The Objective Analysis 2019 Chip Forecast

It’s the time of year for Objective Analysis to release its 2019 forecast.  What does next year promise?

Every year VLSI Research invites us to produce a video of our semiconductor revenue forecast for the coming year.  Since we have been doing this for a number of years there are now twelve videos on the VLSI Research “WeSRCH” website.  The latest video can be viewed by clicking on this link.

We’re proud of our record of semiconductor forecasts.  While other market research companies dislike discussing their past successes and failures, Objective Analysis puts all of our historical forecasts online in one simple table on our website’s Forecast Accuracy page.  A careful review reveals a stellar track record, with the exception of 2009 and 2015, both of which were related to major macroeconomic events that even leading world economists failed to predict (i.e. the 2008 Global Economic Collapse and the combined China currency devaluation and oil price collapse in 2014.)

Another important factor in the Objective Analysis forecast methodology is that we only update the forecast once a year.  Our clients dislike being told one thing at the beginning of the year and something completely different at year-end.  If the forecast is right to begin with, then there’ no reason to change it.

What’s in store for 2019?  The industry has already entered the first stages of its collapse, with both NAND flash and DRAM prices falling, and this will continue, thanks to overbuilt capacity, until prices reach cost.  This is what always happens when there’s an oversupply.  This price collapse will cause DRAM revenues to drop by 35%, and NAND flash revenues to decline by 15%, leading to a decline in overall semiconductor revenues of about 5% year-over-year.

The video provides more background in our reasoning.  If you  have 15 minutes to spare, and want to plan for the most-likely scenario, have a look.

Objective Analysis provides our clients with accurate forecasts and other strategic tools to help them in their business planning efforts.  To see how our company can help yours achieve or exceed its goals, please visit our website at www.Objective-Analysis.com.


4 Responses to The Objective Analysis 2019 Chip Forecast

  • Ed says:

    Considering DRAM managed to rise 3-4x in prices 3 years ago, a ~15% drop this year in 2018, and 35% drop in 2019 is still less than 50% drop in total. Still healthy margin compared to 2016. Not to mention the improved yield and cost structure from technology improvement.

    Lots of people got used to cheaper technology over time. But this hasn’t been the case for the past few years.

  • Jim Handy says:

    Ed,

    Prices did almost double over the past two years, but only in the spot market (a very small portion of the overall market) did prices go as high as 2.3 times the June 2016 bottom point.

    You’re correct that costs do continually decrease, but prices generally hug the cost curve once a price collapse has kicked in.

    Jim

  • Rafael Broshi says:

    Thanks for the great video Jim,
    I learn a lot by watching it every year.

    Do you have any forecast on the semicap space for 2019? (assuming the entire semiconductor industry declines 5%)

    • Jim Handy says:

      Rafael, Thanks for the compliment!

      I don’t stray too far from semiconductors, so I don’t forecast capital equipment.

      That said, I know that an upturn or downturn in the semiconductor market usually drives a larger upturn or downturn in capital spending. If anybody tells you: “This time it’s different,” make sure to hold onto your wallet.

      One ray of light for this down cycle is that Chinese memory makers will continue to spend since they are not (at the moment) focused on profits, and they have a big budget at their disposal. We recently issued a report about that.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.