Semiconductor sales to fall

Weakness in key electronic equipment segments, including smartphones and PCs, is expected to lead to a decline in semiconductor revenues.

Worldwide semiconductor revenue is forecast to total $337.8 billion in 2015, a decline of 0.8% from 2014, according to Gartner, Inc. This is the first decline in revenue since 2012 when the market declined 2.6%. This forecast is down from the previous quarter's forecast of 2.2%.

"Once again the outlook for the major applications that drive the semiconductor market, including PCs, smartphones and tablets, has been revised downward," said Andrew Norwood, research vice president at Gartner.

"This, combined with the continuing impact of the strong dollar on demand in key markets outside of the US, has resulted in a decline in our forecast and a negative growth rate for 2015.

"Not only did the year start badly, but we are not seeing the typical ramp-up in sales of semiconductors in many areas of the market in anticipation of the holiday season," Norwood continued.

"As a result, sales are not going to recover enough in the second half to halt an annual decline in semiconductor revenue for 2015."

This will be the first time worldwide semiconductor sales have contracted since 2012. Global economic headwinds, such as the slowing Chinese economy and the strong dollar, are pushing up the cost of electronic equipment in regions including Western Europe and Japan. This is leading to a reduction in outright sales and also encouraging buyers to shift to lower-cost equipment in these markets.

Gartner predicts a more positive outlook for 2016 and is forecasting semiconductor revenue will increase 1.9% to $344.1 billion. However, Gartner forecasts an oversupply in DRAM in 2016.

"While 2015 has already seen an oversupply in the PC segment of the DRAM market, we believe that 2016 will see a more widespread oversupply that will also impact the server and low-power sectors of the DRAM market. DRAM revenue is forecast to decline 12.2% in 2016 due to oversupply and resulting weak pricing," said Norwood.

Additional analysis on the outlook for the semiconductor market can be found in the Gartner Webinar '3Q15 Semiconductor Forecast Update'.