2016 to be a year of struggle for fabless IC industry

Dec 15, 2015

2016 to be a year of continuing struggle for fabless IC industry

THE FABLESS IC industry will continue to struggle in 2016, as TrendForce projects revenues dropping 4.1 percent year on year.

2015 has been a challenging year for the fabless IC industry, due to slowdown in the end market.

According to global market research firm TrendForce, revenue generated by fabless IC industry worldwide for the entire 2015 is estimated around US$80.52 billion, down 8.5 percent year on year.

 

This is set to continue in 2016, with limited end market demand. While the Internet of Things will eventually lead to a reversal of fortunes, TrendForce analysts say the trend is still nascent in development, and thus will have limited contribution to the industry’s revenue for 2016.

Hence, fabless IC industry will continue to experience falling revenue next year, with the annual decline projected at 4.1%.

 

Price decline in the processor chip market will continue as Chinese IC design houses like Spreadtrum escalate the competition by chipping away at prices at the low end, while the mid-range and high-end markets see Mediatek and Qualcomm locked in a tense struggle.

 

Smartphone vendors who hope to differentiate their devices from their competitors’ will develop their own processor chips. Notable movers in this space include Samsung, Huawei and LG. Chinese brand Xiaomi may also be developing its own processor.

 

While these new entrants to the application processor market will not pose a threat to dedicated chipset makers in the short term because of the initial cost and technology hurdles, this trend does erode the market for ICs.

 

In 2015, the IC design sector saw a massive wave of consolidation, with several landmark deals such as the Avago acquisition of Broadcom in May.Chinese technology conglomerate Tsinghua Unigroup purchased a 51 percent stake in H3C, a local subsidiary of HP that specializes in networking equipment, and later also also bought a 15 percent stake in Western Digital.

 

More mergers and acquisitions will be coming in 2016, and the targets of these deals will be related to areas of high growth potential such as automotive electronics, the Internet of Things and data centers.

 

Source: Electronicsnews