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After three consecutive years of growth – and a sales increase of 13.2 percent in 2018—the global semiconductor market is forecast by IDC to decline to $440 billion this year, down 7.2 percent from $474 billion in 2018.
IDC’s Semiconductor Applications Forecaster also expects that semiconductor revenues will recover in 2020 and log a compound annual growth rate (CAGR) of 2.0 percent from 2018-2023, reaching $524 billion in 2023.
Intel regained the top spot from Samsung as the world’s largest semiconductor manufacturer in Q1 2019, according to IC Insights. While Samsung held the full-year top ranking in 2017 and 2018, Intel is forecast to easily recapture the number one ranking for the full-year of 2019.
With the collapse of the DRAM and NAND flash markets over the past year, IC Insights added, a complete switch has occurred. Samsung had 23 percent more total semiconductor sales than Intel in 1Q18. In Q1 2019, Intel posted 23 percent more semiconductor sales than Samsung.
DRAM and NAND will dampen overall market growth a bit in 2019, IDC said. After a multiyear cycle of strong demand and appreciating prices, the end of 2018 brought an oversupply that’s expected to continue into 2020. Despite the challenging fourth quarter, DRAM and NAND memory markets grew to $99 billion and $55 billion in 2018, respectively, reflecting year-over-year growth rates of 36 percent and 12 percent. Excluding DRAM and NAND, the overall semiconductor market grew by 8 percent year over year.
Revenue concentration will also increase for the semiconductor market, with the top 10 companies making up 62 percent of the semiconductor market compared to 60 percent in 2017 and 56 percent in 2016.
The leaders so far
IC Insights’ top 15 worldwide semiconductor sales ranking for Q1 2019 includes six suppliers headquartered in the U.S., three in Europe, two each in South Korea and Japan, and one each in Taiwan and China.
In total, the top 15 semiconductor companies’ sales dropped by 16 percent in 1Q19 compared to 1Q18, three points worse than the total worldwide semiconductor industry 1Q19/1Q18 decline of 13 percent. Illustrating the volatile nature of the memory market, the Big 3 memory suppliers—Samsung, SK Hynix, and Micron -- each registered year-over-year revenue declines of at least 26 percent in 1Q19 after each company posted greater than 40 percent year-over-year growth one year earlier in 1Q18. Thirteen of the top 15 companies had sales of at least $2.0 billion in 1Q19, one company less than in 1Q18. As shown, it took over $1.7 billion in quarterly sales just to make it into the 1Q19 top 15 semiconductor supplier list.
There were two new entrants into the top 15 ranking in 1Q19, HiSilicon and Sony. As shown, China-based fabless IC supplier HiSilicon jumped up 11 spots in the ranking to 14th place on the back of a 41 percent surge in year-over-year sales in 1Q19. Sony also posted a solid year-over-year sales increase of 14 percent in 1Q19 driven by its primary product line of image sensors.
The top 15 ranking includes one pure-play foundry (TSMC) and four fabless companies. If TSMC were excluded from the top 15 ranking, Taiwan-based fabless supplier MediaTek ($1,711 million) would have been ranked in the 15th position.
IDC’s forecast
IDC expects market consolidation will begin to accelerate as the industry gets more clarity on the trade tariff dispute between China and the U.S. So far this year, there have already been six notable M&A deals announced and one large divestiture by Intel. IDC expects more moves in 2020 and 2021 in the sensor, connectivity, automotive, and AI and computer vision markets as suppliers look to drive more top-line growth and improve access to new markets.
"The current market downturn is being driven by a broad weakness in demand specifically centered in China and an ingestion of excess inventories in some of the major markets including automotive, mobile phones, and cloud infrastructure," said Mario Morales, program vice president, semiconductors at IDC. "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."
In 2018, the automotive market and the industrial markets, excluding memory, grew at 4.8 percent and 7.8 percent, respectively. "While electrification, infotainment, and advanced driving features are increasing semiconductor content per automobile, the decline in automobile unit sales in 2018 lowered overall growth in automotive semiconductors. Economic deceleration and declining vehicle sales will continue to put pressure on the automotive semiconductor market throughout this year," said Nina Turner, research manager for semiconductors at IDC. "However, 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."
Other key findings from IDC's Semiconductor Application Forecaster include:
- While the computing industry experienced strong growth in 2017 and 2018, the SAF forecasts semiconductor revenue for the computing industry segment to decline 5.1 percent this year but will show a positive CAGR of 1.3 percent for the 2018-2023 forecast period. Two bright spots for the computing segment are x86 servers and SSDs, growing with an 11.3 percent and 9.8 percent CAGR respectively for 2018-2023.
- Semiconductor revenue for the mobile wireless communications segment will grow 1.8 percent year over year this year with a CAGR of 4.8 percent for 2018-2023. Semiconductor revenue for 4G mobile phones will experience a slowdown as 5G phones begin to ramp up in 2020, becoming mainstream by the middle of the next decade. RF subsystem in mobile devices will continue to drive most of the revenue growth as the subsystem continues to support more complexity, additional antennas, and the increase in bands on every phone.
- The consumer semiconductor segment will grow at a 6.4 percent CAGR for 2018-2023 as consumer IoT devices and home automation continue to gain traction and scale. Connected devices will continue to drive more sensors and processing at the edge.
