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Due to lower sales of smart phones and other wireless products, IHS expects the wireless segment to face challenges that could result in similar or lower growth this year. “Apple recently reported its fiscal second quarter results, and for the first time iPhone unit sales fell year over year, indicating the potential magnitude of the softness in the premium smartphone market,” said Brad Shaffer, senior analyst, mobile devices and networks, IHS Technology, in a statement.
“If the iPhone and other premium smartphones fail to gain enough traction to support growth in that market segment, it may be reflected in the underlying semiconductor market in 2016,” he continued.
The mobile handset IC market is the largest segment in the wireless segment, accounting for 62 percent of revenue in 2015, according to the IHS Wireless Semiconductor Competitive Intelligence Service.
“If unit shipments from Apple and other smartphone original equipment manufacturers continue to decline, the wireless competitive landscape could have a dragging effect on the larger semiconductor market in 2016. However, though currently too early in their lifecycles to make a material difference in the short term, emerging technologies like LTE-Advanced Pro or 4.5G could provide upside potential in the next 12 to 18 months,” Shaffer added.
The semiconductor market is currently in a downward trend for 2016. Sales in the first quarter of 2016 were $78.3 billion, down 5.5 percent compared to the previous quarter and 5.8 percent lower than the first quarter of 2015, according to the Semiconductor Industry Association (SIA).
On a positive note global sales of semiconductors reached $26.1 billion in March 2016, increasing slightly by 0.3 percent compared to the previous month. Monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.
“Global semiconductor sales increased in March for the first time in five months, but soft demand, market cyclicality, and macroeconomic conditions continue to impede more robust growth,” said John Neuffer, president and CEO, Semiconductor Industry Association, in a statement. “Q1 sales lagged behind last quarter across nearly all regional markets, with the Americas showing the sharpest decline.”
Vertical integration is another key trend to watch. Several OEMs including Samsung, Apple, and Huawei have varying degrees of vertical integration with the capability to supply their own or other OEMs, according to IHS’ Shaffer.
“While this vertical integration has been especially evident in the premium smartphone tier, it helps to create a fiercely competitive environment in all market tiers, as it can limit the available market for third-party suppliers,” Shaffer stated. “The increased competition resulting from a smaller market could impact core handset integrated-circuit prices in the entry-level and mid-range segments, with MediaTek, Spreadtrum and other suppliers vying for revenue share with market leader Qualcomm.”