, its highest level since the onset of the downturn. By comparison, it had dropped to 0.47 in Q3 2023, reflecting post-pandemic inventory overhangs. While this suggests a potential bottoming out of the market, a full recovery remains out of reach.

Europe’s Strategic Challenge: No Seat at the AI Table—Yet

Artificial intelligence is the primary growth engine of the global semiconductor market. However, Europe currently plays a limited role in the first AI wave, which is dominated by hyperscalers, large-scale data centers, and direct-to-OEM supply chains. High-end HBM modules and AI accelerators are shipped directly from manufacturers to tech giants like Google, Amazon, and Meta, bypassing traditional distribution channels where European firms could otherwise participate.

Yet the market is evolving, entering a second wave of AI adoption —commonly referred to as “AI Everywhere”— that is about embedding AI into industrial equipment, vehicles, medical devices, and edge computing environments. This phase aligns closely with Europe’s core strengths in automation, industrial control, and precision engineering.

TSMC’s investments in Dresden (via the ESMC joint venture) and Munich (design center) could help lay the foundation for a European AI ecosystem that does not rely on ultra-fine process nodes. Applications in AIoT (Artificial Intelligence of Things), HAI (Hybrid Artificial Intelligence), and edge computing require robust, specialized architectures rather than cutting-edge miniaturization, an area where European players like Infineon, NXP, and Bosch are already well positioned.

Memory Cycles: Familiar Patterns, New Pressures

While Europe currently lags in the memory segment, global developments in DRAM and NAND remain relevant. Both segments follow traditional cyclical patterns, but demand for HBM is introducing new market dynamics.

DRAM manufacturers are shifting capacity from legacy technologies to boost HBM output, resulting in short-term shortages of standard DRAM and rising prices. Yet Europe is largely excluded from this growth segment, as HBM remains complex, expensive, and highly centralized in OEM-directed channels.

The NAND market continues its familiar cycle: output is constrained early in the year to support pricing, then accelerates later, often outpacing demand and triggering price corrections. Europe remains largely detached from this global memory upswing, both technologically and commercially. This further highlights the need to focus on robust, design-in-driven segments that offer longer-term value creation.

A Niche with Strategic Value

Europe’s semiconductor industry stands at a pivotal moment. Short-term performance remains weak, but the fundamentals are not without promise. In the medium to long term, success will depend on redefining the region’s strategic position, shifting away from commoditized mass markets and toward resilient, high-value, application-specific solutions. A genuine market recovery will be driven not by pricing, but by volume. This is where Europe’s real opportunity lies.