Gartner Curtails 2015 Semiconductor Sales Forecast Due To Application Weakness

Market research firm Gartner lowered its worldwide semiconductor revenue forecast for 2015 from 4 percent growth to a mere 2.2 percent year-over-year growth, citing weak application outlooks.

According to Gartner's report, major applications driving the semiconductor business, like PCs, smartphones and tablets, were weaker than expected and led to a second-quarter lag, powering an overall 2015 revenue forecast of $348 billion.

Jon Erensen, research director at Gartner, told CRN that with the Windows 10 release at the end of July, as well as Intel's Skylake release slated for an unknown date in 2015, the semiconductor will be relying heavily on the third quarter to lift its revenue.

[Related: Feeling The PC Pressure: AMD Slashes Revenue Estimates]

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"So many of the critical applications that the semiconductor market depends on were weak this quarter," he said. "The outlook weakened over the quarter for PCs, but also for tablets and smartphones as well. The concerns are that we didn't see that typical kind of bounce back in the second quarter, weakening outlooks for those applications."

The report comes after AMD and Intel both cut their quarterly expectations at the beginning of the year, citing weaker-than-expected PC demand among SMBs.

Gartner's report added fuel to this fire, stating that the traditional PC segment will experience the greatest decline of the major applications, with production units forecast to decline 8.7 percent in 2015 from last year.

The PC market's health holds a considerable weight with many semiconductor manufacturers, as PCs and ultramobiles jointly make up about 18 percent of semiconductor revenue, according to Erensen.

Randy Copeland, president and CEO of Richmond, Va.-based system builder Velocity Micro, said he has seen the dwindling demand for PCs so far in the beginning of the year, but expects at least a 20 percent boost in business after the launch of Windows 10.

"It's no secret that the overall PC market has been softer so far this year than last year, but we know there is a significant demand for computers once Windows 10 launches in a few weeks," he said. "We've been surveying our Web visitors, and we expect at least a 20 percent increase in sales for the second half of this year over last year's sales. The demand is there, but Windows 8.1 still has a cloud over it, and many would rather hold off."

Meanwhile, Gartner stated that smartphones and solid-state drives (SSDs) will continue to drive the semiconductor market's growth. Another trend in the semiconductor industry slowly starting to take hold is the wearables market, including smartwatches, head-mounted displays, smart glasses and Bluetooth headsets, said Erensen.

However, while vendors are beginning to realize the importance of wearables and the Internet of Things, the market is still relatively new and will make up only 1 percent of total semiconductor revenue by 2019, according to Gartner.

Though the smartphone and wearables market may be gaining traction as the PC market slows, Copeland said he continues to be bullish on PCs because of their essential productivity features and vitality to his core customers.

"Smartphones have significantly impacted the simple needs previously associated with computers, such as email and Web surfing," said Velocity Micro's Copeland. "Those content-consumption-related activities are very easy on modern smartphones, and it's always nearby. On the other hand, it's difficult to be productive with a 5-inch screen, and the PC is still the choice for creating anything, manipulating data, and spreadsheets simply don't work on a small screen."