A least one semiconductor industry market watcher is now predicting contraction for the year, based on macroeconomic sluggishness, weak memory pricing and lack of a “killer app” to drive chip consumption.

Semico Research Corp. recently revised its forecast for 2016 semiconductor sales. The Phoenix-based market research firm now sees thee industry contracting slightly this year, by about one-third of a percent. Late last year Semico was projecting industry revenue would increase this year by 3-4%.

“It [the forecast] is just slightly negative, but it’s certainly down from what our outlook was toward the end of last year,” Jim Feldhan, Semico’s president, told EE Times.

Semiconductor sales decreased by 0.2% in 2015 compared to 2014, according to the World Semiconductor Trade Statistics (WSTS) organization. If Semico’s forecast for 2016 is on the money, it would mark the first time that industry sales decreased for two consecutive years since 2008 and 2009, when the world was reeling from the effects of the financial crisis.

The WSTS and other market research firms are still projecting modest growth for the semiconductor industry in 2016. The WSTS forecast calls for growth of 0.3% this year, while market research firm IC Insights Inc. is projecting growth of 2%.

The disparity in these forecasts is not large. The difference between the WSTS forecast and Semico’s forecast, for example, is less than 1%. But psychologically, at least, the difference is significant. The industry contraction in 2008 and 2009 marked the only consecutive years of declining sales in the semiconductor industry’s history. To have it happen again just seven years later would signal a new stage of maturity for the industry.

The fundamental problem, according to Feldhan, is lack of a compelling driver to spur increased semiconductor consumption. He points out that PCs were the driving force in the semiconductor industry for a couple of decades before the PC market went stagnant a few years ago. Smartphones, which really took off with the introduction of the original iPhone, were an engine of semiconductor growth for several years, but sales of smartphones have recently leveled off. Tablet sales, which also drove semiconductor consumption, grew strongly for several years, but have been in decline since last year.

By: DocMemory
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