The uncertain global economy will continue to have a dampening effect on the semiconductor market, according to two leading analyst firms. While the chip industry had been able to outperform the overall electronics market for decades, chip makers have had to grow accustomed to a more sedate pace of growth. IC Insights and Future Horizons both have forecast the global market for semiconductors in 2016 will increase by about 4 percent.
Worldwide GDP is forecast to increase by 2.7 percent in 2016, according to IC Insights: 0.2 percentage points greater than the 2.5 percent growth rate registered in 2015. This is expected to drive a 2 percent increase in electronic system sales (four points higher than the 2 percent decline in 2015). Overall, IC Insights believes the correlation between worldwide GDP growth and IC market growth in 2016 will be very tight, as it has been since 2010.
Future Horizons CEO Malcolm Penn is forecasting the global semiconductor market will grow by 4 percent in 2016. Much will depend on the global economy performance, said Penn, adding that a pick up could see the market grow 8 percent. A bearish market could see global semiconductor sales flat, and given the lack of confidence and pressures on the global economy there is more scope for a downside than upside, Penn added.
Both analyst firms have gone to great pains to explain the assumptions behind each forecast. IC Insights includes the stock market, financial analysis and 15 other entities that release IC market forecasts. “In that way, our clients can fully understand the forecast and can make their own intelligent assessment of whether they believe the forecast looks good or, in their opinion, is too low or too high,” the analyst said.
The most likely 2016 IC market scenario is for 2 percent to -6 percent growth, according to IC Insights. IC industry capacity utilization rates are forecast to be in the low-90 percent range (with 300mm fabrication facility utilization expected to be in the mid-90s) in 2016. IC unit volume growth is forecast to grow 5 percent in 2016, slightly better than the 4 percent increase in IC unit shipments registered in 2015, as servers and smartphones experience continued good demand.
A market forecast essentially comes down to unit and ASP growth, according to IC Insights. With the expectations for a relatively healthy 5 percent increase in IC unit volume growth, coupled with a 1 percent decline in IC ASPs, a mid- to low-single-digit growth rate in the 2016 IC industry currently appears to be the most likely outcome.
“The 2015 semiconductor market came in like a lion and went out like a lamb,” said Future Horizons’ Penn. “Demand collapsed in the second quarter of 2015 on the back of global economy woes and a slowdown in China. And average selling prices plummeted in the third quarter.”
Penn’s 4 percent uptick for 2016 is predicated on growth hitting 5.8 per cent in Q3, following 1.5 per cent growth in Q2 propelling sales to $349 billion in 2016. Future Horizons also assumes continued growth in IC unit sales, a slow recovery in average selling prices and high fab foundry utilization rates.
China now accounts for 29 per cent of all global semiconductor sales followed by the Americas at 20 per cent, according to Future Horizons. Europe at 10 per cent has just edged ahead of Japan’s nine per cent. The rest of the world accounts for 32 per cent of all sales. Penn is not optimist about Europe’s fortunes. “This is sales,” he remarks. “European IC production is even worse."
Penn added that he believes the semiconductor industry lacks confidence. He points out that the semiconductor market’s CAGR from 2009 to 2014 was 8.3 percent, a number most other industry sectors would regard as manna from heaven.