With average prices for semiconductor components going down dramatically in 2019, especially DRAM and NAND, major chipmakers have been forced to reduce their production output. As a result, the silicon market is expected to shrink by 12 per cent year-on-year.
According to analysts at IC Insights, the global semiconductor market will total just $443.8bn in 2019, having exceeded the $500bn mark for the first time a year ago.
This doesn't mean fewer devices are equipped with chips – the overall electronic systems market is projected to grow 4 per cent this year to $1.68 trillion – but that device manufacturers opt for fewer, or cheaper, silicon components.
Back in 2018, average semiconductor content in electronic systems – as a fraction of the overall cost – reached a record high of 31.1 per cent.
This year, the value of silicon baked into your average electronic device is expected to drop to 26.4 per cent – and according to IC Insights, the industry won't see the ratio going above 31 per cent again until 2023.
This is an unusual situation: historically, the semiconductor industry was showing much higher annual growth rate than the electronic systems market. Even as PC and smartphone sales slowed down, chipmakers were still raking it in because each new generation of devices required more complex, more capable, and by extension more expensive silicon.
"While the trend of increasing semiconductor content has been evident for the past 30 years, the big jump in the average semiconductor content in electronic systems in 2017 and 2018 was primarily due to the huge surge in DRAM and NAND flash ASPs (Average Selling Prices) and average electronic system sales growth last year," said Bill McClean, president of IC Insights.
"The memory IC ASP jump experienced over the past two years (56 per cent in 2017 and 29 per cent in 2018) is expected to reverse itself this year (-33 per cent) and bring the semiconductor content percentage down with it."
The silicon printers forced to curtail some of their manufacturing operations in 2019 include Samsung, SK Hynix and Micron.
McClean noted that the semiconductor content of electronic systems obviously couldn't grow faster than the electronics market forever – otherwise we would be left with systems that are 100 per cent silicon-based. He suggested that once a certain ceiling is reached, the average annual growth for the semiconductor industry will closely track that of the electronic systems market. ®