Worst Down Year for Chip Industry in 10 Years

Article By : Dylan McGrath

IHS Markit says semiconductor sales will fall by 7.4% this year, the biggest market drop since 2009

SAN FRANCISCO — With conditions in the semiconductor market deteriorating rapidly since the beginning of the year, market research firm IHS Markit has slashed its forecast for chip sales by more than 10%.

The chip market is now poised to decline by 7.4% to $446.2 billion in 2019, according to IHS. The firm had previously projected that chip sales would increase by 2.9% this year.

A decline of 7.4% in chip sales would mark the worst down year for the semiconductor industry since the Great Recession in 2009, when the semiconductor market declined by nearly 11%, IHS said.

The forecast revision by IHS is consistent with other market research firms that have revised their forecasts for the market downward in response to weakness in the market during the first quarter. IC Insights is currently forecasting that chip sales will decline by at least 9% compared to last year. The World Semiconductor Trade Statistics organization — made up of a group of semiconductor suppliers that pool sales data — has projected that the market will fall by about 3% this year.

According to Myson Robles Bruce, a research manager at IHS, many semiconductor suppliers were optimistic early this year that they could achieve modest growth in 2019. But the chipmakers’ confidence “quickly transformed into apprehension as they witnessed the depth and ferocity of the current downturn,” Bruce said.

Semiconductor Revenue

The severity of the current downturn is due to increasingly soft demand combined with a rapid rise in inventory levels during the first quarter. Product segments including DRAM, NAND flash, general-purpose microcontrollers, 32-bit microcontrollers, and ASICs all suffered double-digit revenue declines in the first quarter, according to IHS.

While IHS is now projecting the biggest semiconductor industry revenue drop since 2009, the firm is also forecasting that market conditions will recover in the third quarter, led by a recovery in sales for NAND used in solid-state drives and smartphones and a processor used in notebook PCs and servers.

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