Global headwinds, weak demand and oversupply of inventories are going to hit the semiconductor industry this year. Research firm Gartner has forecast that revenues of the industry is projected to be at $532 billion in 2023, as against $599.6 billion in 2022.

The industry, which remained stagnant in 2022 growing at 0.2 per cent over the 2021 revenues, is likely to witness a steep decline this year.

While the PC, tablet and smartphone semiconductor markets are expected to stagnate. The automotive and industrial, military/civil aerospace semiconductor markets will achieve growth. The automotive semiconductor market is forecast to grow 13.8 per cent, reaching $76.9 billion in 2023.

“The short-term outlook for the semiconductor market has deteriorated further. As economic headwinds persist, weak end-market electronics demand is spreading from consumers to businesses, creating an uncertain investment environment,” Gartner said in its latest report.

“In addition, an oversupply of chips which is elevating inventories and reducing chip prices, is accelerating the decline of the semiconductor market this year,” said Richard Gordon, Practice Vice-President at Gartner.

Impact on Memory industry

The memory industry is going to take a big time impact, with projections indicate a decline of 35.5 per cent in 2023. It, however, said that it will bounce back in 2024.

“The memory industry is dealing with overcapacity and excess inventory, which will continue to put significant pressure on average selling prices (ASPs) in 2023,” it said.

The memory market is projected to total $92.3 billion, showing a decline of 35.5 per cent in 2023. The research firm, however, asserted that this segment would bounce back in 2024 with a growth rate of 70 per cent.

Steep decline in DRAM market likely

The DRAM (Dynamic Random Access Memory) market will witness significant oversupply for most of 2023 due to weak end-equipment demand and high inventory levels. Gartner analysts foresee DRAM revenue will decline 39.4 per cent in 2023 to total $47.6 billion.

“The market will move to undersupply in 2024 and DRAM revenue is set to increase 86.8 per cent as pricing rebounds,” it said.

The research firm expects a similar trend for the flash memory market. The revenues are expected to decline by 32.9 per cent to $38.9 billion in 2023. It would bounce back in 2024 by growing at about 61 per cent due to supply shortages.

“The semiconductor industry is facing a number of long-term challenges in the decade to come. The past decades of high volume, high-dollar content market drivers are coming to an end, notably in the PC, tablet and smartphone markets where technology innovation is lacking,” Gordon said.