Worldwide Semiconductor Revenue Grew 13.4 Percent in 2018 Increase Driven by Memory Market, Gartner Says

Worldwide semiconductor revenue totaled $476.7 billion in 2018, a 13.4 percent increase from 2017, according to preliminary results by Gartner, Inc. Memory strengthened its position as the largest semiconductor category, accounting for 34.8 percent of total semiconductor revenue, up from 31 percent in 2017.

“The current rankings may see significant change this year with the expectation that memory market conditions will weaken in 2019,” says Andrew Norwood, Vice President and Analyst, Gartner, . “Technology product managers must prepare for this limited growth to succeed in the semiconductor industry.”

Memory vendors, for example, will need to plan for future oversupply and intense margin pressure by funding research and development on continued node transitions, emerging memory technologies and new manufacturing technologies. This will provide them the best cost structure as new entrants from China emerge.

Non-memory vendors must increase design-in activity with key customers that have been enduring high memory pricing. As the market for smartphones and tablets continues to saturate, application processor vendors must seek adjacent opportunities in wearables, Internet of Things (IoT) endpoints and automobiles.

In terms of semiconductor devices, memory was simultaneously the largest (35 percent) and highest-performing device category for 2018 with 27.2 percent revenue growth. This was driven by increases in ASP for DRAM for much of the year with the exception of the fourth quarter of 2018.

Within the memory segment, NAND flash suffered a marked slowdown with ASP declines through much of the year due to oversupply. This device category still managed to show a 6.5 percent revenue increase, driven by higher adoption of solid-state drives (SSDs) and increasing content in smartphones.

The second-largest semiconductor category, application-specific-standard products (ASSPs), saw limited growth of 5.1 percent due to a stalling smartphone market combined with a tablet market that continues to decline. Leading vendors in this segment area, including Qualcomm and MediaTek, are aggressively expanding into adjacent markets with stronger prospects for growth, including automotive and IoT applications.

Merger and acquisition (M&A) activity in 2018 was more significant for the deals that did not happen than the deals that did. Broadcom’s hostile takeover attempt of Qualcomm failed as the U.S. government stepped in, and Qualcomm’s bid to secure NXP became embroiled in the ongoing trade war with China. Completed deals included Toshiba spinning off its NAND business into Toshiba Memory in June 2018 and Microchip’s May 2018 acquisition of Microsemi.

“2019 will be a very different market from the previous two years,” says Norwood. “Memory has already entered a downturn, there is the looming trade war between the U.S. and China, and mounting uncertainty about the global economy.”

(For more information visit: https://www.gartner.com).