The good news for semiconductor buyers is it will not be a seller’s market in 2014. The bad news is that it will not be a buyer’s market, either.
Rather, supply and demand will be mostly in balance through most of the year, although inventory levels could build in the fourth quarter.
“We are looking at a pretty balanced situation for the full year, but there will be softness in the latter half of 2014,” says Dale Ford, vice president electronics and media for researcher IHS, Englewood, Colo. “We are calling for 5.8% growth in 2014 and are a bit more bullish than World Semiconductor Trade Statistics (WSTS).” WSTS compiles sales figures for the industry and forecasts 4.1% revenue growth for 2014.
Other researchers are also more optimistic than WSTS. For instance, IC Insights, Scottsdale, Ariz., forecasts 7% revenue growth, while Gartner says the chip industry revenue will rise about 5.6%.
The semiconductor industry will post mostly steady growth through 2018
when global chip revenue will total $446.1 billion.
Because chip demand will not be overwhelming, there will be plenty of capacity in place for most semiconductor products, and lead times will be mostly stable with no serious shortages in 2014.
Some tags will fall
While supply and demand will be mostly in demand, buyers can still expect some price erosion for certain semiconductors, such as SRAM and NOR flash. However, prices will rise for some high-volume chips such as DRAM and NAND flash.
Overall, the average selling price for semiconductors will drop about 1% overall in 2014, according to IC Insights. Brian Matas, vice president of research for IC Insights, says increasing prices and strong revenue growth for NAND and DRAM are two reasons IC Insights’ forecast is more optimistic than WSTS’ outlook for the industry.
He notes that with DRAMs there are only three major suppliers left: Samsung, Hynix and Micron. As a result, there will be more stability in the DRAM industry. “You won't see a big overbuilding in capacity,” he says, “and there won’t be new entrants undercutting each other on price so there will be market stability.”
IC Insights forecasts a 14% increase in the DRAM market as revenue reaches $38.3 billion in 2014. The growth rate will be down from 31% in 2013, according to the researcher. The average price for DRAM will increase 20% in 2014 after rising 48% in 2013 to $2.50.
“The same is true with NAND flash. Average prices are rebounding," says Matas. NAND average prices will rise 8%, and the overall NAND market will grow 15% to $25.9 billion. Driving DRAM and NAND flash memory demand will be media tablets and smartphones.
Expect broad-based growth
Semiconductor sales growth in 2014 will be more broad-based than it was in 2013, according to Ford. He explains that in 2013 sales growth was largely due to higher prices for memory ICs. In 2014, semiconductor revenue will rise because of increased demand for microcontrollers, sensors, actuators, LEDs and processors used in smartphones and media tablets.
Image sensors will post 14.8% revenue growth, while microcontroller sales will rise 13.6% in 2014, according to Ford.
“A lot of this is driven by automotive and industrial market," says Ford. He notes that industrial equipment and automotive systems are using more sensors and microcontrollers in other semiconductors. “In our long-term outlook, we have industrial electronics growing strongly as wireless in terms of revenue overall." He adds that semiconductor revenue in the industrial segment will rise by about 8% per year from 2012 through 2017. Automotive will be the third biggest driver for the chip industry as semiconductor content in cars rises.
More LEDs, sensors and MCUs are being designed into cars, Ford notes.
Matas says that media tablet processors will post 35% growth as the market reaches $5 billion in 2014 while the cell phone applications processor market will rise 19% to $19.3 billion.
Media tablets and smartphones are having a significant impact on the semiconductor market, says Sergis Mushell, principal research analyst for Gartner Inc., Stamford, Conn. “People are no longer just computing on PCs. People are computing on tablets and smartphones,” he says. Such products use more system on chip (SoC) devices, which integrate many components that were used alongside the microprocessor.
More SoC products mean that fewer semiconductors will be responsible for semiconductor growth. For instance, the top 25 semiconductor suppliers increased revenue by 6.2% in 2013, which is more than the overall growth rate for the industry, says Mushell. The top 25 also accounted for 69.3% of total semiconductor revenue, up from 68.6% in 2012.
SoC is one reason that demand is weaker for some chips such as SRAM and digital signal processors (DSPs). SRAM is being incorporated into other chips, and fewer discrete SRAM chips are shipping. As a result, SRAM revenue will fall 21% in 2014. In addition, DSP and NOR flash revenue will drop 10%, according to IC Insights.
Although there will be revenue declines in some semiconductor segments, overall, Matas says suppliers are optimistic that business in 2014 will be better than 2013. However, they are also cautious “because there's still a lot of uncertainty out there as far as what the economy is going to do. Time will tell.”