IHS Markit predicts worst-in-a-decade downturn for semiconductors

IHS Markit has slashed its 2019 growth outlook by more than 10 percentage points as conditions in the global semiconductor market deteriorate.
 

The analyst predicts that the worldwide microchip industry will see a 7.4 percent drop in revenue this year in the company’s Application Market Forecast Tool (AMFT), with revenue falling to $446.2 billion from $482.0 billion in 2018.

 

The company’s previous forecast in December predicted this year’s market to expand by 2.9 percent. The 7.4 percent decline will be the semiconductor industry’s biggest annual percentage decrease since 2009, when chip sales dropped by nearly 11 percent.
 

 

“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 downturn is due to increasingly soft demand, combined with a rapid rise in inventory levels in the first quarter. The DRAM, NAND flash, general-purpose microprocessors (MPUs), 32-bit microcontrollers (MCUs) and analog application-specific integrated circuits (ASICs) were among the worst-affected products, all featuring double-digit revenue declines in Q1 2019 compared to the Q1 2018.

 

However, IHS Markit Technology forecasts a recovery in semiconductor sales in the third quarter. This revival will be led by NAND flash memory parts. MPUs employed in notebook PCs and datacenter servers also will help drive a resumption of overall semiconductor sales growth.