The global semiconductor market, which was upended by Covid-induced supply chain problems in 2020 and last year, is projected to drop 3.6 per cent in revenue next year on poor consumer demand and weakening economy, a report has found.
Semiconductor revenue is forecast to reach $596 billion next year, down from the previous prediction of $623 billion, US research company Gartner said.
However, the market is on pace to grow 4 per cent this year to $618 billion.
“The short-term outlook for semiconductor revenue has worsened,” said Richard Gordon, vice president at Gartner.
“Rapid deterioration in the global economy and weakening consumer demand will negatively impact the semiconductor market in 2023.”
Semiconductors are important components in electronic devices and, particularly, in electric and self-driving vehicles. They are used to manage functions such as navigation and parking, and for monitoring engine performance.
Car makers, particularly, have been affected as the lack of chips had halted production in factories around the world.
The global semiconductor shortage will drive nearly 50 per cent of the top 10 car makers to design and produce their own chips by 2025, Gartner said in an earlier report.
Supply chain disruptions, severe chip scarcity and trends such as electrification of vehicles and autonomy, will propel manufacturers to reduce their reliance on traditional chip makers. This will give car makers more control over their product road map and supply chains, according to Gartner's latest report.
Worldwide chip sales surged 26 per cent to hit an all-time high of $553 billion last year, making the wider electronic component industry one of the winners from the pandemic, Euler Hermes, a subsidiary of German financial services company Allianz, said in a report this year.
Currently, the semiconductor industry is divided between consumer-driven markets and enterprise-driven sectors.
Market weakness is due mainly to a decline in disposable income caused by rising inflation and interest rates, Gartner said.
It is also affected by the reprioritisation of consumer discretionary spending to other areas such as travel, leisure and entertainment, which are having a negative knock-on effect on technology purchases.
Meanwhile, enterprise-driven markets such as networking, computing, industrial, medical and commercial transportation, have, so far, been relatively resilient, despite a looming macroeconomic slowdown and geopolitical concerns.
“The relative strength in the enterprise-driven markets comes from strategic investments by corporations that are looking to strengthen their infrastructure to continue supporting their work from home workforce, business expansion plans and ongoing digitalisation strategies,” Mr Gordon said.
The memory chip market, in particular, is witnessing faltering demand, swollen inventories and customers pressing for considerably lower prices. As a result, the market will remain flat this year and is forecast to decline 16.2 per cent in sales in 2023.
The worsening economic outlook is also negatively impacting smartphone, personal computers and consumer electronics production which is positioning the DRAM (dynamic random access memory) chip market for oversupply during the first three quarters of 2023.
Gartner expects DRAM revenue to decrease 2.6 per cent to reach $90.5 billion in 2022 and a further decline of 18 per cent next year to reach $74.2 billion.
Though the deterioration in the macroeconomic environment will weaken consumer demand, Gartner expects relatively better semiconductor consumption from business investments.
“Consequently, markets such as industrial, telecom infrastructure and data centre will be less impacted by consumer sentiment and spending in the short term,” Mr Gordon said.
The ongoing chip shortage and increasing future demand are expected to help chip makers such as Intel, Qualcomm and GlobalFoundries among others.
GlobalFoundries, the world's third-largest semiconductor manufacturer owned by Abu Dhabi's Mubadala Investment Company, capitalised on the market conditions and listed on New York's Nasdaq in October last year to raise $2.6 billion.
Source: The National
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