Semiconductor Market: Between Boom and Bust Europe’s Chip Industry: Limited Tailwind from the Global Boom

Looking back at the second quarter of 2025 in the global and European semiconductor market, two familiar trends persist: globally, there is a boom, while growth stagnates at the European level. IDEA analyst Marco Mezger discusses the developments of the second quarter of 2025.

By 2030, the global semiconductor market is expected to boast a value of one trillion USD; by 2040, this is predicted to double again. Theoretically, these are fantastic prospects, but can reality keep up with these forecasted developments?

It can, as industry expert and IDEA analyst Marco Mezger notes in his review of the second quarter of 2025, at least on a global level. For 2025, the WSTS (World Semiconductor Trade Statistics) expects approximately 728 billion US dollars in revenue, following 631 billion US dollars achieved in the previous year, 2024. This keeps the goal of 1 trillion US dollars globally by 2030 within reach.

However, as Mezger points out, this path is littered with obstacles. Shipments of integrated circuits (ICs) declined in the second quarter of 2025, while average selling prices (ASPs) increased. This can be interpreted as a sign that while recovery in the market is noticeable, it remains fragile.

Europe remains a tough terrain

In Europe, the situation looks more challenging, as Mezger analyzes based on the quarterly figures. Distribution through distributors reported a 14 percent decline in Q2 compared to the previous year. France (-20 percent), Germany (-17 percent), and Austria (-36 percent) were particularly affected. Nevertheless, the level remained higher compared to the fourth quarter of 2024. The downside, however, is that the small upturn from the first quarter could not be sustained.

A structural problem remains the book-to-bill ratio: Since 2023, the book-to-bill ratio in Europe has been below 1 (Q2/2025: 0.97). This means that distributors are shipping more than they are receiving new orders. This is a clear warning signal that the market is either stagnating or declining.

And while the USA and Asia benefit from massive investments by hyperscalers and data centers in AI, Europe remains more reserved. Here, industries like automotive, industrial, and robotics dominate. These are sectors that traditionally adopt new technologies more slowly. As a result, the current AI wave is passing Europe by, and the transformation toward "AI Everywhere" is stagnating.

"AI Everywhere" and the associated opportunities for Europe were already highlighted by Mezger in the Q1 talk. His core message: Europe has the opportunity to catch up on its delayed entry into the AI growth market with the second wave. The real strengths lie in automotive, industrial, and robotics — precisely where artificial intelligence will deeply penetrate applications in the future. This opportunity must be seized.

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Memory market: Driven by HBM

The memory market remains a key focal point in market forecasts. After the downturn in 2023, the market recovered rapidly. A significant driver is HBM (High-Bandwidth Memory) fueled by the AI boom: In 2024, HBM accounted for 18 billion US dollars, representing nearly 20 percent of DRAM market revenues. By 2030, HBM is expected to make up half of DRAM revenues, approximately 194 billion US dollars. It is no surprise that SK Hynix, Samsung, and Micron have recently decided to reallocate production capacities. In Q2, only 14 percent of the bits at SK Hynix came from HBM, yet these contributed an impressive 54 percent of the profits. Other types of memory are stagnating, with only NOR-Flash showing growth.

However, another development must be considered for the third quarter of 2025. Mezger emphasized in the Q2 talk that manufacturers like Samsung and SK Hynix are massively shifting their production capacities toward HBM, reducing DDR4 and low-power DDR generations. This led to significant price increases for DDR4 in the spring of 2025. However, a countertrend has now emerged: as demand remained high and prices climbed well above DDR5 levels, both companies have decided to keep DDR4 in production longer – at least until 2026. This is a response to short-term market dynamics and the unusually strong profitability of DDR4.

Automotive: The price pressure remains

Automotive remains a double-edged topic. Traditionally, Europe is strong in this sector, but Chinese manufacturers are leading in electric vehicles. In China, a battery-electric vehicle is now, on average, cheaper than a comparable combustion engine vehicle — a situation heavily supported by government subsidies and massive investments in battery technologies. In Europe and the USA, the situation is reversed: here, electric vehicles remain significantly more expensive than combustion engine vehicles.

This not only provides Chinese brands with competitive advantages but also drives demand for domestic chips. By 2026, Chinese OEMs aim to use 100 percent locally produced semiconductors. As a result, China's share of global capacity for major nodes (≤ 40 nm) will grow from 31 percent (2023) to nearly 40 percent by 2027, primarily at the expense of Taiwan.

For European automakers, the decision by Chinese manufacturers to fully rely on domestic chips also has consequences. On the one hand, the production costs of Chinese BEVs decrease due to shorter supply chains and government support, further widening the price gap with European models. On the other hand, European suppliers lose sales opportunities in the important Chinese market, while their own OEMs simultaneously face aggressively priced, technologically well-integrated competitor vehicles from China in their home market.

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Springboard for the second AI wave

The global semiconductor market remains on a growth trajectory, driven by AI and memory technologies like HBM. However, Europe is under pressure: while Asia and the USA benefit from the first AI wave and China leverages its cost and technology advantages in the automotive sector, Europe must consistently capitalize on its strengths in industry, robotics, and automotive in the second AI wave. Only then can the region benefit from growth instead of falling further behind in global competition. (sb)