Q1 2019 Semiconductor Sales Fell By 4th-Largest Decline in 35 Years
The semiconductor market may be facing a grim 2019 after the first quarter chewed the hell out of overall sales. Some seasonal decline is always expected in certain markets — anything related to desired consumer goods always takes a hit after Christmas — but the drop in revenue in Q1 2019 is one of the largest in history.
According to the World Semiconductor Trade Statistics (WSTS) organization, sales fell 15.5 percent in Q1 2019, from $114.7B to $96.8B. That’s the fourth-largest decline in the past 35 years. Year-over-year, sales still fell 13 percent, down from Q1 2018’s $111.1B. Examined on a monthly basis, sales fell 1.8 percent in March 2019 compared with February, and 13 percent compared with March 2018. This is the largest sequential decline for the market since 2001, when the dot-com recession was in full swing.
“Sales in March decreased on a year-to-year basis across all major regional markets and semiconductor product categories, consistent with the cyclical trend the global market has experienced recently,” John Neuffer, president and CEO of the Semiconductor Industry Association (SIA) trade group, told EETimes.
Analyst group IC Insights has released its own statement, saying: “The first quarter is usually the weakest quarter of the year for the IC market, averaging a sequential decline of 2.1 percent over the past 36 years, but the severity of the 1Q19/4Q18 IC market drop has started this year off at a very low level. As a result, given the typical seasonality of the IC market, an abnormally strong second half of the year will be required in order to avoid a full-year 2019 double-digit IC market decline.”
The massive decline in semiconductor sales is being driven by a number of factors. There’s the expected drop in RAM and NAND sales caused by simultaneous declines in both the smartphone and data center markets, the ongoing impact of trade disputes between the US and China, and economic uncertainty around Brexit. There have been fears of sluggish growth in China and other countries as well.
That puts the decline of Q1 2019 in slightly unusual territory. If you look at IC Insights list above, you’ll notice that three of the top seven declines took place in the same year — 2001. The other three happened in 1985 (the Chicago Tribune has details if you’re curious), 2009 (undoubtedly Great Recession related), and in 1996. The 1996 decline may have been DRAM-related; a news link on Japanese DRAM manufacturing notes that “In particular, the supplies of DRAMs were excessive, and many semiconductor manufacturers were forced to adjust their production and suffered a severe downturn.” Japanese companies began leaving the DRAM market after this: Fujitsu, Hitachi, NEC, and Toshiba either spun off their memory divisions or exited the market.
These declines are likely being driven by decreased RAM sales to both data centers and phone manufacturers, but we know that’s not the only reason — GPU sales are down sharply from the end of the cryptography boom (hitting yearly sales figures) and Intel has said the data center market is cooling as well. With sales of the PS4 and Xbox also expected to slump as we move towards 2020 and the launch of new consoles, we may be in a perfect storm for overall semiconductor sales declines, even if the globe isn’t in the grip of a worldwide depression or recession.