Revenue from the sale of memory chips was down 10% globally in 2022 over the year before, according to a new report from Gartner. Sales made up about 25% of all semiconductor sales, which saw a drop in revenue growth due to a “significant collapse in demand” as OEMs started to deplete inventory built up during the global chip shortage.
Gartner’s global semiconductor report revealed a mere 1.1% growth in revenue, working out at a rise from $595bn in 2021 to $601.7bn in 2022. The previous year saw a 26% year-on-year revenue growth due to higher-than-usual demand.
The chip shortage was initially sparked by the Covid-19 pandemic, with the widespread switch to home working causing a sharp uptick in demand for laptops and consumer devices, while other industries such as the automotive sector paused or cancelled their chip orders.
This led to a significant increase in revenue in 2021, but as the supply chain crisis eased and demand slowed, companies were left with a glut of supply which contributed to the current lower-than-usual level of revenue growth in both memory and the wider semiconductor sector.
“Conditions have now worsened to the point where most memory companies have announced CapEx reductions for 2023,” said Gartner analysts. “Some have cut wafer production to reduce inventory levels and try to bring the markets back into balance.”
The majority of the revenue is held by the top 25 vendors globally, accounting for 77.5% of the entire market and overall they saw a 2.2% growth in revenue between 2021 and 2022.
The picture is also gloomy in the global PC market, with worldwide PC shipments down by 28.5% in the last quarter of 2022 and shipments to Europe, Middle East and Asia (EMEA) experiencing a historical decline of 37.2%. Dell, HP and Lenovo were the worst affected, and the news comes as Dell confirmed plans to move away from the use of Chinese-made chips in its hardware.
Memory chip demand unlikely to grow in 2023
The picture is unlikely to improve for 2023, particularly in the memory chip space, with companies such as Micron reporting that sales could drop more than 50% this year as inventory-saturated customers work through the products they already hold, with hopes for a better third and fourth quarter.
“2022 began with many semiconductor devices in shortage resulting in extended lead times and increasing pricing which led to reduced electronic equipment production for many end markets. As a result, OEMs started hedging themselves from shortages by stockpiling chip inventory,” said Andrew Norwood, VP analyst at Gartner.
“However, by the second half of 2022, the global economy began to slow under the strain of high inflation, rising interest rates, higher energy costs and continued Covid-19 lockdowns in China, which impacted many global supply chains. Consumers also began to reduce spending, with PC and smartphone demand suffering, and then businesses started to reduce spending in anticipation of a global recession, all of which impacted overall semiconductor growth.”
Samsung remains the largest of the semiconductor suppliers in terms of revenue, although they saw a fall of 10.4% in 2022 over the previous year due to a drop in memory and NAND flash sales. Intel was in the second spot but it also experienced a large cut in revenue, down 19.7%, largely due to growing competition in the x86 processor space.
It wasn’t all bad news for companies operating in this space, as Qualcomm saw a 28.3% increase in growth year-on-year, with Broadcom, AMD, Texas Instruments, MediaTek and Apple also posting revenue growth last year.
Revenue not related to memory grew 5.3% overall in 2022 but performance varied across different device categories, with the strongest coming from analogue devices followed by discretes. This was driven by automotive and industrial markets.