Semi Market to Return to Growth Early 2020
Following several years of strong demand, 2019 will mark the global semiconductor market's biggest slump in 18 years. The largest decline was experienced in 2001, amid the burst of the internet bubble. The 2019 decline is pegged at 15%, the third largest annual drop since a 32% decline in 2001 and the 17% decline in 1985. An uncertain global economy and weakness in key demand are cited as the key contributors to the current downturn.
Nevertheless, experts anticipate that 2020 will see the semiconductor market return to growth and continue to prosper. Memory chips are expected to hold the largest market share through 2022, although every application market is likely to experience growth, led by the automotive and data processing markets. Demand for AI-related chips is projected to be the driving force behind this growth, with 5G and automotive also playing a part.
Demand in the semiconductor industry is typically sparked by a disruptive new technology. From 1997-2007, demand for central processing units (CPUs) and memory chips was boosted by the rapid rise in popularity of PCs, while the wider penetration of the internet triggered an increase in Ethernet equipment, network processors and ASICs. The launch of the iPhone in 2007 saw the dawn of the smartphone era, driving demand for mobile processors, while wider use of the cloud computing has increased growth in server CPUs and storage.
Experts now anticipate that artificial intelligence will lead another 10-year growth cycle in the semiconductor sector. It is projected that the market for AI-related semiconductors will grow from its present $6 billion in revenue to over $30 billion by 2022, with a compound annual growth rate (CAGR) of nearly 50%. While AI-use cases are expected to penetrate every industry segment over time, their adoption will be dictated by the rate of investment in the technology, the speed of development, and how quickly its benefits are realised.
Following closely behind, the market for 5G semiconductors is predicted to grow to almost $19 million in revenue by 2022, up from $593 million in 2018, according to a report by the Bank of America/Merrill Lynch.