Electronics materials makers are preparing for a boom

The electronic materials business is on the upswing. One big driver—the boom in data center construction to run artificial intelligence applications—shouldn’t come as a surprise, but also at play is a broader recovery after a downturn in the postpandemic years.The investment bank Goldman Sachs projects that electricity use for data centers will grow 165% by the end of the decade from a 2023 base. All these data centers use advanced chips that are fabricated with materials such as chemical mechanical planarization slurries, high-purity gases, thin-film precursors, and lithography agents.“AI was really the bright spot that drove a lot of the industry for advanced-node semiconductor manufacturing,” says Mike Corbett, managing partner of the electronic materials market research firm Linx Consulting, referring to semiconductors with feature sizes 7 nm or smaller. “Another bright spot was high-bandwidth memory,” which is also used in AI applications, he adds.AI accounts for only about 5% of the chips manufactured each year. But because these chips are so valuable, they generate about 30% of the revenue from chip making, Dave Reeder, CEO of the materials firm Entegris, said on a recent conference call with analysts. And because higher-performance chips are so hard to fabricate, they also require proportionally more materials.The business of making more-prosaic chips still hasn’t recovered from a recent downturn. According to the semiconductor industry group Semi, demand for the wafers on which semiconductors are built fell by 14.3% in 2023, to about 8.0 million m2. Demand slipped again in 2024 by another 2.5%.Corbett says