forecast Gartner says 2020 chip market to be 0.9% down

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Gartner forecasts a worldwide decline in semiconductor revenues of 0.9% this year due to the impact of the COVID-19 pandemic.

This figure of 0.9%, primarily caused by COVID-19’s impact on semiconductor supply and demand globally, is down from Gartner’s Q1 2020 forecast of 12.5% growth which would have helped the market recover from its 11.9% overall decline in 2019, contributed to largely by the U.S.-China trade war. With the current spread of the COVID-19 virus and the disruption it is causing worldwide, the trade war has become a minor issue.

“The wide spread of COVID-19 across the world and the resulting strong actions by governments to contain the spread will have a far more severe impact on demand than initially predicted,” explained Gartner’s VP of research practice, Richard Gordon. This year’s forecast could have been worse, but growth in memory could prevent a steep decline,” he added.

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Last year, oversupply in the DRAM market helped push the memory market down to 32.7%, a market that accounted for 26.1% of semiconductor sales in 2019 and was the “worst-performing device segment,” according to Gartner’s Andrew Norwood, a research VP.

Overall, Gartner’s new forecast has reduced 2020 global semiconductor revenue from the Q1 forecast to $415.4 billion, a reduction of $55 billion. 2020 total market growth has been reduced from growth of 12.5% to a decline of 0.9%, with nonmemory products expected to decline by 6.1% while memory is expected to maintain a growth level of 13.9%.

Weak demand from consumer electronics manufacturers, such as smartphones, and other key areas has heavily influenced these figures. This has caused prices to be driven down and has forced virtually all component vendors to do a u-turn and pull the plug on existing fab plans and, in many cases, cut levels to below 2018 levels.

And although NAND flash memory revenue is expected to grow 40% in 2020 due to shortages persisting from 2019, which is keeping prices firm, demand “will diminish later in 2020,” said Gordon. “Initial price increases of 15.7% during the first half of 2020 will reverse to a 9.4% decline during the second half of the year. However, average pricing levels will still enable NAND flash revenue to achieve growth this year.”

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