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Logic Integrated Circuits to Command Semiconductor Space in 2016

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Top semiconductor products

The semiconductor industry has been one of the hottest industries in 2015 with new product launches, mergers and acquisitions, and regulatory concerns. In the series Global Semiconductor Industry to Enter a Phase of Slow Growth, we looked at the future growth prospects of the semiconductor industry in different regions of the world. In this series, we will look at which semiconductor products and companies will do well in 2016.

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Looking at the market share, logic ICs (integrated circuits) will continue to have the largest share, accounting for $113 billion in revenue during 2014-2019, according to PricewaterCoopers (or PwC). This would be followed by memory at $103 billion and MCUs (microcontrollers) and MPUs (microprocessors) at $78 billion.

Fastest growing semiconductor products

Looking at the growth rate, sensors and actuators would grow at the fastest pace of 10.4% CAGR (compounded annual growth rate) during 2014-2019, followed by optical semiconductors at 6.6% and discrete at 4.8%.

However, growth in the memory space will fall in 2016 after strong growth in 2014. However, it will slowly pick up in 2017. PwC expects memory sales to grow at a CAGR of 5.4% during 2014-2019. Memory makers Micron (MU), Samsung (SSNLF), and Toshiba (TOSBF) are ramping up production of new 3D technology during the slow growth phase of 2016 in order to capture growth in the long term.

Key drivers for growth

Logic IC sales will be driven by increasing demand from cars, consumer electronics, and smartphones, whereas analog sales will be boosted by demand from cars and communication. The IoT trend will then drive demand for sensors and actuators in multiple applications ranging from cars to wearables to industrial applications.

Intel (INTC), the world’s leading semiconductor company by revenue, is investing aggressively in IoT research and development.

The Technology Select Sector SPDR Fund (XLK) has exposure to the semiconductor supply chain and its customers. It has a 3.2% exposure in INTC.

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