Eine Publikation der Swissprofessionalmedia AG
22.02.2019

What’s Ahead for the Global Semiconductor Market?

After experiencing record sales in early- to mid-2018, the global semiconductor market cooled off a bit toward the end of the year and has maintained that status during the first quarter of 2019. Here’s what could be ahead for the rest of the year. Last year was one for the records for the global semiconductor market, which saw sales increase by 13.7% as 1 trillion units—for a total of $468.8 billion in sales—were shipped to customers, according to the Semiconductor Industry Association (SIA). That sales figure represents the industry’s highest-ever annual total, SIA reports, with global sales for December hitting $38.2 billion, a slight increase of 0.6% over the same period in 2017 (but down 7% compared to the total from November 2018). Fourth-quarter sales of $114.7 billion were 0.6% higher than the total from the fourth quarter of 2017, but 8.2% less than the third quarter of 2018.  
“Global demand for semiconductors reached a new high in 2018, with annual sales hitting a high-water mark and total units shipped topping 1 trillion for the first time,” SIA’s President and CEO John Neuffer said in a press release. “Market growth slowed during the second half of 2018, but the long-term outlook remains strong,” Neuffer continued. “Semiconductors continue to make the world around us smarter and more connected, and a range of budding technologies—artificial intelligence, virtual reality, the Internet of Things, among many others—hold tremendous promise for future growth.”
What’s Hot?
According to SIA, memory comprised the largest semiconductor category by sales with $158 billion in 2018, and the fastest-growing, with sales increasing 27.4%. Sales of DRAM products increased 36.4% and sales of NAND flash products increased 14.8%. Logic ($109.3 billion) and micro-ICs ($67.2 billion)—a category that includes microprocessors—rounded out the top three product categories in terms of total sales. In “These Tech Trends Could Change Semiconductor Industry in 2019,” Paige Tanner writes that semiconductor companies could benefit from the looming 5G revolution, with Qualcomm and Intel being the biggest beneficiaries of that trend. Both “have already developed 5G modems for smartphones, which are set to hit the market in 2019,” she points out.
Unlike 3G and 4G, 5G will expand the mobile ecosystem beyond phones to interconnect and control multiple devices simultaneously, Tanner reports. “While 5G will deliver faster speed, it will offer ultra-low latency, massive capacity, and a more uniform user experience,” she says. “The 5G infrastructure requires software-defined network virtualization where everything from computing to storage to data distribution are embedded in the network fabric, which presents opportunities to memory chip makers like Samsung and Micron (MU), network infrastructure providers like Intel and Qualcomm, and FPGA (field programmable gate arrays) suppliers like Xilinx (XLNX),” Tanner continues. “The 5G spectrum will boost the demand for RFFE (radio frequency front end) where Qualcomm and Broadcom (AVGO) have exposure.”
A Challenging Market
There could also be challenges ahead for semiconductor manufacturers. Citing Gartner statistics, SEMI principal analyst Christian G. Dieseldorff says that the research firm expects good long-term growth for the semiconductor market, with a compound annual growth rate (CAGR) from 2017 to 2022 of 5.1%, outpacing 2011 to 2016 CAGR of 2.6%. But after a strong 2018 with 13.4% revenue, Gartner forecasts a slower 2019 with 2.6% growth followed by an 8% growth in 2020 and a negative growth rate in 2021. That shift to slower growth is being echoed by other industry analysts and investors. According to Investor’s Business Daily, investment bank UBS recently forecast semiconductor industry revenue to decline year-over-year in 2019 for the first time since 2015.
“UBS sees semiconductor industry revenue dropping 4.3% in 2019, driven by a downturn in memory chip sales. Memory chips account for 34% of total industry revenue,” the publication reports. Calling the current market “challenging,” UBS says it expects year-over-year semiconductor revenue growth to ‘trough’ by the third quarter of the year.
Positive Signs
SIA naturally has a more bullish outlook on its industry for 2019, citing the fact that more than 1 trillion semiconductors were sold for the first time ever last year as an indicator of good things to come. “As semiconductors become more integrated into a broader swath of end applications, demand for them will continue to grow,” SIA Director Falan Yinug writes. “In addition, new innovations such as AI, IoT, and driverless vehicles offer other exciting sources of demand for semiconductors,” Yinug continues. “With a healthy demand environment in place, annual semiconductor unit sales look to continue to grow.”

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The global semiconductor market cooled off a bit toward the end of the year 2018 (Getty Images)