Beancounters at research firm IHS Markit have slashed its outlook for 2019 semiconductor sales by more than 10 percentage points, projecting revenue to decline 7.4 percent to $446.2 billion.
The outfit had predicted 2.9 percent growth for 2019 revenue in December.
This would mean that the semiconductor industry is facing its biggest annual percentage decrease since 2009, when chip sales dipped by nearly 11 percent.
IHS Markit researcher Myson Robles Bruce said: “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.
“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” largely impacting DRAM and NAND flash memory, general-purpose processors, microcontroller units and ASICs (application-specific integrated circuits).
These trends are reflected in the most recent earnings results from the world’s largest semiconductor companies, namely Intel and Samsung. Chipzilla Intel reported last week that it now expects 2019 revenue to decline three percent to $69 billion from the previous year, attributing the anticipated decline to continued deterioration of memory pricing, as well as lower demand from cloud service providers and enterprises.
Samsung said that weak memory chip demand hurt its operating profit, which dropped a staggering 60 percent in the first quarter to $5.4 billion. The company’s Q1 revenue declined 13 percent year-over-year to $45 billion.
While the IHS Markit report casts a shadow on the semiconductor industry, the firm expects a recovery to begin in the third quarter, echoing recent statements from Intel.
IHS Markit said the recovery will be led by NAND flash memory parts used in solid-state drives and high-end smartphones, as well as processors in laptops and servers.
Intel and its rival AMD plan to release new processors in the second half of the year that could help fuel this recovery. For Intel, it will be the company’s 10-nanometer Ice Lake mobile platform for next-generation laptops. AMD, on the other hand, plans to release new 7-nanometer processors for desktop computers and servers, as well as a new line of 7nm graphics cards.
