The semiconductor sector reports record first-half growth primarily driven by pricing and AI-related sales, but industry experts warn of underlying vulnerabilities and an uncertain outlook as demand remains subdued beyond the tech giant-led focus.
The semiconductor market has posted its strongest first-half surge on record, but Future Horizons chief executive Malcolm Penn says the headline numbers conceal a far narrower and more fragile recovery than they first appear. Electronics Weekly reported that global semiconductor revenue rose 102.5% in the first half of 2026, yet Penn argued that most of the expansion came from pricing rather than volume, with average selling prices rising 79.8% while unit shipments increased only 12.1%. He said the market was being pulled along by a small number of AI-related product categories and a limited group of wealthy hyperscale customers.
That pattern fits the view Penn set out earlier this year, when he said a genuine upturn would need to be driven by unit demand rather than higher prices alone. In September 2025, Electronics Weekly reported that Future Horizons expected 2025 semiconductor sales to reach $732 billion, then climb to $813 billion in 2026, but warned that the market’s strength was being distorted by the AI datacentre build-out while broader end markets remained weak. Penn has repeatedly said that consumer-facing areas such as automotive, computers and smartphones are still under pressure from a subdued global economy and elevated memory costs.
The latest data also underlines how concentrated the boom has become. In March, Electronics Weekly reported that Ethernet switch sales in AI back-end networks had more than tripled and accounted for more than two-thirds of datacentre switch sales in AI clusters during 2025, as major operators including Amazon, Microsoft, Meta, Oracle and xAI shifted to Ethernet. In February, Dell’Oro said the related data centre physical infrastructure market could top $80 billion by 2030, with power constraints forcing a rethink of facility design. Other forecasters have been equally upbeat: Semiconductor Intelligence predicted 30% market growth in 2026, while Omdia said global semiconductor revenues could exceed $1 trillion this year.
Even so, Penn remains sceptical that the present phase can last. Electronics Weekly reported in January that he had seen signs of a modest improvement in chip unit demand, but he still cautioned that the market was being flattered by AI-linked shortages and unusually high prices. In his latest comments, he said any growth built mainly on higher prices is unlikely to endure once new supply arrives, alternative technologies emerge or demand cools. He said the industry’s best outcome would be a soft landing, but added that such an adjustment looks doubtful given how heavily the market now depends on AI spending.
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