The Importance of Semiconductors
Three semiconductor manufacturers currently rank among the top ten in global market capitalization, compared to only one thirty years ago. The primary reason for widespread interest in semiconductors (including in Taiwan) is the current AI era and the irreplaceable role semiconductors play in advancing modern civilization. Semiconductors are ubiquitous.
In 2024, the semiconductor industry, breaking a pattern that has persisted for over half a century, will surpass software for the first time to become the primary driver of tech stock growth and the largest market capitalization.
US Semiconductor Industry
According to the Semiconductor Industry Association’s (SIA) “2025 State of the Industry Report”:
US semiconductor companies are expected to achieve sales of $318.2 billion in 2024, accounting for 50.4% of global chip sales, maintaining their market leadership since the late 1990s. Despite fierce global competition, American companies maintain leading market share in major markets such as Asia, Europe, and the Americas, holding 45.2% of the Japanese market, 51.1% of the European market, and 50.7% of the Chinese market.
Taiwan’s Semiconductor Industry
According to data from The Economist magazine in March 2023, the semiconductor industry accounts for 15% of Taiwan’s GDP.
According to statistics from the Taiwan Semiconductor Industry Association (TSIA) and the Industrial Technology Research Institute’s International Industrial Science and Technology Research Institute, the semiconductor industry’s output value is estimated to be NT$4.8858 trillion in 2022. Taiwan’s gross domestic product is approximately NT$25.35 trillion, and semiconductor production accounts for nearly 20% of its GDP.
In recent years, chip exports have been the most important force supporting Taiwan’s GDP, accounting for 40% of exports, while South Korea accounts for less than 20% and Japan for only 5%. Taiwan’s economic growth rate can be maintained at 3%, thanks to the semiconductor industry.
Semiconductor Supply Chain
The semiconductor supply chain is highly globalized. The United States holds a dominant position in intellectual property/electronic design automation (IP/EDA) tools and manufacturing equipment (62% and 43%, respectively). Wafer manufacturing is highly concentrated in Taiwan (83%), while packaging and testing are primarily performed in mainland China (28%). U.S. semiconductor exports are projected to reach $57 billion in 2024, making it one of the top six U.S. export commodities. Approximately 70% of U.S. chips are sold overseas, maintaining a trade surplus for nearly three decades.
Tariffs
Trump’s remarks on semiconductor tariffs are ambiguous, leaving questions unanswered: when they will take effect, whether the tariffs will be levied on end products or the chips contained within, the scale of U.S. production and investment eligible for exemptions, and how to segment the market within the sophisticated semiconductor supply chain.
AI will determine success or failure
The AI revolution is driving a surge in chip demand. Global chip sales will exceed $630 billion for the first time in 2024, a 19.6% increase. This growth was primarily driven by AI-related demand, resulting in the Computer/AI sector accounting for 34.9% of the end-use market, making it the largest segment. Logic chips ($215.8 billion) and memory chips ($165.5 billion) performed particularly well, with DRAM sales soaring 82.6%, the highest among all categories.
Accounting for the vast majority of capital expenditures
Since the first quarter of 2023, US investment in information processing equipment has grown by 23% after adjusting for inflation, while total US gross domestic product (GDP) has only grown by 6% over the same period. In the first half of 2025, information processing investment contributed to more than half of the overall US GDP growth of 1.2%.
Tech giants’ spending surpass EU’s annual defense budget
The five largest tech giants, represented by Meta, Microsoft, Alphabet, Amazon, and Apple, are making staggering AI capital expenditures. Their spending on AI infrastructure is expected to approach $400 billion in 2025, even exceeding the EU’s defense budget for the entire year of 2024. Amazon, Alphabet, Microsoft, and Meta reported that they will spend $100 billion in fiscal year 2025, up from their previous forecast of approximately $325 billion. These tech giants’ AI capital expenditures are expected to contribute 0.5 percentage points to US GDP between 2024 and 2025.
Generous governments subsidies
The US government is actively promoting the reshoring of semiconductor manufacturing. Since 2020, driven by government incentives, the semiconductor ecosystem has announced over $500 billion in private investment, covering over 100 projects across 28 US states.
These investments are expected to triple U.S. chip manufacturing capacity by 2032 and create and support over 500,000 American jobs, including 68,000 within the semiconductor ecosystem. The government is also further encouraging industry investment by increasing the Advanced Manufacturing Investment Credit (AMIC) to 35%.
Who uses semiconductor chips?
Almost every modern physical device—anything that uses electricity—uses chips—a simple criterion: the more advanced the semiconductor, the more it uses. Jokingly, everything except food and soap uses semiconductors, or will use them in the future.
So, in addition to AI chips, computers, phones, tablets, cars, electric cars, all electronic devices, televisions, refrigerators, washing machines, weapons, satellites, space vehicles, and robots. Furthermore, the vast majority use mature processes, with only a minority using advanced processes.
What about the future? It will only increase, not decrease.
Investors only need to remember one thing: the semiconductor market is only going to get bigger, and its current growth seems to have no boundaries.
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