STAMFORD, CT – Worldwide semiconductor revenue is expected to decline 9.6% to $429 billion in 2019, according to Gartner. The research firm cited falling prices and weaker demand for key products for the drop.

“The semiconductor market is being impacted by a number of factors,” said Ben Lee, Gartner senior principal research analyst. “A weaker pricing environment for memory and some other chip types, combined with the US-China trade dispute and lower growth in major applications, including smartphones, servers and PCs, is driving the global semiconductor market to its lowest growth since 2009. Semiconductor product managers should review production and investment plans to protect themselves from this weaker market.”

A demand-driven oversupply in the DRAM market will push pricing down 42.1% in 2019, says the firm. The oversupply is expected to extend through the second quarter of 2020. The decline is due to signs of a slower demand recovery at the hyperscale vendors and the increasing inventory levels of DRAM vendors. This ends the longest period of undersupply seen in the DRAM industry.

The ongoing dispute between the US and China is causing uncertainty over trade rates. US-imposed restrictions on Chinese businesses are based on security concerns and will have a longer-term impact on semiconductor supply and demand. These combined issues will accelerate China’s domestic semiconductor production, as well as create local forks of technologies such as ARM processors. Some manufacturing will relocate outside China during the dispute, and many companies will seek to diversify their manufacturing base to reduce any further disruption.

The global NAND market has been in oversupply since the first quarter of 2018 and is now more pronounced as the near-term demand for NAND is weaker than expected.

“We expect high smartphone inventory and sluggish solid-state-array demand will last for a few more quarters,” said Lee. “Given the aggressive price declines for NAND, it is possible to see a more balanced supply/demand outlook in 2020. However, looking further out is concerning given slowing demand drivers, such as PCs and smartphones, and more capacity as new fabs in China impact the market.”

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