The global semiconductor market has been on a decline (three-month-average change versus a year ago) since July 2015 according to World Semiconductor Trade Statistics (WSTS). Although numerous factors affect the semiconductor market (capacity and utilization, prices, inventory levels) in the near term, the long term growth is driven by the growth rate in electronics. The chart below shows three-month-average change versus a year ago for electronics production by key regions and for the global semiconductor market.
China is the largest producer of electronics. Its growth rate has decelerated from the 12% – 14% range in 2014 to the 10% – 13% range in 2015 and to the 8% – 9% range in the first four months of 2016. The slowdown in China electronics production has been fairly moderate. U.S. electronics production was in decline for most of 2014 through April 2015. In the last year U.S. growth has been positive, reaching a peak of 7% in November 2015. Japan’s electronics production has been extremely weak, with declines almost every month over the last two years. Although Japan electronics is a drag on the global semiconductor market, Japan is only 9% of the market. Europe monthly electronics production data is not available, but overall industrial production has been positive in the range of 1% to 3% over the last two years.
The chart below shows three-month-average change versus a year ago for electronics production in the key countries of Asia. Asia Pacific accounts for about 60% of the global semiconductor market. China is over half of Asia Pacific. Taiwan has seen generally declining production in the last few years as much of its manufacturing shifts to China. South Korea production growth turned positive in September 2015 after a year of negative change. Singapore turned positive in March 2016 after a year of declines. Malaysian growth has remained positive in the last few years. Two key emerging countries, Vietnam and India, are currently growing at over 20%. Over the last year, the Asia Pacific semiconductor market has slowed from 7% growth in April 2015 to declines in December 2015 and January 2016. After returning to positive growth in February and March of 2016, the Asia Pacific semiconductor market dropped 4.2% in April 2016.
The global semiconductor market decline in the range of 5% to 6% over the last five months is out of line with electronics production. The Asia Pacific semiconductor market has been stronger than the global market, but is still out of step with electronics production. The short term factors of semiconductor pricing (especially in volatile memory business) and inventory level adjustments are likely driving the semiconductor market decline. Assuming electronics production levels remain positive through 2016, the semiconductor market should turn positive in the second half of 2016. We at Semiconductor Intelligence are holding to our May forecast of 1% growth for the semiconductor market in 2016.