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The Worldwide Semiconductor Demand Outlook

Supply chain resolved, or overcapacity, what's the issue? Global semiconductor revenue is projected to decline by 3.6 percent in 2023, according to the latest worldwide market study by Gartner. In 2022, the market is on pace to grow 4 percent and total $618 billion.

Moreover, global semiconductor revenue is forecast to total $596 billion in 2023 -- that's down from the previous forecast of $623 billion.

"The short-term outlook for semiconductor revenue has worsened," said Richard Gordon, vice president at Gartner. "Rapid deterioration in the global economy and weakening consumer demand will negatively impact the semiconductor market in 2023."

Semiconductor Technology Market Development

Currently, the semiconductor market is polarized between consumer-driven markets and enterprise-driven markets. Weakness in the consumer-driven markets is being driven largely by the decline in disposable income caused by rising inflation and loan interest rates.

Also, it's driven by the reprioritization of consumer discretionary spending to other areas -- such as travel, leisure and entertainment -- which are having a negative effect on consumer gadget purchases.

On the other hand, the enterprise-driven markets -- such as enterprise networking, enterprise computing, industrial, medical and commercial transportation -- have, so far, been relatively resilient despite the looming macro-economic slowdown and geopolitical concerns.

"The relative strength in the enterprise-driven markets comes from strategic investments by corporations that are looking to strengthen their infrastructure to continue supporting their Work-from-Home workforce, business expansion plans, and ongoing digitalization strategies," said Gordon.

For the remainder of 2022, the memory market is witnessing faltering demand, swollen inventories, and customers pressing for considerably lower prices. As a result, the memory market will remain flat in 2022 and is forecast to decline by 16.2 percent in revenue in 2023.

According to the Gartner assessment, the worsening economic outlook is negatively impacting smartphone, personal computer, and consumer electronics production which is positioning the DRAM market for oversupply for the remainder of 2022 and the first three quarters of 2023.

Gartner analysts now foresee DRAM revenue to decrease 2.6 percent to reach $90.5 billion in 2022, and will further decline 18 percent in 2023, to a total of $74.2 billion.

The NAND fab outage which occurred in the first quarter of 2022 increased prices and masked the rapidly deteriorating demand environment, resulting in excess inventory in the third quarter of 2022 which is expected to carry into the first half of 2023.

NAND revenue is projected to increase 4.4 percent to $68.8 billion in 2022, but it is on pace to decline 13.7 percent in 2023 to $59.4 billion.

Outlook for Semiconductor Technology Demand

"While the deterioration in the macroeconomic environment will weaken consumer demand, we expect relatively better semiconductor consumption from business investments," said Gordon.

Consequently, markets such as industrial, telecommunications infrastructure, and IT data centers will be less impacted by consumer sentiment and spending in the short term.

That said, I believe the volatility of the semiconductor market demand will raise questions about government incentive-based investment in new fab production facilities within the United States. How has the projected manufacturer ROI been impacted by these latest trends? What are the implications?

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