We’re pleased to share the Future Horizons Semiconductor July update.
You can find the latest industry insights below:
Executive Summary
July’s WSTS Report saw May’s total semiconductor sales up 118.4 percent vs. May 2025. Month-on-month sales were also up 18.1 percent on April 2026.
To say the chip market is undergoing a boom is, by any measure, a numerical understatement, with current annualised growth rates twice the highs recorded in either the mid-1990’s memory market or early 2000’s dot com boom years.
It would however also be a gross over-simplification and potentially misleading. This is not a ‘normal’ chip industry boom in the historical ‘three good years and one bad’ boom-bust pattern.
The current eye-watering growth is being driven by ICs, up 131.9 percent, more specifically by Memory, up 320.9 percent, and Logic, up 49.2 percent, each in turn driven by a single end market application, the white-hot AI hyperscaler boom.
Even more disturbing than the disparity in sector growth was the fact growth was being driven by ASP increases, not unit demand. This, we believe, makes the current growth rates untenable and a downstream correction inevitable.
We are still currently out on a limb and alone with this opinion; indeed, the general market euphoria shows the opposite with no sign of slowing, witness the recent WSTS industry consensus forecast calling for two further years of uninterrupted market growth.
Such an extended bull run would be an unprecedented industry first in its 70 plus year history, even more extraordinary considering the somewhat subdued global economic outlook. Extended market booms are usually coincident, and driven by, strong GDP growth triggering broader market-based demand and associated supply-side shortages.
Time alone will tell if our cautionary view is merited but if we are wrong, we will be the first to admit it and you will read about it first here.
Market Outlook
May 2026 was the 33rd consecutive month of positive year-over-year growth making it the second longest growth period on record, with only the 35-month June 2002-May 2005 upturn longer.
The critical distinction, however, between this growth spurt and all previous upturns, is the fact it is ASP-driven and not based on strong unit shipment growth. It has also been driven by a single, highly specialist, market sector, namely AI hyperscalers, and their associated, equally unique, Logic, GPU and Memory device demand.
It has not been driven by a strong economic recovery or a broad-based upturn in demand. As such, the broader-based Discretes, Analog, Micro, Opto and Sensor product sectors have yet to recover.
What we are seeing is a chip market that is currently dominated by AI, with its associated product shortages and sky-high ASPs. The much broader, traditional chip markets are struggling to grow, weighed down by an overall weak global economy.
The over-riding hypothesis at the forefront 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 structural shift that has barely got started and, given the huge number and large size of the datacentres needed to power this revolution, the demand for expensive processor chips and memory, as well as a myriad of other more traditional components, will continue to grow exponentially for the foreseeable future.
Whilst we do not disagree with the underlying concepts behind the AI opportunity, we believe the current forecasts all ignore two important factors.
First, these transformations always take a lot longer to materialise and evolve, with the first manifestations never the shape, size or form factor that eventually deliver the solution, think cars, aeroplanes, computers or phones, with most of the early adopters falling by the wayside on the way.
Second, it ignores the fundamental cause of all 17 previous industry downturns: excess supply. The only variable has been what created the oversupply, namely either overinvestment or a slowdown in demand. Once additional DRAM capacity comes on line, over-capacity is inevitable … it is impossible to bring on new supply in a gradual and orderly fashion … and memory ASP growth will reverse.
Unless of course “It’s different this time!”
