The global semiconductor market, which has been rocked by Covid-induced supply chain problems in 2020 and last year, is expected to drop 3.6% in revenue next year due to weak consumer demand and a weakened economy, it found a report.
Semiconductor revenue is expected to reach $596 billion next year, down from a previous estimate of $623 billion, US research firm Gartner said.
However, the market is on track to grow 4% this year to $618 billion.
“The near-term outlook for semiconductor earnings has worsened,” said Richard Gordon, vice president at Gartner.
“The rapidly deteriorating global economy and weakening consumer demand will negatively impact the semiconductor market in 2023.”
Semiconductors are important components in electronic devices and especially in electric and self-driving vehicles. These are used to manage functions such as navigation and parking and to monitor engine performance.
Car makers, in particular, have been hit as chip shortages have halted production in factories around the world.
Global semiconductor shortages will drive nearly 50 percent of the top 10 carmakers to design and manufacture their own chips by 2025, Gartner said in a previous report.
Supply chain disruption, severe chip shortages, and trends such as vehicle electrification and autonomy will propel manufacturers to reduce their reliance on traditional chipmakers. This will give carmakers more control over their product roadmaps and supply chains, according to Gartner’s latest report.
Global chip sales rose 26 percent to a record $553 billion last year, making the electronics industry one of the winners of the pandemic, Euler Hermes, a subsidiary of the German financial services company Allianz. this year.
Currently, the semiconductor industry is divided between consumer-led markets and enterprise-led sectors.
The market weakness is mainly due to a decline in disposable income caused by rising inflation and interest rates, Gartner said.
It is also affected by the re-prioritization of consumer discretionary spending towards other areas such as travel, leisure and entertainment, which have a negative knock-on effect on technology purchases.
Meanwhile, enterprise-led markets such as networking, computing, industrial, medical and commercial transport have so far been relatively resilient despite a looming macroeconomic slowdown and geopolitical concerns.
“The relative strength of enterprise-led markets comes from strategic investments by corporations looking to strengthen their infrastructure to further support their home-based workforce, business expansion plans and ongoing digitization strategies,” said Mr. Gordon.
The memory chip market, in particular, is facing weak demand, bloated inventories and customers pushing for significantly lower prices. As a result, the market will remain flat this year and is expected to decline by 16.2% in sales in 2023.
The worsening economic outlook is also having a negative impact on the production of smartphones, personal computers and consumer electronics, which positions the DRAM (dynamic random access memory) chip market to be oversupplied in the first three quarters of 2023.
Gartner expects DRAM revenue to decline 2.6% to $90.5 billion in 2022 and a further 18% decline next year to $74.2 billion.
Although the deteriorating macroeconomic environment will weaken consumer demand, Gartner expects relatively better semiconductor consumption from business investment.
“As a result, markets such as industrials, telecommunications infrastructure and data centers will be less affected by consumer sentiment and spending in the near term,” Gordon said.
Continued chip shortages and rising future demand are expected to help chipmakers such as Intel, Qualcomm and GlobalFoundries, among others.
GlobalFoundries, the world’s third-largest semiconductor maker, owned by Abu Dhabi’s Mubadala Investment Company, capitalized on market conditions and listed on Nasdaq in New York last October to raise $2.6 billion.
Updated: November 30, 2022, 5:30 am