Global currencies, excess inventory, and an end to the PC upgrade cycle is slowing growth in the global semiconductor industry, reports Gartner Inc. A new forecast pegs global semiconductor revenue at $354 billion in 2015, a four percent increase from 2014, but down from the previous quarter’s forecast of 5.4 percent growth.
“Concern is mounting about semiconductor revenue growth in 2015 as system suppliers start to grapple with the rapid depreciation in value of global currencies relative to the U.S. dollar, excess inventories in the semiconductor and electronics supply chains, and the end of a PC upgrade cycle,” said Bryan Lewis, research vice president at Gartner, in a statement. “The downward revision from last quarter’s forecast is due to these three factors combining to create a significant headwind for the semiconductor market in 2015.”
What’s happening is that the strong dollar is resulting in some system suppliers and buyers to re-evaluate their strategies, explained Gartner. This will likely translate into higher prices for systems in select regions such as Europe, coupled with fewer features in some products to maintain price points. “System buyers will push out purchases in select regions, extending product life cycles as well as buying down the price curve. All this leads to reduced semiconductor growth in 2015,” according to the report.
The growth areas for semiconductors will be smartphones, solid-state drives (SSDs) and ultra-mobiles, while the traditional PC segment will fall the greatest. Gartner’s preliminary results for PC shipments indicate a 5.2 percent decline in the first quarter of 2015 from the first quarter of 2014.
The reason for the PC decline is two-fold – the slowing replacement demand for Windows XP systems and consumers delaying the migration to Windows 10. Gartner said “the next critical season for the PC and ultra-mobile markets is in the third quarter of 2015, when Windows 10 and Intel’s Skylake products come to market.”
In terms of device growth, DRAM remains one of the biggest growth drivers, forecast to increase 7.9 percent in 2015, following a 32 percent increase in 2014. This growth is expected to end in 2016 and 2017 with a revenue decline of 20.2 percent and 8.4 percent, respectively. The outlook is slightly better than Gartner’s previous forecast of 30.1 percent and 20 percent declines, respectively.
“2015 semiconductor growth hinges on the strength of the second-quarter bounce,” stated Lewis. “The second quarter is traditionally where we see strong sequential growth coming off the traditionally negative first quarter as inventory is burned off from the holidays. First quarter 2015 looks to have the worst sequential growth since 2009 with at least a 7 percent decline, so a strong second-quarter bounce is needed to achieve the 4 percent annual growth predicted for 2015. Intel’s recent second quarter’s mid-point sequential revenue guidance of a 3.3 percent increase was in-line with the expected industry re-bound after it experienced a 13.2 percent sequential decline in the first quarter of 2015.”