The chip boom is over: Gartner

Chip sales are growing much more slowly than expected and will begin to decline in 2023, according to Gartner, marking an abrupt end to one of the industry’s biggest boom cycles.

Global semiconductor revenue will increase just 7.4% in 2022, the research firm projected in a report on Wednesday. That’s roughly half the 14% rate that Gartner was predicting three months ago and is far off the 26% growth that the chip business posted in 2021.

“The global semiconductor market is entering a period of weakness, which will persist through 2023 when semiconductor revenue is projected to decline 2.5%,” Richard Gordon, a Gartner analyst, said in the report. “We are already seeing weakness in semiconductor end markets, especially those exposed to consumer spending.”

Gartner’s new outlook underscores the concerns that have led investors to dump chip stocks this year. After a run-up during Covid-19 lockdowns, the PC market is now contracting again, dragging down chips along with it. And smartphone sales are faltering as consumers delay purchases because inflation is hurting their spending power.

PC shipments will contract 13% in 2022 after two years of growth, Gartner predicts. Chip revenue from that market will shrink 5.4%. Smartphone sales, meanwhile, will climb just 3.1% this year after surging almost 25% in 2021.

While the appetite for chips used in consumer goods has slackened, demand for semiconductors in data centres is still strong. That market will grow 20% this year, Gartner said. Automotive demand also remains a highlight, with the amount of chips per vehicle continuing to increase. Semiconductor content per vehicle will grow to US$931 in 2025 from $712 in 2022, Gartner said.  — (c) 2022 Bloomberg LP