Global semiconductor revenues to fall this year on supply glut, China weakness

The envious run witnessed by the global semiconductor market over the past three years is coming to an end, International Data Corporation (IDC) has projected. After three consecutive years of growth, the industry is set for a 7.2% decline in 2019, as both DRAM and NAND chips are expected to see weakness, IDC said.

According to the report, worldwide semiconductor revenues will decline from $474 billion in 2018 to $440 billion in 2019. Meanwhile, the weakness is expected to be temporary, and revenues are slated to improve from 2020. By 2023, the market is projected to touch $524 billion.

The weakness may be attributed to oversupply of DRAM and NAND around the latter end of last year, as well as demand weakness in China. Both DRAM and NAND are expected to decline in 2019 and 2020.

Mario Morales, program vice president, Semiconductors at IDC said, “We expect the market to bottom by end of the third quarter this year as we work through inventories and demand begins to gradually return. Cloud infrastructure investment, 5G mobile devices, WiFi 6 adoption, Smart NICs, automotive sensors, powertrain technologies, AI training accelerators, and edge inference SoCs will be instrumental in our growth expectations for 2020 and beyond.”

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IDC expects to see more consolidation activities this year as the industry gets in grips with the outcomes of the US-China trade war. There have already been six major M&A deals this year, besides a divestiture by Intel (NASDAQ: INTC).

Research manager for Semiconductors Nina Turner said, “Our long-term thesis remains intact. The automotive market remains one of the strong growth drivers over the forecast horizon as semiconductor content and design activity for autonomous enabling technologies will continue to drive 3-4 times more growth than the overall market.”

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