TrendForce : Global Semiconductor Sales for 2016 to Sink 0.6 percent Annually

Due to the slowing growth of the mobile communication industry, global market research firm TrendForce projects that the total revenue from sales of semiconductors worldwide will grow by a mere 0.9 percent year on year in 2015, a sharp plunge from the 10.5 percent year-on-year growth in 2014. Looking forward to 2016, the decline in the sales of memory products will become steeper and drag down the total semiconductor sales revenue. As a result, semiconductor revenue growth is projected to become negative and slide slightly by 0.6 percent year on year, amounting to around US$329 billion.

According to TrendForce Research Manager Jian-Hong Lin, the semiconductor sector will witness the following trends in 2016:

(1) The decline in PC shipments will moderate and ASPs of mobile devices will recover

Weak PC demand and the rising share of PCs carrying CPU/GPU SoC products this year have led to a contraction in the overall revenue from PC-related IC products. However, the overall inventory level of PCs has been through corrections this year and this will help stabilize CPU sales next year, narrowing the fluctuation of average sales prices (ASPs) for CPU products.

While growth in the mobile device market has slowed this year, the share of devices carrying application processors (APs) made on the 16/14nm processes is expected to grow. The price decline in APs for mid-range and high-end devices will decelerate going into 2016. TrendForce estimates that the global sales revenue of digital IC chips will decline by 1.4 percent year on year in 2015 and see a lesser drop of 0.7 percent year on year in 2016.

(2) Growth in analog IC and OSD markets will continue with automotive components and high-resolution CIS's becoming demand drivers

In 2016, automobile shipments worldwide is expected to grow 5 percent year on year, and the average cost of analog IC components for each vehicle will rise as well. Consequently, the share of automotive application in the overall analog IC market will grow from the estimated 28 percent in 2015 to the forecast of 30 percent in 2016. The automotive application will also drive the overall analog IC sales, which will grow 3.5 percent year on year in 2016.

Rising demand from high-resolution CMOS imaging sensors (CIS's) and automotive components will continue to benefit the optoelectronics, sensors/actuators and discretes (OSD) market. TrendForce estimates the annual increase in the global OSD sales revenue to reach 4.4 percent for 2016.

(3) Memory IC market will remain as an oligopoly and see sales revenue decline next year due to oversupply

Global sales revenue of memory IC products are projected to grow just 1.8 percent year on year in 2015 owing to supply outstripping demand in the end market. Both DRAM and NAND Flash sales will slide next year and cause the total memory IC sales revenue to fall 7 percent year on year, based on TrendForce's latest analysis. Compared with other product types (i.e. digital IC, analog IC and OSD), the memory IC segment is expected to suffer the steepest price decline next year and will be the main culprit behind the 0.6 percent year-on-year drop in next year's global semiconductor revenue.

Lin added that there will be two major forces guiding the semiconductor sector in 2016:

(1) With the rise of vertical markets, systems companies will be a new force to be reckon with in the IC market

In addition to IDMs and fabless IC design houses, systems companies are gradually becoming important players in IC manufacturing. For instance, Apple now accounts for nearly 10 percent of the global foundry revenue, and this encourages other smartphone vendors to develop their own IC components. Data center operators are considering this option as well. ARM, for example, has collaborated with several major data center operators with various degrees of progress. The advent of the Internet of Things will demand systems companies to assert greater control over the vertical markets that they are developing. Hence, systems companies will also exert greater influence over IC manufacturing and have greater control over IC products used in their businesses.

(2) Regional markets will push for local manufacturing but trade agreements will determine the geographical distribution of semiconductor production

China has been aggressively conducting investment, merger and acquisition deals with foreign semiconductor companies since its government released "Guidelines to Promote IC Industry Development" last year. Some of the landmark deals made by the Chinese this year included the acquisitions of STATS ChipPAC and OmniVision. Moreover, the state-backed Chinese technology conglomerate Tsinghua Unigroup has been actively investing in the NAND Flash industry. Besides China, India and Indonesia have also heavily promoted local manufacturing and their governments are developing massive support programs to fulfil their respective policy agendas. On the other hand, the increasing number of free trade agreements signed by countries around the world will weaken tariff barriers and diminish the effects of national industrial policies on international markets. TrendForce concludes that the combination of these factors will cause shifts in the geographical distribution of semiconductor manufacturing.