Short-term semiconductor revenue estimates have worsened, says Gartner

The analyst company Gartner has revealed that semiconductor revenue growth is now going to decline by 3.6% in 2023 due to the “rapid deterioration” of the global economy and weakening consumer demand. Initially, the company expected that semiconductor revenue would grow from $618 billion in 2022 to $623 billion in 2023, but this latter figure has now been downgraded to $596 billion, just a billion more than the $595 billion in revenue that was seen in 2021.

So far, revenue from consumer spending has been hit due to a decline in disposable income, but enterprise spending is still pretty resilient. Gartner said consumers are being hit by inflation and higher interest rates and that they are prioritizing their spending on things like travel, leisure, and entertainment rather than tech purchases. Enterprise spending is resilient so far, but there are concerns over an expected recession as well as geopolitical worries.

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

Interestingly, the demand for memory is declining which means that inventories are getting full, causing customers to demand lower prices. As a result of this, the memory market revenues will be flat in 2022 and decline by 16.2% next year. In the first quarter of the year, there was a NAND fab outage which increased prices but hid the falling demand, leading to excess inventory. This excess is likely to remain into the first half of next year and revenue growth will fall by 13.7% in 2023 following a 4.4% increase this year.

While consumers will be squeezed with their spending for a while, especially with unemployment expected to rise, there’s the potential upside that things like phone and laptops will be a bit cheaper. There’s no guarantee of this, but with companies demanding lower prices, savings could potentially be passed on.

It’s unclear what Gartner thinks will happen to the sector in 2024 because it didn’t provide any data, but how quickly consumer demand recovers will likely be important to revenue growth recovering.

Short-term semiconductor revenue estimates have worsened, says Gartner