# Sector update: Semiconductors

_AI demand is soaring. Inventories are clearing. Pricing power is returning. And that’s showing up in the numbers — not just in Nvidia, but in less obvious names like STMicro and TSMC._

Neil Woodford · 18 June 2025 · 2 min read

![Sector update: Semiconductors](https://cdn.sanity.io/images/v3acfbvo/production/5db96a46218e3cd5af7d03d742e9ae72047c5755-3840x2160.jpg?w=1600&fit=max&auto=format)

---

The semiconductor industry is huge, global, deeply cyclical, essential to the growing prosperity and technological development of the human race, and for a lay observer like me, it is fascinating. Although its significant capital intensity dictates that the businesses that dominate it are large, it is highly fragmented, with different businesses specialising in and dominating different aspects of chip design, manufacturing and packaging. For example, China is dominant in the supply of the raw materials used in semiconductor manufacturing, including silicon, gallium, germanium and scandium, the US leads in chip tech development and design, Taiwan and South Korea dominate chip manufacturing, and companies in SE Asia specialise in assembly, test and packaging. Consequently, no one country or company controls the semiconductor value chain, and as a result, this industry structure creates a complex web of critical interdependencies and potential vulnerabilities.

The industry’s inherent cyclicality, partly due to its significant capital intensity, also means that identifying when and for how long companies in this industry can become attractive investment opportunities is challenging. Nevertheless, having looked long and hard at a number of the global industry’s leading businesses, I have decided to write about several of them here.

In the immediate aftermath of Trump’s election and the tariff announcement on Liberation Day, chip stocks globally went through a difficult period. Of course, underlying concerns about trade friction between the US and China are ongoing. However, against this backdrop of nervousness, underlying industry fundamentals appear to be improving, driven by the unwinding of excess inventory and consequent pricing pressure and by genuine growth in demand as AI investment globally is increasing very rapidly, particularly in the US.

More evidence of this improving backdrop was evident this week in TSMC’s May Revenue Report. (TSMC is the world’s largest semiconductor foundry – it manufactures chips for companies based on their designs, including Nvidia, Apple, AMD and Qualcomm. It is based in Taiwan, and with a market capitalisation of $1.1trn is the world’s 9th biggest company) In it TSMC reported that May revenues were up 8.3% on April 2025 and a remarkable 40% ahead of May 2024, underlining the strong growth in the industry driven in large part by the emerging AI industrial revolution. This latest evidence backs up what has also been reported by some other leading chip industry players, including Nvidia and STMicro, a leading European chip business I've written about here before.

I will continue to monitor developments in this exciting and essential industry closely, but for the time being, it is becoming increasingly clear to me that a cyclical low point has passed and that a global recovery is underway.