Following two years of expansion, the global microcontroller (MCU) market is set to stall in 2019 because of a combination of factors including a downturn in the wider electronics industry, rising geopolitical tensions, and slowdown in sales to the automotive business, according to IHS Markit.
MCU market revenues for 2019 are expected to rise 0.2% on year, compared with increases of 13.6% in 2017 and 5.4% in 2018, said IHS. This represents a far better result than the larger semiconductor business, IHS indicated. The global semiconductor market this year is set to post its worst performance in a decade, with a 7.4% drop in sales.
MCU market growth is being affected by the same factors buffeting the wider semiconductor business, IHS noted. Before 2019, the semiconductor industry was booming, with a compound annual growth rate (CAGR) of 11.7% from 2015 through 2018. The excitement surrounding new technologies such as artificial intelligence (AI) and automotive advanced driver assist systems (ADAS) triggered tremendous amounts of activity in the chip business, attracting new competitors and spurring the creation of numerous new products like application-specific integrated circuits (ASICs) targeting the automotive area.
However, the geopolitical situation has negatively impacted automotive chip demand, IHS said. The result of this sales decline is a buildup of excess chip inventory, which must be worked off throughout 2019. This will force suppliers to reduce production and cut prices to liquidate their stockpiles.
A number of major geopolitical events now are suppressing semiconductor and MCU sales growth, IHS continued. The year 2019 began with the longest government shutdown in the history of the US. Then came increasing signs of an economic slowdown in China - the world's largest MCU market. Meanwhile, tariff-and-trade battles between the US and China have added to uncertainty in the market
The automotive market dropped overall in 2018 and is continuing to decline into 2019, IHS indicated. With the automotive industry accounting for more than 30% of the global MCU market, this market stall is driving an expected 3% year-over-year decrease in automotive MCU revenues for 2019.
Despite the current industry, economic and geopolitical issues, the semiconductor and MCU markets are expected to return to normal growth in 2020, with a revenue expansion of 4.9% for the year, according to IHS.