Chip Revenues To Decline 2.5 Percent In 2023, Warns Gartner

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Global semiconductor revenues are projected to grow 7.4 percent in 2022, but will decline in 2023 as inflationary pressures take their toll

Analyst house Gartner warns chip makers to enjoy the rest of the year whilst they can, as chip revenues in 2023 are forecast to decline.

In its forecast Gartner said global semiconductor revenue is projected to grow 7.4 percent in 2022, down from its previous quarter’s forecast of 13.6 percent growth in 2022.

And the 2022 growth of 7.4 percent is also down from the 26.3 percent grow during 2021, at the height of chip shortage and the global Coronavirus pandemic.

Semiconductor slowdown

Gartner’s forecast revealed the analyst house expects the declining PC market to impact chip revenues going forward.

Rival analyst group IDC Research earlier this month published a worrying decline in the shipments of PCs amid fears of a global recession.

It revealed that worldwide PC shipments fell 15.3 percent in the second quarter of 2022, “as supply and demand both waver.”

Now Gartner has axed its growth forecast for semiconductor revenues for the rest of 2022, and expects an actual decline in 2023.

“Although chip shortages are abating, the global semiconductor market is entering a period of weakness, which will persist through 2023 when semiconductor revenue is projected to decline 2.5 percent,” said Richard Gordon, Practice VP at Gartner.

“We are already seeing weakness in semiconductor end markets, especially those exposed to consumer spending,” said Gordon. “Rising inflation, taxes and interest rates, together with higher energy and fuel costs, are putting pressure on consumer disposable income. This is affecting spending on electronic products such as PCs and smartphones.”

Overall, 2022 global semiconductor revenue has been reduced from the previous quarter’s forecast by $36.7 billion, to $639.2 billion, as economic conditions are expected to worsen through the year, Gartner said.

Memory demand and pricing have softened, especially in consumer-related areas like PCs and smartphones, which will help lead the slowdown in growth, the analyst house said.

For next year, Gartner expects chip revenue to contract to $623.1 billion.

Down cycle

Gartner said PC shipments are set to decline by 13.1 percent in 2022, after recording growth in 2020 and 2021.

Semiconductor revenue from PCs is estimated to record a decline of 5.4 percent in 2022.

Semiconductor revenue from smartphones is on pace to slow to 3.1 percent growth in 2022, compared to 24.5 percent growth in 2021.

From an enterprise perspective, inventories are recovering rapidly, lead times are beginning to shorten, and prices are starting to weaken.

“The semiconductor market is entering an industry down cycle, which is not new, and has happened many times before,” said Gordon. “While the consumer space will slow down, semiconductor revenue from the data centre market will remain resilient for longer (20 percent growth in 2022) due to continued cloud infrastructure investment.”

“In addition, the automotive electronics segment will continue to record double-digit growth over the next three years as semiconductor content per vehicle will increase due to the transition to electric and autonomous vehicles,” said Gordon. “The semiconductor content per vehicle is projected to increase from $712 in 2022 to $931 in 2025.”

The forecast from Gartner comes after the United States and the European Union have already announced massive subsidy plans to attract chipmakers to build factories in their blocs, in order to reduce dependency on Asian suppliers.