STAMFORD, CT -- Gartner today lowered its worldwide semiconductor revenue forecast to $354 billion for 2015, down 1.4 percentage points from last quarter's outlook.

The research firm now says sales will rise 4% this year, versus the previous quarter's forecast of 5.4% growth.

"Concern is mounting about semiconductor revenue growth in 2015 as system suppliers start to grapple with the rapid depreciation in value of global currencies relative to the US dollar, excess inventories in the semiconductor and electronics supply chains, and the end of a PC upgrade cycle," said Bryan Lewis, research vice president at Gartner. "The downward revision from last quarter's forecast is due to these three factors combining to create a significant headwind for the semiconductor market in 2015." 

The strong dollar is causing system suppliers and system buyers to re-evaluate their strategies. System suppliers will raise prices in select regions such as Europe to keep their margins intact as well as de-feature some products to maintain current price points. System buyers will push out purchases in select regions, extending product life cycles as well as buying down the price curve. All this leads to reduced semiconductor growth in 2015. 

From an application point of view, smartphones, solid-state drives and ultramobiles will see the largest semiconductor growth, while the traditional PC segment will experience the greatest decline. The end of support for Windows XP, which lifted the replacement demand for traditional PCs, particularly in the professional market, faded out in late 2014. Through 2015, the replacement demand is expected to remain muted, as consumers delay migrating to Windows 10. The next critical season for the PC and ultramobile markets is in the third quarter, when Windows 10 and Intel's Skylake products come to market. 

From a device point of view, DRAM continues to be one of the primary growth drivers of the overall industry. DRAM revenue is expected to increase 7.9% in 2015, following a 32% increase in 2014. However, Gartner maintains its view that the good times in DRAM will come to an end in 2016 and 2017 when DRAM industry revenue will decline 20.2% and 8.4%, respectively. While this may seem like a dire outlook, it is actually slightly better than the previous quarter's forecast for 2016 and 2017 declines of 30.1% and 20%, respectively. 

"2015 semiconductor growth hinges on the strength of the second-quarter bounce," said Lewis. "The second quarter is traditionally where we see strong sequential growth coming off the traditionally negative first quarter as inventory is burned off from the holidays. First quarter 2015 looks to have the worst sequential growth since 2009 with at least a 7% decline, so a strong second-quarter bounce is needed to achieve the 4% annual growth predicted for 2015. Intel’s recent second quarter’s mid-point sequential revenue guidance of a 3.3% increase was inline with the expected industry rebound after it experienced a 13.2% sequential decline in the first quarter of 2015.”