We are pleased to share the Future Horizons Semiconductor July update.
You can find the latest industry information below:
Executive Summary
The WSTS July report had May’s semiconductor sales volume up 118.4 percent compared to May 2025. Month-on-month sales also increased 18.1 percent in April 2026.
To say that the chip market is booming is, by any measure, an understatement, with current annual growth rates more than double those recorded during the memory market of the mid-1990s or the early 2000s dot com boom.
However, it can also be an oversimplification and can be misleading. This is not a ‘normal’ chip industry in the history of the ‘three good years and one bad pattern’ boom-bust.
The current eye-watering growth is driven by ICs, up 131.9 percent, especially Memory, up 320.9 percent, and Logic, up 49.2 percent, each driven by the end-market application, white-hot AI hyperscaler boom.
More disturbing than the difference in sector growth is that growth was driven by rising ASP, not unit demand. This, we believe, makes current growth rates unsustainable and a correction of the river inevitable.
At the moment we are still a bit out and alone with this idea; indeed, the general market euphoria shows the opposite with no sign of slowing down, witness the latest WSTS industry consensus forecast calling for two years of uninterrupted market growth.
An extended bull run like this would be the industry’s first ever seen in its 70-plus year history, which is even more surprising given the sluggish global economy. Increased market growth is often combined, and is driven by strong GDP growth resulting in market-based demand and supply-related shortages.
Only time will tell if our cautionary opinion is correct but if we are wrong, we will be the first to admit it and you will be the first to read about it here.
Market Outlook
May 2026 marked the 33rd consecutive month of positive year-over-year growth, making it the second-longest growth period on record, with only the 35-month period of June 2002-May 2005 as the longest.
The key difference, however, between this acceleration and all previous increases, is the fact that it is driven by ASP and not based on strong growth in unit shipments. It was also driven by a single, highly specialized market sector, namely the AI hyperscaler, and its related, equally unique, demand for Logic, GPU and Memory devices.
It has not been driven by a strong economic recovery or broad demand growth. Therefore, the broad based product sectors of Discretes, Analog, Micro, Opto and Sensor have not recovered.
What we are seeing is a chip market currently dominated by AI, with a shortage of related products with sky-high ASPs. Broader, mainstream chip markets are struggling to grow, weighed down by a weak global economy.
The leading hypothesis of the current boom is that AI will reduce costs, shorten time to market and improve customer retention.
In other words, this is a fundamental change that has not yet begun and, given the large number and size of information centers required to implement this change, the need for expensive processor chips and memory, as well as a host of other traditional components, will continue to grow continuously for the foreseeable future.
While we don’t disagree with the underlying concepts behind the AI opportunity, we believe that current predictions all ignore two important factors.
First, these changes always take a very long time to happen and evolve, with the first manifestation there is never a shape, size or aspect of the situation that ends up bringing a solution, think of cars, airplanes, computers or phones, most of the first adopters fall by the wayside.
Second, it ignores the root cause of all 17 industrial declines: oversupply. The only variable has been what caused the oversupply, i.e. overinvestment or decreased demand. When more DRAM capacity comes on line, overcapacity is inevitable… it is impossible to deliver new supply gradually and systematically… and ASP memory growth will slow down.
Unless it’s “It’s different this time!”
