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IoT not enough to boost semiconductor market

Posted: 17 Sep 2015 ?? ?Print Version ?Bookmark and Share

Keywords:Gartner? semiconductor? smartphone? tablet? PC?

Gartner is still weeks away from lowering their forecasts for semiconductor growth for the second time this year, this time to as little as 0.5 per cent. According to the market research firm, the short-term issue is an excess of inventory from an overheated 4Q14, but the longer term issue is the industry lacks a driver.

Growth rates for PCs, tablets and smartphones are all down this year. They are expected to rebound somewhat but not strongly in 2016 and beyond.

"This industry going forward is in a slower-growth mode because the big three drivers are slowing down so we expect 4-7 per cent growth for the next several years, no double-digit growth," said Jim Walker, a semiconductor analyst at Gartner.

PC sales will shrink at least 5.1 per cent in 2015. That includes a 1.9 per cent decline in the ultramobile segment Intel defined as its hottest slice, one that was up as much as 15.2 per cent last year. Mobile phone sales overall are expected to be about flat at 0.7 per cent growth this year.

"If you are a supplier to Apple you are doing well this year; but if not, you are not doing well this year," he said.

Jim Walker

As an aside, he noted mobile phones have a broad range of styles from low-end models with as little as $24 in components to the latest iPhones that sport an estimated $202 in chips and displays. Much of Apple's margins are in reselling memory chips because it charges about a $100 premium for versions of iPhones with 64GB of flash even though a 64GB SD card costs only $20, he said.

Overall PC sales are expected to edge up to 3-5 per cent a year over the next three years. The ultramobile segment will rebound into the high single digits, and mobile phones will nudge back up but stay under five per cent growth.

The sluggish numbers have people instinctively pointing to the Internet of Things as the next big driver. But that's an assumption market watchers think is unrealistic. For example, even though wearables are growing at a 25 per cent rate they will only represent one per cent of the semiconductor market in 2019 because they use only a few chips and very inexpensive ones at that.

"It's not the new big killer app some people think it is...the [semiconductor] driver has yet to be determined, but it's not the IoT," Walker said.

Nor is it automotive for the same reasons, despite intense work and discussion on driverless cars. The U.S. will turn out about 17 million cars this year, up from about 15 million previously, and each one contains as much as $400 in semiconductor content. Nevertheless, the entire sector only represents about eight per cent of the total chip market.

PCs were a driver because they packed lots of chips. Smartphones used fewer, typically cheaper chips but sold in much higher volumes. Nothing on the horizon has the makings of a new driver, but "no one knew ten years ago the tablet would be a driver," Walker said, suggesting the next big thing has yet to be invented.

Smartphone sales

Smartphone sales are nearly flat this year and will stay below five per cent growth, according to market watchers at Gartner.


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