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Analyst lifts Semiconductor market forecast to 15% growth in 2018

22/03/18 Natalie Tyler Associate Director

The semiconductor industry’s future is brighter than we thought. That was the conclusion of market research firm IC Insights on Wednesday, when it almost doubled the growth forecast for the semiconductor industry from 8 to 15 percent in 2018.

According to the World Semiconductor Trade Statistics (WSTS), the global semiconductor market grew 21.6% for the year 2017. The market was much stronger than anticipated at the beginning of the year.

In a move reminiscent of the continual upward revisions to semiconductor market forecasts that characterised 2017, market watcher IC Insights has increased its forecast for semiconductor industry growth this year to 15 percent from a previous projection of 8 percent.

Technology research firm Gartner also recently revised its estimate of worldwide semiconductor revenues to $451 billion, up from $419 billion in 2017. In January, the company pointed to price increases for both NAND and DRAM to explain why it changed its forecast from 4 percent to 7.5 percent growth.

Natalie Tyler, Redline Group Technical Sales and Marketing Manager comments: “The price increases are likely to add pressure on profit margins for OEM manufacturers of servers, personal computers, smartphones and other consumer products with a growing usage of memory in such devices.”

“The semiconductor industry tends to bust after booms and boom after busts, as component shortages lead to increased fab capacity which historically has generated a surplus in the global supply chain. For the last five years, the industry has typically hinged on the success of the market for DRAM and Memory devices sold by the likes of  Samsung, Micron and Toshiba.”

We asked Natalie what the outlook is for the UK and European semiconductor and components industry.

“The growth rate for semiconductor market during 2018 is largely dependent on the first quarter,”says Natalie. “The first quarter is seasonally the weakest, averaging a 3.5% quarter-to-quarter decline over the last five years. Revenue guidance from major semiconductor companies confirms a likely decline in Q1 2018.”

The key 2018 assumptions the forecast are:

  • Steady or improving demand for key electronic equipment
  • Slight improvement in global economic growth
  • Moderating, but continuing strong memory demand
  • Strong quarterly growth set in 2017 drives healthy 2018

The Semiconductor Intelligence forecasting models shows the rate of semiconductor market growth is more closely linked to acceleration or deceleration in GDP than to the level of GDP growth.

With demand for IoT services and connectivity continuing to grow significantly particularly in industrial sectors like manufacturing, automotive and utilities, the demand for new semiconductors will increase supply pressure. Smart machine communications, as well as semiconductors for autonomous cars, will boost the sector over the next 5 years. The ongoing research and trend towards driverless should create a larger TAM for the electronics component market, possibly greater than the smartphone sector.

According to Avnet, electronic components will be widely applied in a car's control system, dashboard, entertainment system and air-conditioner, as well as the future driverless system.

It is projected that by 2030, there will be 150 million autonomous vehicles around the world, which means a $150 billion market is forming for electronic components which the likes of semiconductor OEM's and distributors including Avnet, Arrow and Digikey would like to address.

This continuous drive for advanced technology across multiple sectors including AI, wireless infrastructure and automotive will put greater demands on the need for highly skilled engineering talent. In particular areas such as IC design, semiconductor fabrication, embedded software, RF, power management, IOT, security and digital signal processing jobs (DSP) should also see demand. 

Internet-capable converging technologies and mobile electronic systems will keep demand for ICs strong through 2021. The Internet of Things virtual representation of uniquely identifiable objects with an Internet-like structure (IP address) has been gaining momentum for more than a decade with no slowdown in sight. Machine learning is a key component of this far-reaching trend.

Redline's Sales and Marketing division is a specialist in technical sales and marketing opportunities providing solutions to a range of clients in the semiconductor and electronic component industry throughout the UK and mainland Europe.

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