Financial

Semiconductor revenue hits $476.7bn

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While 2018 continued to build on the growth established in 2017, the overall gains driven by memory were at half the 2017 growth rate, says Gartner.
While 2018 continued to build on the growth established in 2017, the overall gains driven by memory were at half the 2017 growth rate, says Gartner.

Worldwide semiconductor revenue totalled $476.7 billion in 2018, a 13.4% increase from 2017.

This is according to preliminary results by Gartner, which notes that memory strengthened its position as the largest semiconductor category, accounting for 34.8% of total semiconductor revenue, up from 31% in 2017.

"The largest semiconductor supplier, Samsung Electronics, increased its lead as the number one vendor due to the booming DRAM market," says Andrew Norwood, vice president, analyst at Gartner.

"While 2018 continued to build on the growth established in 2017, the overall gains driven by memory were at half the 2017 growth rate. This is attributed to memory entering a downturn late in 2018."

Gartner says the combined revenue of the top 25 semiconductor vendors increased by 16.3% during 2018 and accounted for 79.3% of the market, outperforming the rest of the market, which saw a milder 3.6% revenue increase. This is due to the concentration of the memory vendors in the top-25 ranking, the market analyst firm says.

It adds that Intel's semiconductor revenue grew by 12.2% compared with 2017, driven by a combination of unit and average selling price (ASP) growth. Major memory vendors that performed strongly in 2018 include SK hynix - driven by DRAM, and Microchip Technology - due to its acquisition of Microsemi. The top four vendors in 2017 retained their ranking in 2018, Gartner notes.

"The current rankings may see significant change this year with the expectation that memory market conditions will weaken in 2019," says Norwood. "Technology product managers must prepare for this limited growth to succeed in the semiconductor industry."

Gartner points out that memory vendors, for example, will need to plan for future oversupply and intense margin pressure by funding research and development on continued node transitions, emerging memory technologies and new manufacturing technologies. This will provide them the best cost structure as new entrants from China emerge, it says.

Non-memory vendors must increase design-in activity with key customers that have been enduring high memory pricing, says Garner, adding that as the market for smartphones and tablets continues to saturate, application processor vendors must seek adjacent opportunities in wearables, Internet of things endpoints and automobiles.

In terms of semiconductor devices, memory was simultaneously the largest (35%) and highest-performing device category for 2018 with 27.2% revenue growth, says Gartner. This was driven by increases in ASP for DRAM for much of the year with the exception of the fourth quarter of 2018, the firm explains.

Within the memory segment, says Gartner, NAND flash suffered a marked slowdown with ASP declines through much of the year due to oversupply. This device category still managed to show a 6.5% revenue increase, driven by higher adoption of solid-state drives and increasing content in smartphones.

"2019 will be a very different market from the previous two years," says Norwood. "Memory has already entered a downturn, there is the looming trade war between the US and China, and mounting uncertainty about the global economy."

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