A consensus has emerged among IC design companies during recent earnings calls, with all players expressing positive evaluations for their 2025 outlook. Growth momentum is widely projected to surpass 2024 levels.
The realization of these projections will ultimately depend on economic conditions. While cloud AI applications are expected to remain the strongest growth driver, other sectors may experience only moderate expansion.
For automotive and industrial control applications, major overseas IDMs maintain their conservative stance. While Taiwanese companies express confidence in gaining market share in these sectors, this optimism marks a stark contrast to their cautious outlook from several months ago.
During the previous quarter's earnings calls, Taiwan's IC design firms expressed significant caution about the second half of the year, suggesting that the traditional third-quarter peak season might underperform expectations. This led to a more pessimistic longer-term outlook, with order visibility beyond one quarter appearing limited. Given the weak customer demand at the time, maintaining optimism seemed improbable.
However, the situation shifted with the emergence of urgent orders near the end of the third quarter. China's home appliance replacement subsidy policy proved particularly influential, with many manufacturers reporting third-quarter revenue exceeding expectations and a more optimistic outlook for the second half of the year.
This renewed optimism has strengthened industry confidence for 2025. Cloud AI applications, spearheaded by Nvidia and CSPs, are anticipated to see even more explosive growth in 2025. Major research institutions forecast stronger replacement cycles for both mobile phones and PCs in 2025.
Furthermore, the expanding adoption and advancement of edge AI applications are driving comprehensive specification upgrades across these major consumer electronic products and other edge devices. IC design firms see legitimate reasons for optimism about 2025, particularly given healthy order estimates for the first half of 2025.
However, market risks persist. Some IC design companies note that given 2024's subdued demand, manufacturers will naturally present optimistic 2025 budgets, supported by encouraging forecasts from research institutions and customer orders.
Yet, considering the global market's volatility in recent years, significant economic recovery in 2025 remains uncertain. Consumer willingness to adjust electronic product budgets and corporate capital expenditure plans for 2025 are still unknown variables.
Growth drivers: AI, replacement cycles, and specification upgrades
IC design firms broadly identify AI, replacement cycles, and specification upgrades as the three key growth drivers for 2025. The materialization of any of these factors could significantly benefit the entire market. Companies including MediaTek, Novatek, and Realtek maintain positive outlooks, while Elan, Weltrend, GMT, and Fitipower also express optimism.
However, similar optimism prevailed in late 2023 regarding 2024's growth prospects, which were expected to rely on the same factors. Ultimately, only cloud AI delivered strong performance in 2024, as recognized early on by a select few semiconductor companies.
Currently, none of these growth drivers have successfully convinced consumers to lift their budget constraints and make substantial purchases of the latest electronic products in 2024.
The authenticity of the optimistic 2025 outlook will likely become more apparent in the first quarter of 2025.
