Semiconductor market forecasts and trends

According to the president of IC Insights, the semiconductor industry is set for slow steady growth that will drive more consolidation, but big technology transitions are just two to three years away. "This is very unusual, in 35 years I've been doing this, we have not seen a fairly flat five-year period of 2-3 per cent GDP growth like this," said Bill McClean. "We won't have a big cycle in semiconductors until there's a big cycle in GDP growth, and it doesn't seem like its coming," he indicated.

The semiconductor market is expected to be nearly flat this year up two percent to $362 billion, rising just 4.9 per cent on a compound basis through 2019 to $450 billion. A world economy chugging along at a sluggish 2-3 per cent GDP growth for the past several years is mainly to blame.

The forecast marks a big cut from predictions of seven per cent semiconductor sales growth in 2015 made in January.

System sales are forecast to rise four per cent this year, but 'there's downside...I would not be surprised to it being as low as two per cent,' McClean said

An expected increase to five per cent growth next year would only be about a 3-4 per cent rise if not for the also unusual situation of the U.S. dollar outperforming all other world currencies.

The good news is unit sales of chips is rising at a steady six per cent since the 2008 recession. "I think this could go to seven per cent over the next few years, there's upside here," McClean said.

The IoT won't help much

Although unit sales of ICs will rise about six per cent this year, average selling prices are falling about five per cent, leaving the market value about flat in 2015.

The rise in sales of 32bit processors suggests the Internet of Things is gaining traction, but McClean is sceptical of the emerging market's strength. "In general IoT doesn't look like the saviour for returning this industry to 10 per cent growth rates...something could hit with tremendous impact very quickly [and] as price per bit of memory comes down it opens up new applications [but] the world's still looking for the next big thing in technology," he said.