The global semiconductor market is forecast to reach $337.8 billion in 2015, a decline of 0.8 percent from 2014, according to Gartner, Inc. The forecast is down from the previous quarter's forecast of 2.2 percent growth due to weakness in several electronic equipment sectors including smartphones and PCs.
The Gartner report, “3Q15 Semiconductor Forecast Update," also indicates this is the first revenue decline in the semiconductor market since 2012 when the market fell by 2.6 percent.
"Once again the outlook for the major applications that drive the semiconductor market, including PCs, smartphones and tablets, has been revised downward," said Andrew Norwood, research vice president at Gartner, in a statement. "This, combined with the continuing impact of the strong dollar on demand in key markets outside of the U.S., has resulted in a decline in our forecast and a negative growth rate for 2015.
"Not only did the year start badly, but we are not seeing the typical ramp up in sales of semiconductors in many areas of the market in anticipation of the holiday season," Mr. Norwood continued. "As a result, sales are not going to recover enough in the second half to halt an annual decline in semiconductor revenue for 2015."
Gartner attributes the first market contraction since 2012 to several factors. These include the slowing Chinese economy and the strong dollar, which are driving up the cost of electronic equipment in Western Europe and Japan. The result has been lower sales and buyers shifting to lower cost equipment in these markets, Gartner said.
The good news: Gartner expects a more positive outlook for 2016 and forecasts semiconductor revenue to increase 1.9 percent, reaching $344.1 billion. However, the industry is still expected to face an oversupply situation in the DRAM market in 2016, according to Gartner.
"While 2015 has already seen an oversupply in the PC segment of the DRAM market, we believe that 2016 will see a more widespread oversupply that will also impact the server and low-power sectors of the DRAM market. DRAM revenue is forecast to decline 12.2 percent in 2016 due to oversupply and resulting weak pricing," Norwood said.
Gartner is not alone in its forecast. DRAMeXchange expects the price decline of DRAM to become more severe in the first of half of 2016 than the current pricing. Over the past few months, DRAMeXchange analysts have reported that the slow PC market combined with a DRAM oversupply has significantly hurt DRAM suppliers, contributing to continued price declines.
“The bit output from original DRAM suppliers keeps rising, but the weak global economy has lowered bit consumption, which results in inventory accumulation. In July, the excess DRAM capacity caused contract prices for PC DRAM to drop significantly as well as negatively affecting server DRAM prices, which has declined nearly 10 percent,” stated Avril Wu, DRAMeXchange’s assistant vice president, in August.