A recent report by world’s leading IT research company Gartner suggests that global semiconductor spending will decline by approximately 2 percent in 2016 but will clock growth rates of 4.4 percent and 6.8 percent in 2017 and 2018 respectively.
The forecast has been upwardly revised from its previous estimate of 4.7 percent decline.
David Christensen, Senior Research Analyst at Gartner said,
“While the first quarter 2016 forecast has improved from a projected decline of 4.7 percent in the previous quarter’s forecast, the 2 percent decline in the market for 2016 is still bleak. Excess inventory and weak demand for PCs, tablets, and mobile products continue to plague the semiconductor industry, resulting in a slow growth rate that began in late 2015 and is continuing into 2016.”
World’s leading businesses which are directly or indirectly involved in the chip industry have been facing declining profits as the demand wanes. Micron Technology, Inc. (NASDAQ: MU) and Intel Corporation (NASDAQ: INTC) are just some of the many big businesses facing a slowdown.
The semiconductor business is a very competitive one as companies aggressively pursue technological advancements in the development of memory such as NAND. Gartner expects increased demand for the 10 nanometers (nm) and 3D NAND process development in memory and logic/foundry to drive overall spending to grow 4.4 percent next year.
Taiwan Semiconductor Manufacturing Co (TSMC), Globalfoundries, UMC and Samsung Electronics are the giants in this business and they pose stiff challenges to the relatively smaller players such as Micron as they have better cash flows, better technology, and higher market shares.
The rapid technological development in the Chinese semiconductor sector is aimed at creating and maintaining an industry that is independent of foreign support. China is one of the world’s leading markets in semiconductor manufacturing and usage. The efforts by the Chinese government will increase the competition in this space in the next 5 years.