Growing Demand for Electric Cars and Its Impact on Chip Manufacturers

Electric vehicles (EVs) are significantly changing the automotive sector, and alongside them comes an unprecedented demand for semiconductors. These tiny chips are essential to contemporary cars, powering everything from sophisticated safety features to battery management. For that reason, a rise in demand has been impacting silicon prices in 2025.

As EVs become more sophisticated, the semiconductor market expands quickly, influencing the sector's direction. In this article, we'll explore how demand for EVs has grown and how this has impacted the price of silicon worldwide.

How Is the Demand for Electric Vehicles Growing in 2025?

Although the growth rate varies by region, experts believe the demand for electric vehicles (EVs) will continue to increase in 2025. Global EV sales are anticipated to reach about 20 million units in 2025, a 17% increase over the previous year. Strong adoption in China, Europe, and America is driving this growth, with rates such as:

• Europe: In the first quarter of 2025, EV sales increased by 28%, with Germany driving the increase.

• China: With more than a million EVs sold in Q1 2025, BYD has surpassed Tesla in sales.

• United States: Despite the strong demand for EVs, some manufacturers, such as Rivian, have revised their projections because of trade and tariff issues.

The shift toward electrification has been underway for years. By the end of 2022, electric vehicles—including plug-in hybrids and battery electric models—made up 13% of all vehicles sold globally, according to data from the EV-Volumes.com database. That percentage was less than 1% of the total as recently as 2016 and slightly more than 4% in 2020.

Why Demand for EVs Is on the Rise

Demand for electric vehicles (EVs) is rising in 2025 due to technological, economic, regulatory, and societal factors. The primary drivers behind this growing trend include:

• Government Incentives & Regulations: Governments worldwide are enacting policies to reduce carbon emissions and accelerate the shift toward clean energy. Many offer financial incentives for EV buyers, making them more affordable than ever.

• Battery Technology Improvements: Battery innovation makes EVs more competitive with gasoline-powered cars. Modern EVs can now travel 300–500 miles on a single charge, reducing range anxiety. Moreover, rapid charging stations and new battery chemistries have reduced charging times dramatically.

• Environmental Awareness: A growing number of consumers are prioritizing sustainability. Public awareness of global warming and pollution pushes consumers to make eco-conscious choices. Even fleets operated by companies like Amazon and UPS are transitioning to EVs to meet ESG (Environmental, Social, Governance) goals.

• Expanding EV Lineups: Automakers rapidly diversify their EV offerings to meet every lifestyle and price point. EVs are no longer niche—buyers can now choose from trucks, sedans, SUVs, and even performance cars.  

• Charging Infrastructure Growth: Public and private investment in charging infrastructure is reducing barriers to adoption. Charging stations are popping up in urban centers, apartment complexes, shopping centers, and along highways. More consumers can access home chargers, too, making daily use of EVs more convenient.

• Smart Tech & Connectivity: EVs often feature cutting-edge technology that enhances the driving experience, such as intuitive touchscreens, voice commands, and app-based controls.

• Lower Long-Term Ownership Costs: EVs tend to be more cost-effective over time. With fewer moving parts, EVs require less maintenance than gas-powered cars. Moreover, electricity is generally cheaper than gasoline, especially with home or solar charging setups.

The Link Between EVs and Silicon Wafers

Since EVs need many semiconductors for various purposes, this rising demand has a noticeable effect on silicon wafer prices. Some estimates place the average car's chip count today between 1,400 and 1,500.

Compared to internal combustion engine (ICE) vehicles, electric vehicles require two to three times as many semiconductors because they mainly rely on electronic systems for connectivity, power management, and propulsion. This means a single EV may have three times as many chips as an ICE vehicle.

Similarly, non-internal combustion engine vehicles in China were estimated to have a significantly higher number of chips than internal combustion engines. Allied Market Research estimates that the total automotive semiconductor market will be worth approximately $38 billion in 2020. It is expected to grow to $114 billion by the end of 2030, representing a compound annual growth rate of 11.8%.  

This is a small portion of the global semiconductor market, which the Semiconductor Industry Association estimates to be worth around $574 billion. Nevertheless, it still has the potential to grow.

Some Takeaways:

• If you're an automaker, this statistic emphasizes the importance of working closely with semiconductor suppliers to avoid future shortages.

• For chip manufacturers, it's clear that focusing on automotive chips is a wise business decision.

The Impact on Silicon Wafer Prices  

Rising demand for electric vehicles has led to increased semiconductor production, influencing silicon wafer prices:

• Price Increase: Due to increased demand and global economic conditions, silicon wafer prices are expected to rise by up to 25% by 2025.

• Market Growth: The global silicon wafer market is expected to increase from USD 20.29 billion in 2025 to USD 24.42 billion by 2033.

Autonomous Vehicles: A Future Possibility  

Autonomous vehicles are another growing market pushing semiconductor sales. These vehicles rely heavily on advanced semiconductor components to process vast amounts of data in real time.  

These components include high-performance processors, sensors, and communication modules, all built on silicon wafers. Integrating technologies such as AI, LiDAR, radar, and V2X communication systems in AVs necessitates a substantial increase in semiconductor usage.  

While it is unclear when vehicles will achieve full autonomy in L4 or L5, numerous sensors and electronic components will be required. The more sophisticated the computational power and data storage required, the more control and storage chips will be needed.

As driving autonomy increases, increasingly complex sensor chips rise sharply.  

Understand Changes in Silicon Prices with Wafer World

In 2025, we saw a surge in EV demand due to various factors: supportive policies, advancing technology, consumer values, and industry innovation. As these factors continue to converge, 2025 will be a pivotal year in the global transition to electric mobility.

While rising costs in silicon wafers can't exclusively be attributed to the growing demand for electric vehicles, this trend only shows how fundamental these components are to technologies in our present and future. If you'd like to learn more about silicon prices and how they can change, contact Wafer World!