The semiconductor industry is forecast to decline by 7.2% in 2019 as a result of a growing trade war between China and the U.S., and market consolidation and weakness due to excess inventories, according to new research from International Data Corp (IDC).
The semiconductor industry has experienced three consecutive years of growth, with year-over-year growth of 13.2% in 2018. However, this year it will decline to $440 billion, down from $474 billion last year. The good news is that growth is forecast to return in 2020, logging a compound annual growth rate (CAGR) of 2.0% from 2018 to 2023 and reaching $524 billion in 2023.
Market consolidation is beginning to accelerate in the semiconductor industry with six merger and acquisition deals already done or underway this year. In the next few years this is expected to accelerate, especially in the sensor, connectivity, automotive and AI/computer vision markets as suppliers look at new revenue opportunities and improve access to new markets, IDC said.
"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 of semiconductors at IDC.
Morales said that the bottom will hit in the third quarter as inventories are worked through. Investments in 5G mobile devices, Wi-Fi 6 adoption, cloud infrastructure, powertrain technologies, automotive sensors, AI and edge system-on-chips will be instrumental in returning the semiconductor industry back to growth in 2020.
One of the other drivers will be the automotive market, as more semiconductor content is being put inside vehicles due to electrification, infotainment and other features, including advanced driver assistance systems (ADAS). While a decline in vehicle sales is putting pressure on automotive semiconductors in 2019, the automotive market will be strong in the next few years as semiconductor content and design activity for self-driving vehicle technology will drive three to four times more growth than the overall semiconductor market, IDC said.
Learn more about IDC’s findings with its Worldwide Semiconductor Applications Forecaster.
