Worldwide Semiconductor Market forecast to be US$335 billion in 2016 –virtually unchanged from 2015 (Charts 1 & 2)

The World Semiconductor Trade Statistics (WSTS) released its new semiconductor market forecast generated in November 2016.

WSTS expects the world semiconductor market to remain stable in 2016 at US$335 billion with growth returning in 2017 and 2018. For 2016, growth in Discretes (4.2%), Sensors (22.6%), Analog (4.8%), and Microprocessors (2.3%) is expected to be offset by declines in Optoelectronics (-3.6%), Memory (-3.8%) and Logic (-2.7%).

By geography, for 2016, declines are expected in Americas and Europe with slight gains in Japan and Asia-Pacific.

For 2017 and 2018, all major product categories and regions are forecast to grow reaching US$354 billion in 2018. As a result, the worldwide semiconductor market is forecast to be up -3% year in 2017 and -2% in 2018.

By region, a positive growth rate is projected for all regions in 2017 and 2018. The Americas and Asia Pacific regions are expected to show the highest growth rate.


IoT and Automotive to Drive IC Market Growth through 2020 (Chart 3)

New report also projects good IC sales increases in medical electronics, digital TVs, and servers.

Integrated circuit sales for connections to the Internet of Things are forecast to grow more than three times faster than total IC revenues during the last half of this decade, according to IC Insights’ new 2017 Integrated Circuit Market Drivers report. ICs used to embed Internet of Things (IoT) functionality into a wide range of systems, sensors, and objects are expected to generate sales of $12.8 billion in 2016, says the new report, which becomes available this week.

Between 2015 and 2020, IoT integrated circuit sales are projected to rise by a compound annual growth rate (CAGR) of 13.3% compared to 4.3% for the entire IC market, which is projected to reach $354.7 billion in four years versus $287.1 billion last year, based on the forecast in the 492-page report. As shown in Chart 3, strong five-year IC sales growth rates are also expected in automotive (a CAGR of 10.3%), medical electronics (a CAGR of 7.3%), digital TVs (a CAGR of 5.9%), and server computers (a CAGR of 5.4%).

Cellphone IC sales—the biggest end-use market application for integrated circuits—are expected to grow by a CAGR of 4.8% in the 2015-2020 period. Saturation in smartphone markets and economic weakness in some developing regions are expected to curb cellphone IC market growth in the next four years after sales increased by a CAGR of 10.8% between 2010 and 2015. Meanwhile, weak and negative IC sales growth rates are expected to continue in standard personal computers, set-top boxes, touchscreen tablets, and video game consoles.

The new 2017 IC Market Drivers report shows 2016 integrated circuit sales for IoT applications climbing nearly 19% compared to 2015 to an estimated $12.8 billion, followed by the automotive segment increasing about 12% to $22.9 billion, medical electronics rising 9% to $4.9 billion, and digital TV systems growing 4% to $12.9 billion this year. The report estimates IC sales growth in server computers being about 3% in 2016 to $15.1 billion, cellphones being 2% to $74.2 billion, and set-top boxes being 2% to $5.7 billion. Meanwhile, standard PC integrated circuit sales are estimated to be down 5% in 2016 to $54.6 billion while video game console IC revenues are expected to finish this year with a 4% drop to $8.9 billion and tablet IC sales are on track to decline 10% to $12.1 billion in 2016, according to IC Insights’ new report.


Apple has begun to reduce orders for iPhone 7

Apple reportedly has begun to reduce orders for iPhone 7s as initial sales momentum has started fading, according to sources from Taiwan's handset supply chain.

The initial shipment momentum of the iPhone 7 was in part driven by strong demand for the jet black iPhone 7 models and in part by the mishap brought upon by Samsung Galaxy Note 7, said the sources.

Demand for the iPhone 7 devices in China and other markets has scaled down significantly since their launch less than three months ago, the sources noted.

Instead of paying attention to sales performance of the iPhone 7 devices, component suppliers and consumers alike have been shifting their focus to the next generation iPhone to be released in 2017, commented the sources.

Market rumors have indicated that the next generation iPhone will come with OLED displays, glass cases, dual-lens cameras, enhanced CPUs, and advanced sensors, while supporting mixed reality (MR) and wireless charging technologies.

Affected by consumers' high expectations on the next generation iPhone, makers in the supply chain are mostly conservative about the shipment outlook for the iPhone 7 in the first half of 2017, expecting shipments in this six-month period to be at least five million units less than those shipped in the second half of 2016.


PC Market Outlook improves mildly with faster shift to slim and convertible models (Chart 4)

Worldwide PC shipments are forecast to decline by 6.4% on year in 2016, according to an updated forecast from the IDC Worldwide Quarterly PC Tracker. This is an improvement over August's projection for a decline of 7.2% in 2016. While IDC's outlook for 2017 remains at negative 2.1% on-year growth, the absolute volumes are slightly higher based on stronger 2016 shipments.

The third quarter of 2016 saw an on-year decline in shipments of 4.6%, more than two percentage points ahead of expectations. Although factors such as the transition to Windows 10 played a role, the third quarter of 2016 gains came largely as a result of stronger momentum in the US, Western Europe, and Japan, and were driven by channel build up in anticipation of component shortages in areas such as display panels and storage. This is expected to slightly boost shipments into early 2017, but will not carry into later periods.

Beyond 2016, the PC shipment outlook has been raised slightly, and continues to trend toward stabilization with modest commercial growth starting in 2018. Commercial notebook shipments are expected to grow during 2016 and throughout the forecast, with a peak at 3.7% in 2019. Commercial desktop growth is expected to be effectively flat by 2018, while consumer notebook and desktop shipments are expected to decline slightly throughout the forecast.

Competition from tablets and smartphones continues to ease as those markets mature. Nevertheless, overlap in usage and converging designs is accelerating the shift in notebooks to ultra slim and convertible designs, which are now expected to account for almost 63% of notebook shipments by 2020. Combining detachable tablets with PCs, the market is projected to decline by 3.2% in 2016 with small positive growth in later years.

“The PC market continues to perform close to expectations,” said Loren Loverde, vice president, Worldwide Tracker Forecasting and PC research. “Some volatility in emerging regions is being offset by incremental gains in larger mature markets while the interaction with tablets and phones is stabilizing. We continue to see steady progression toward smaller desktops and notebooks as replacement buying helps stabilize overall shipments in the coming years.”

"Despite continued weakness in the consumer segment, the US PC market is showing some signs of stability in the near future with some sources of optimism for the long haul," said Neha Mahajan, senior research analyst, Devices and Displays. "Backed by early Windows 10 transitions that are expected to boost commercial PC shipments in the next couple of years, and steady growth of PCaaS (PC as a Service) which should help shorten refresh cycles of commercial systems in the long-term, the overall US PC market sentiment certainly seems to be improving."


Worldwide Tablet Shipments expected to decline 12% y/y to 182.3 million units in 2016, Detachables gain traction in both mature and emerging markets (Charts 5 & 6)

Worldwide tablet shipments are expected to decline by 12% in 2016, rounding out the year at 182.3 million shipments, according to a new forecast from International Data Corporation. IDC expects the market to rebound in 2018 though growth will remain in the low single digits as detachable tablets slowly gain traction.

“The benefits of a thin and light design combined with a touchscreen are bolstering growth in the detachable tablet market, but are also bleeding over into the PC market as slim and convertible-type notebooks gain popularity,” said Jitesh Ubrani, senior research analyst with IDC's Worldwide Quarterly Mobile Device Trackers. “This is a welcome change for vendors as average selling prices for notebooks and tablets are expected to increase in the near term.”

From a geographic perspective, emerging markets will continue to decline until 2018 and then growth will flatten out in the following two years. Although these markets are forecast to show growth in the detachable segment, the disproportionate decline in slate tablets ensures no growth until 2020. Meanwhile, mature markets will experience positive single-digit growth until 2020 as the decline in slate tablets is offset by the growth in detachable tablets.

“The transition to detachables is inevitable, but slate tablets will remain relevant as highlighted by recent results from Amazon with its Kindle Fire portfolio,” said Jean Philippe Bouchard, research director, Tablets at IDC. “Fueled by ultra low-end prices and a growing ecosystem play involving the Internet of Things, slate tablets will still account for more than twice the volume of the detachable segment with 124 million units forecast to be shipped in 2020.”


  • Total tablet market includes slate tablets plus detachable tablets. References to "tablets" in this release include both slate tablets and detachable devices.
  • Mature Markets include U.S., Western Europe, Japan, and Canada. Emerging Markets include Asia/Pacific (excluding Japan), Latin America, Central and Eastern Europe (CEE), Middle East, and Africa (MEA).


Worldwide Server Revenue declined 5.8% y/y to $12.7 billion, Shipments declined 2.6% to 2.69 million units in 3Q’16 (Charts 7-10)

In the third quarter of 2016, worldwide server revenue declined 5.8% year over year, and shipments declined 2.6% from the third quarter of 2015, according to Gartner, Inc. Among the top five vendors, only Cisco increased revenue in the third quarter, while Huawei and Inspur Electronics saw growth in shipments. HPE, Dell and Lenovo all experienced declines in both server revenue and shipments.

“The server market was impacted during the third quarter of 2016 by generally conservative spending plans globally. This was compounded by the ability of end users to leverage additional virtual machines on existing x86 servers (without new hardware) to meet their server application needs,” said Jeffrey Hewitt, research vice president at Gartner. “Server providers will need to reinvigorate and improve their value propositions to help end users justify server hardware replacements and growth, if they hope to drive the market back into a positive state.” All regions showed a decline in shipments except Eastern Europe, which posted growth of 0.9%. In terms of revenue, all regions except for Japan experienced a decline. Japan grew by 1.3%.

x86 servers declined 2.3% in shipments and 1.6% in revenue in the third quarter of 2016. All vendors in the top five except for Cisco experienced a decline in revenue. In x86 server shipments, only Huawei and Inspur Electronics experienced growth.

Despite a decline of 11.8%, HPE continued to lead in the worldwide server market, based on revenue, with 25.5% market share. Dell declined 7.9%, but maintained the second spot in the market with 17.5% market share. Lenovo secured the third spot with 7.8% of the market. IBM dropped to the fifth position and experienced the largest decline among the top five vendors.

HPE secured the number one position in server shipments in the third quarter of 2016, with 18.3% of the market. Despite a decline of 9.8%, Dell secured the second spot with 16.8% market share. Huawei and Inspur were the only vendors in the top five to increase server shipments in the third quarter of 2016.

Note: Beginning in the second quarter of 2016, HPE's server sales in China are reflected in H3C.


North American PCB Book-to-Bill Ratio Climbs to 1.08 in October (Charts 11 & 12)

IPC announced the October 2016 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. The PCB book-to-bill ratio continued to strengthen, climbing to 1.08, while sales and orders were both down in October.

Total North American PCB shipments in October 2016 were 8.3% below the same month last year. Year-to-date as of October, shipment growth is up 2.8%. Compared to the preceding month, October shipments decreased 13.9%.

PCB bookings in October decreased 1.8% year-on-year, reducing year-to-date bookings growth to -0.1%. Compared to the previous month, orders in October 2016 were down by 12.3%.

“As a leading indicator, the book-to-bill ratio’s dip below parity (1.00) in June and July of this year anticipated last month’s downturn in sales,” said Sharon Starr, IPC’s director of market research. “The flip side of this, however, is that the current strong book-to-bill ratio indicates the probability of a return to growth later this year or in early 2017,” she added.


Global NAND Flash Value increased 19.6% q/q to US$10.23 billion in 3Q’16

Output value for the global NAND flash industry increased 19.6% sequentially to US$10.23 billion in the third quarter of 2016, according to DRAMeXchange.

NAND flash prices rose in the third quarter driven by robust demand for smartphones, said DRAMeXchange. Meanwhile, the overall industry output reduced due to chipmakers' ongoing transition to 3D NAND technology which led to the price rally in the third quarter, DRAMeXchange indicated.

Samsung Electronics remained the leading NAND flash vendor with a 36.6% market share in the third quarter, followed by Toshiba with a 19.8% share and Western Digital (formerly SanDisk) with a 17.1% share, according to DRAMeXchange.

DRAMeXchange expects output value for the global NAND flash industry to reach its peak for 2016 in the fourth quarter.

“The NAND flash market outlook for the fourth quarter of 2016 indicates that NAND flash supply will be under greater strain with the advent of the peak shipment season for end devices,” said Sean Yang, research director of DRAMeXchange. “Therefore, contract prices for various NAND flash products will see larger increases, which in turn will take suppliers' revenues and operating margins to new highs for this year.”


Worldwide Enterprise Storage Market sees modest decline in 3Q’16 (Charts 13-15)

Total worldwide enterprise storage systems factory revenue was down 3.2% year-over-year and reached $8.8 billion in the third quarter of 2016 (3Q’16), according to the International Data Corporation (IDC) Worldwide Quarterly Enterprise Storage Systems Tracker. Total capacity shipments were up 33.2% year-over-year to 44.3 exabytes during the quarter. Revenue growth increased within the group of original design manufacturers (ODMs) that sell directly to hyperscale datacenters. This portion of the market was up 5.7% year-over-year to $1.3 billion.

Sales of server-based storage were relatively flat, at -0.5% during the quarter and accounted for $2.1 billion in revenue. External storage systems remained the largest market segment, but the $5.4 billion in sales represented a decline of 6.1% year-over-year.

“The enterprise storage market closed out the third quarter on a slight downturn, while continuing to adhere to familiar trends,” said Liz Conner, research manager, Storage Systems. “Spending on traditional external arrays resumed its decline and spending on all-flash deployments continued to see good growth and helped to drive the overall market. Meanwhile the very nature of the hyperscale business leads to heavy fluctuations within the market segment, posting solid growth in 3Q’16.”

3Q’16 Total Enterprise Storage Systems Market Results, by Vendor Group

Dell Technologies held the number one position within the total worldwide enterprise storage systems market, accounting for 25.5% of spending. HPE held the next position with a 15.5% share of revenue during the quarter. NetApp, IBM, and Hitachi finished in a statistical tie* for the third position, capturing 6.6%, 5.9% and 5.7% of global spending, respectively. As a single group, storage systems sales by original design manufacturers (ODMs) selling directly to hyperscale datacenter customers accounted for 15.0% of global spending during the quarter. Dell Technologies represents the combined revenues for Dell and EMC.

3Q’16 External Enterprise Storage Systems Results, by Vendor Group

Dell Technologies was the largest external enterprise storage systems supplier during the quarter, accounting for 31.6% of worldwide revenues. NetApp and HPE finished in a statistical tie* for the number 2 position with 10.9% and 10.2% of market share, respectively. Hitachi and IBM rounded out the top 5 in a statistical tie* for the number 4 position with revenue shares of 9.1% and 8.6%, respectively.

Flash-Based Storage Systems Highlights

The total All Flash Array (AFA) market generated over $1.1 billion in revenue during the quarter, up 61.0% year over year. The Hybrid Flash Array (HFA) segment of the market continues to be a significant part of the overall market with $2.1 billion in revenue and 24.1% market share. IDC defines a Disk Storage System as a set of storage elements, including controllers, cables, and (in some instances) host bus adapters, associated with three or more disks. A system may be located outside of or within a server cabinet and the average cost of the disk storage systems does not include infrastructure storage hardware (i.e. switches) and non-bundled storage software.


Ethernet Switch Market Increased 2.0% Year/Year in 3Q’16 (Charts 15 & 16)

Router Market Was Up 2.6%

The worldwide Ethernet switch market (Layer 2/3) recorded $6.29 billion in revenue in the third quarter of 2016 (3Q’16), an increase of 2.0% year over year. Meanwhile, the worldwide total enterprise and service provider (SP) router market finished at $3.56 billion in revenue in 3Q’16, increasing 2.6% on a year over year basis. These growth rates are according to results published in the International Data Corporation (IDC) Worldwide Quarterly Ethernet Switch Tracker and Worldwide Quarterly Router Tracker.

From a geographic perspective, the 3Q’16 Ethernet switch market recorded its strongest growth in the Middle East and Africa (MEA) region, which increased a solid 11.2% year-over-year, rebounding from a 2Q’16 that saw a moderate decline. The United Arab Emirates (UAE) was a standout performer, growing 23.5% on an annualized basis in 3Q’16. Similarly, Asia/Pacific (excluding Japan)(APeJ) increased 9.8% year over year in 3Q’16. Vietnam (up 57.3% year- over-year) was the growth pacesetter, while a strong performance in China (up 21.5% year-over-year) was largely responsible for the region's overall strong performance. Latin America also saw strong growth, increasing 9.2% year-over-year. Strong performers included Peru (up 21.1% year-over-year) and Argentina (up 17.0%). Japan experienced its strongest growth in some time, increasing 2.6% on an annualized basis in 3Q’16.

The remaining regions contracted in 3Q’16. North America decreased 1.1% year-over-year in 3Q’16, with Canada experiencing a notable 5.7% annualized decline. Western Europe declined by 1.9% on a year-over-year basis, despite standout quarters in Sweden (up 33.3% year-over- year) and Portugal (up 32.4% year over year). Central and Eastern Europe (CEE) saw the most significant decline, with revenues decreasing 5.8% on a year-over-year basis, heavily influenced by a 25.7% year-over-year decline in the Czech Republic.

“Recent macroeconomic developments and maturing IT architectures have led to a spectrum of reactions by IT decision-makers across the regions with regard to Ethernet switching investments in 3Q’16,” said Rohit Mehra, vice president, Network Infrastructure, at IDC. “Strong growth in the 40GbE and 100GbE segments specific to datacenter deployments brought a degree of stabilization to a market in transition where the enterprise campus market for switching declined.”

10Gb Ethernet switch (Layer 2/3) decreased 1.3% year-over-year in 3Q’16, coming in at $2.22 billion, while 10Gb Ethernet switch port shipments grew 10.6% year-over-year with over 9.76 million ports shipped in 3Q’16. 40Gb Ethernet revenue came in at $756.4 million in 3Q’16, growing 20.5% year-over-year, while port shipments reached nearly 1.9 million ports, representing an increase of 68.5% year-over-year. 10Gb and 40Gb Ethernet are now joined by emerging 100Gb Ethernet (revenue up 330.1% and shipments up 447.5% on annualized basis in 3Q’16) to be the primary drivers of the overall Ethernet switch market in 2016. 1Gb Ethernet switch revenue decreased 4.3% year-over-year, despite a 10.9% increase in port shipments in the same period, pointing to a maturing campus segment.

The worldwide enterprise and service provider router market grew 2.6% on a year-over-year basis in 3Q’16 based on a 0.8% increase in the larger service provider segment and a solid 8.2% increase in enterprise routing. This will be a market to watch closely over the coming quarters as software-defined architectures start to take hold across the WAN, with the potential for SD-WAN to disrupt traditional routing architectures and WAN transport markets.

The combined enterprise and service provider router market saw a varied regional performance in 3Q’16, with Asia/Pacific once again carrying the market forward. APeJ was by far the best performing region on a year-over-year basis in 3Q’16, increasing 23.9%. Japan followed with 15.3% year-over-year growth. No other region experienced year-over-year growth in 3Q’16: Latin America declined 2.6%, North America contracted by 3.5%, Western Europe decreased 5.7%, MEA was down 6.3%, and CEE finished 9.6% below 3Q’15.

“Software-defined network architectures and network transformation for the digital economy are among the factors shaking up the core network infrastructure segments,” said Petr Jirovsky, research manager, Worldwide Networking Trackers. “This, combined with the emergence of new Ethernet port speeds across the Datacenter and enterprise campus deployments, will likely lead to continued interest.”


Walt D. Custer

Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.

View other posts from Walt D. Custer. View other posts from Walt D. Custer.
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