Semiconductor market expected to shrink by 1% in 2016

18 July, 2016

Among the main reasons for the bleak forecasts – the slump in Chinese growth, Brexit’s aftermath and the sharp decline in DRAM prices

Among the main reasons for the bleak forecasts – the slump in Chinese growth, Brexit’s aftermath and the sharp decline in DRAM pricing 

idc-semiconductorsThe weakening global economy and the slump in the DRAM market are expected to weigh heavy on the global semiconductor market in the second half of 2016. This is IC Insights – a specialized semiconductor market research institute – bleak forecast. The research institute lowered its 2016 market forecast to -1%.

There is a strong correlation between the global economy’s state and the semiconductor industry. In most cases, an economic slump translates into a weakening demand for semiconductors. Taking this correlation into account, IC Insights lowered its forecast for the semiconductor market due to the unimpressive state of the global economy. According the current forecast, global economy will grow by 2.3% in 2016, well below the 2.5% threshold which marks a recession.

A closer look at the stste of the global economy shows that the current weakness does not stem from a single source – China, one of the leading markets for PC’s, digital TV’s, smartphones, commercial airplanes and cars, is losing traction. The Chinese economy is expected to grow by a mere 6.6% in 2016. The slump in Chinese economic growth is persistent since 2010. That year, the world most populous nation grew by more than 10%. China is the world second largest economy and a major growth engine. The slump in Chinese growth thus affects various industries across the world.

But China is not the only troubled economy. Britains unexpected decision to leave the European Union has shocked the market in the last weeks. The “Brexit” had immediate negative effects on the British and European economies, and it is expected to have even more lasting and global effects, dampening market sentiments in the months and years to come.

Falling DRAM prices weigh heavy on semiconductor market

Another major contributor to weakening of the semiconductor market according to IC Insights is the waning DRAM market. The $450 DRAM market was the largest single product category in the semiconductor industry in 2015. IC Insights forecasts that the DRAM market will register a 19% drop of $8.5 billion in 2016 to $36.5 billion. The DRAM market alone is forecast to shave 3% of total semiconductors market growth this year. Semiconductor market growth excluding DRAM is forecasted to be 2%.

Most of the DRAM market decline expected for this year is due to a rapid decline in DRAM pricing over th last 18 months. For 2016, the average price for a DRAM device is forecasted to drop to $2.55, a sharp 16% decline compared to an average DRAM device price of $3.03 in 2015.

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Posted in: Business , News , Semiconductors

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