Jean-Christophe Eloy. Source: Ojo-Yoshida Report
By Bolaji Ojo
Jean-Christophe Eloy has been closely involved in the electronics and semiconductor industries for several decades, during which period the founder and CEO of the Yole Group has observed a handful of transitions in the sector.
Another one is taking place now, according to Eloy, who says the current transformation of the technology world is multifaceted and deeper than previous ones because it encompasses most segments of the global economy. To further complicate the situation, the industry is also trying to wrangle down the disruptive impacts of geopolitical disputes and the uncertainties associated with the applications, investments and access to innovations in artificial intelligence, he noted.
In a webcast interview with editors of the Ojo-Yoshida Report, Eloy explored diverse topics of interest to the industry, ranging from AI to the increasing role of China in the semiconductor supply chain and the outlook for leading players like Nvidia and TSMC. He also delved into the fractious issue of how Taiwan’s relationship with China and the West will be resolved, suggesting that he sees a peaceful, negotiated resolution that while not pleasing to everyone would still be acceptable on a longer-term basis.
How will the semiconductor industry fare in 2025, however? The Yole Group is finalizing its forecast for the year but Eloy insists the industry will cross $700 billion in sales this year, driven by continued strong investments in AI chips, a recovery in the automotive market, and a push to reenergize operations by companies that have struggled with tepid demand over the last two years.
The demand-supply challenges that have in the past plagued the sector will remain, according to Eloy. Outside of AI, semiconductor vendors have not regained pricing leverage, and this situation may not change in 2025 because of new fabs that began operating in 2024, he said.
“What will be interesting is all these new fabs that have started operation last year and that will go into volume production this year,” Eloy observed. “How will this affect the market? Will the device maker be wise enough not to push all the production, all the new units at the same time, and with the price war that could happen later this year? A lot of new capacity is coming, and if these capacities are put online at the same time, there will be a big effect on pricing.”
Click below to watch and listen to the discussion between editor-in-chief Mike Markowitz and Bolaji Ojo, managing editor of the Ojo-Yoshida Report.
Diving deeper into the state of the semiconductor market, Eloy identified three factors which he said are critical to the evolution of the industry. The first is the role of China, in terms of its market size, the level of IC innovations taking place in the country in response to Western – especially US – sanctions and restrictions and the growing increase in the content of Chinese-made semiconductors going into markets like automotive.
Sanctions are proving counterproductive for Western chip enterprises, Eloy observed. As the restrictions on their access to Western technologies intensify, Chinese chipmakers are doubling down on internal productions and using whatever tools are at their disposal to cut the technology gap with their foreign counterparts. As a result, the West’s share of the semiconductor market will continue to shrink. It’s a lose-lose situation for Western chipmakers, he concluded, adding that China’s IC growth is inevitable and unstoppable.
“The growth of the production of semiconductor in China will continue at a very high level and there is nothing to stop that,” Eloy said. “The only way to stop it is to stop selling EDA tools in China, which will never happen. The Chinese semiconductor industry will continue to grow, including in leading edge processes due to the developments they are doing locally.”
Grim outlook for the West in China
Western countries and semiconductor enterprises based in the region face a catch 22 situation regarding China, according to Eloy. Sanctions imposed on the Communist nation have reinforced the belief that they must not rely on foreign sources for their semiconductor requirements. As a result, the local companies are being pushed by their government to intensify their R&D activities and procure components in the country. This has resulted in an increase in local sales at the expense of foreign IC vendors, Eloy said.
“It’s not a good game for China, but they are taking steps to increase the speed of developments locally and pushing the system makers to increase the content of semiconductors coming from Chinese manufacturers,” he said. “Step by step, quarter after quarter, year after year, they will push the non-Chinese suppliers out of the Chinese market, and it’s starting in automotive with the BYD cars.”
“Step by step, quarter after quarter, year after year, they will push the non-Chinese suppliers out of the Chinese market, and it’s starting in automotive with the BYD cars.”
Jean-Christophe Eloy, The Yole Group
Unsurprisingly, Eloy believes Taiwan will remain a sticky point in the relationship between America and China. However, he suggests the best solution all the parties will agree to will involve a political resolution of their differences. China, he says, will eventually regain control of Taiwan via a process like the resolution of the United Kingdom’s relationship with China over Hong Kong. The two parties negotiated a multi-year separation deal under which Hong Kong retained its economic and judicial independence as a “Special Administrative Region” of China for a period expected to last 50 years.
“The question is no more whether Taiwan will become Chinese, but when, which is a major difference compared to the past,” Eloy said. “The change will happen, and it will be a political transition. At one point in Taiwan, there will be an election of a government or president that will be pro-Chinese and then something will happen. US politics will not be able to change anything on that.”
If such a development were to take place with Taiwan and China finding a political and peacefully negotiated solution to the future of the island, the move will help reduce tensions over Taiwan and lessen Western concerns about the role of Taiwan Semiconductor Manufacturing Co. Ltd., the world’s No. 1 contract chip manufacturer., in the electronics supply chain.
Drama in Europe
The political theatre is already moving to Europe with the beginning of the new Trump administration. In his first days in office, Donald Trump has already threatened or taken steps to indicate his readiness to turn the existing US-Europe relationships upside down.
His previous questioning of America’s role in the North Atlantic Treaty Organization (NATO) and calls for Europe to increase its defense spending have caused jitters among the political leaders in the continent. Eloy said the continent is bracing for more political uncertainties about its relationship with America, a development that will impact economic relations too.
“What is difficult to answer is how this US Trump administration will act against Europe,” Eloy said. “The support of the US for Ukraine in the Russian war is critical. The support of US for NATO is critical. The support of US for Korea and Japan is critical. But here there are big questions. Will the support continue in the same way? I don’t think so, but what will change? Nobody knows, but there will be changes.”
To watch the discussion with Eloy, click below.
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Bolaji Ojo is publisher and managing editor of the Ojo-Yoshida Report. He can be reached at [email protected].
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