Dramatic chip downturn approaching says report

May 06, 2019 //By Julien Happich
downturn
Conditions in the global semiconductor market have deteriorated rapidly since the start of the year, with IHS Markit cutting its 2019 growth outlook by more than 10 percentage points.

The worldwide microchip industry is set to suffer a 7.4 percent drop in revenue this year, according to the latest figures from the IHS Markit Application Market Forecast Tool (AMFT). Revenue will fall to $446.2 billion in 2019, down from $482.0 billion in 2018. This represents a major downturn in the market outlook compared to the previous forecast in December, which anticipated the market would expand by 2.9 percent this year.

A 7.4 percent decline will mark the semiconductor industry’s biggest annual percentage decrease since the Great Recession year of 2009, when chip sales plunged by nearly 11 percent. The figures are backed up by a recent report from the Semiconductor Industry Association (SIA) and first quarter results from ST, TI, Infineon and ON Semiconductor. 

“After the chip industry attained a heady revenue expansion of 15 percent in 2018, many semiconductor suppliers in early 2019 remained optimistic that they could achieve modest growth this year,” said Myson Robles Bruce, research manager, semiconductor value chain, at IHS Markit. “However, the chipmakers’ confidence quickly transformed into apprehension as they witnessed the depth and ferocity of the current downturn. The latest data indicates the semiconductor business now is destined for its worst year in a decade.”

The chips are down
According to the market research firm, the precipitous nature of the downturn is due to increasingly soft demand, combined with a rapid rise in inventory levels in the first quarter. These events have impacted some semiconductor product segments more than others. DRAM, NAND flash, general-purpose microprocessors (MPUs), 32-bit microcontrollers (MCUs) and analog application-specific integrated circuits (ASICs) were among the worst-affected products, with all of them double-digit revenue declines in the first quarter of 2019 compared to the first quarter of 2018.

Recent concerns over DRAM market conditions, a harsh drop in average selling prices, and weak demand all served to slash DRAM revenue projections for 2019.


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