Semiconductors: Chips the world can't have enough of

A booming market

The semiconductor industry’s journey is nothing short of extraordinary. Evolving from modest beginnings, it has grown into a global powerhouse, fuelling the technologies we rely on today. In 2023, the market was valued at $544.7 billion and is projected to exceed $1.1 trillion by 2033, growing at a CAGR of 7.6%. While 7.6% may seem low at first glance, average annual global growth is around 2-3%. The industry is projected to consistently outperform the global economy.

Source: Precedence Research

What’s driving this rise?

• Smartphones: The demand for 5G, AI, and AR/VR chips is revolutionizing the market. Back in 2007, the first generation iPhone had just 62 million transistors, a marvel at the time. Fast forward to the iPhone 13, packing an astonishing 15 billion transistors, a testament to how far semiconductor innovation has come.

• Data centers and AI: The rise of generative AI and cloud services has fueled a growing demand for powerful, efficient semiconductors. The global AI chip market, valued at $73.27 billion in 2024, is expected to grow to $94.4 billion in 2025 and surpass $927.9 billion by 2034, with a remarkable CAGR of 28.9% over the decade.

• Automotive innovation: The shift to electric and autonomous vehicles has made the automotive sector a driving force in semiconductor innovation. Chip counts vary by vehicle type, but EVs outshine traditional ICE vehicles with their tech demands. While ICE cars use 300-1,000 chips, EVs pack up to 3,000, powering smart batteries and autonomous systems.

The makers behind the magic

Modern technology owes much of its existence to the semiconductor industry, where foundries produce the chips that power the devices and systems we rely on daily. Driving AI, 5G, and IoT, these companies quietly shape global innovation. To understand how the industry is shaped, let’s take a closer look at the market share distribution among the leading semiconductor foundries:

Source: Statista

What the numbers reveal

This visualisation paints a vivid picture of the semiconductor industry’s ecosystem, a dynamic mix of global giants, specialized pioneers, and regional powerhouses driving the innovations that keep our world connected.

The global leaders in advanced manufacturing

• TSMC (Taiwan): With an impressive 64.9% market share, TSMC dominates the global semiconductor industry, driving technologies that define modern life. Founded in 1987, it revolutionised chip manufacturing by introducing the Dedicated IC Foundry business model, reshaping the industry. Partnering with tech giants like Apple (AAPL), Qualcomm (QCOM), Nvidia (NVDA), and Advanced Micro Devices (AMD), TSMC is the backbone of innovation. In 2024, it supported 522 customers and delivered 11,878 products, enabling breakthroughs in AI, 5G, IoT, and automotive advancements.

• Samsung Electronics (South Korea): Balancing memory chip dominance with advanced logic manufacturing, Samsung’s 9.3% market share reflects its critical role as both supplier and innovator. The South Korean conglomerate began its foundry business in 2005 and established it as an independent business unit in 2017.

Regional importance

• SMIC (China): Semiconductor Manufacturing International Corporation (SMIC), established in 2000, plays a key role in China’s drive for technological self-reliance, serving as the largest contract chip maker in mainland China. Capturing 6% of the global market, this partially state-owned publicly listed foundry focuses on mature nodes, catering to both domestic and global markets.

• UMC (Taiwan): As the first semiconductor foundry in Taiwan, UMC laid the foundation for the country’s dominance in the global chip industry. Established in 1980, it has grown into Taiwan’s second-largest foundry, holding a 5.2% global market share. From its fabrication plants in Taiwan, Singapore, and China, United Microelectronics Corporation delivers affordable chips that keep the world connected.

Specialised foundries

• GlobalFoundries (US): Representing 4.8%, GlobalFoundries excels in IoT, automotive, and niche markets, focusing on mature process technologies.

• Tower Semiconductor (Israel): Tower Semiconductor, established in 1993, may hold just 1% of the global market, but its impact is far-reaching. Specializing in analog and industrial semiconductors, it powers healthcare, automotive, and industrial electronics with solutions in power management, radio frequency, and imaging sensors.

Supporting producers

• HuaHong Group (China): Contributing 2.2%, HuaHong produces mid-level chips for consumer electronics and industrial applications, supporting China’s growing demand.

• Smaller Foundries (Global): Collectively holding 6.8%, companies like VIS (Taiwan), PSMC (Taiwan), Nexchip (China), and other regional players provide essential legacy and specialized chips, ensuring a balanced and resilient supply chain.

Behind these percentages lies the fascinating story of regional dominance. Over 80% of the global market is concentrated in Asia, with Taiwan, South Korea, and China leading the charge. The contributions from the US and Israel, while smaller in share, reflect the diversity and specialization that keeps the industry resilient.

Where does India stand?

The country’s journey may be at its dawn, but its ambitions are shining brighter than ever. What is the Indian blueprint for chip Success?

• Global collaborations: Tata Electronics, has recently partnered with PSMC (Taiwan) to establish India’s first AI-enabled semiconductor fab in Gujarat, with PSMC providing design, technology licensing, and transfer support.

• Reducing import dependency: Larsen & Toubro (L&T) will invest $300 Mn to establish a fabless chip company in India, aiming to design 15 chip products by 2027 and reduce semiconductor imports.

• Government initiatives: The India Semiconductor Mission (ISM) and the ₹760,000 Mn PLI Scheme aim to establish India as a semiconductor hub by supporting fabrication units, chip design, and display fabs.

• Fiscal support agreement: The ISM has signed a Fiscal Support Agreement with CG Power and CG Semi to set up a ₹76,000 Mn OSAT unit in Sanand, Gujarat, in partnership with Renesas Electronics America and Stars Microelectronics (Thailand) to strengthen India’s semiconductor ecosystem.

In summary

Semiconductors are more than just technology; they are the unseen architects of modern life, shaping industries and defining progress. As the global race for innovation intensifies, the true power lies not in who leads today, but in who adapts, collaborates, and innovates for tomorrow. The future of semiconductors is not just about scaling production; it’s about crafting a resilient, inclusive, and transformative ecosystem.