On Wednesday, information services firm IHS Markit reported the semiconductor revenues hit a decade low in the first quarter of this year. The company noted global electronics component sales were $101.2 billion in Q1 2019, which is 12.9 percent lower than they were in Q1 2018.
Consequently, IHS Markit noted the worldwide chip market had its worst quarterly performance since Q2 2009.
Staggering Declines in Memory Chips
The organization offered a concise explanation for the component industries recent steep declines: the collapse of the memory chip market. The firm explained that if internal storage sales were subtracted, the semiconductor market’s year-to-year declines would have only been 4.4 percent.
A few interrelated factors caused the worldwide decrease in memory chip sales. The smartphone market, which has driven internal storage sales for years, has fallen flat recently. Aside from Chinese device maker Huawei, all the world’s leading mobility companies suffered significant losses in Q1 2019.
Another factor that contributed to the memory chip sector’s recent abysmal performance is the quality of its output. Right now, the leading internal storage makers are producing high-quality components that exceed consumer needs. As such, smartphone owners feel no urgency to replace their handsets even though they’re nearing end of life.
South Korean corporation Samsung posted the worst declines of any component maker in Q1 2019. The conglomerate experienced a 34.6 percent year-to-year revenue decline in the first quarter. Notably, 84 percent of the firm’s semiconductor business came from memory chips.
Conversely, Intel did well in spite of industry-wide underperformance. The corporation’s income only declined by .3 percent year-to-year, a reflection of the fact that only six percent of its revenues come from memory chips.
As a result, Intel was the world’s most successful semiconductor corporation for its second consecutive quarter. Nevertheless, IHS attributes its lack of growth in the first quarter to decreased demand for personal computer and server processors.
German component manufacturer Infineon also suffered negligible losses in Q1 2019. Thanks to the robustness of its automotive chip business, the company’s revenues only fell by .3 percent year-to-year.
Finally, IHS revealed Nvidia saw precipitous drop-offs in its first-quarter profitability. The graphics card manufacturer saw its revenues fall by 23.7 percent from the same time last year. The corporation’s underperformance was due to two factors. One, the company’s once mighty cryptocurrency segment waned due to fluctuations within that market. And two, the firm’s data center business was undercut by AMD’s more affordable GPUs.
Sadly, with the U.S.-China trade war intensifying this month, semiconductor firms will have to deal with increased disruption to their supply chains. Coupled with stagnant consumer demand, the conflict between superpowers ensures the component industry is unlikely to bounce back anytime soon.