December 14, 2012 - Joining the growing chorus of industry watchers lowering their outlooks on the semiconductor sector, Gartner has reduced both its 2012 and 2013 forecasts for semiconductor sales but is remarkably more bullish on prospects in 2014.

"The looming fiscal cliff, ongoing European debt crisis, slower emerging market growth and regional tensions have all played a part in reduced growth projections for semiconductor revenue in both 2012 and 2013," stated Peter Middleton, principal analyst at Gartner. He also pointed to an inventory buildup; levels were already high, and with softness in PC demand, "simply overshot demand."

The firm now sees global semiconductor revenues slipping by -3% in 2012 to $298B, vs. its previous expectation of essentially flat back in September. Chip sales in 2013 will increase about 4.5% in 2013 to $311B, instead of the expected 6.9% climb to $330B.

Beyond PC chip demand, another dent to the market was continued softness in DRAM pricing; Gartner thinks this won't recover until 2H13 with supply slowing down and actually creating undersupply. "This should prove a turning point for the semiconductor industry," the firm says; memory will enjoy 15% growth in 2013, boosting total semiconductor revenue in 2014 by 9.9% to $342B -- that's noticeably better than the 5.6% growth Gartner previously foresaw for 2014.

Two chip areas will see better demand than other segments in 2013: NAND memory and ASICs, growing 17% and about 9% respectively, thanks to usage in Apple devices (Gartner counts Apple's A4/A5/A6 custom and exclusive chips as ASICs). New video game consoles coming in late 2012 and 2013 will also help boost ASIC demand.

One area expected to stay weak overall is PCs, declining -2.5% in 2012 and continuing to be soft in 2013. One exception: ultramobile PCs, which will "grow strongly off a small base," Gartner says. Blame the economic malaise, within which end-users are choosing to hang onto older machines and not upgrade; if they do get a new computer it's often a tablet instead.

Speaking of tablets, look for eye-popping 38% growth in 2013 to 207M units -- that's an extra 30M units more than Gartner foresaw three months ago. Credit the successes of the Amazon Kindle Fire, Google Nexus 7, and Apple iPad Mini, which are showing that there is a market for smaller tablets at the right price. Even "white-box" tablet demand is stronger than expected, Gartner says.

One end-market category with mixed results is the mobile phone sector. Gartner sees output softening in 2012 and into 2013 (still up 33% in 2013 though), again blaming the economy for reducing short-term demand. However, utility/basic smartphones are seeing better popularity, particularly Android-based devices and in emerging regions. Gartner points out.

Gartner's new forecast for worldwide semiconductor revenues is
lower for 2012 and 2013, but higher in 2014. (Source: Gartner)