U.S. long-term and short-term Treasury yield spread at risk of inversion for the first time in 10 years
The explosive growth of IoT is driving the growth of the semiconductor market.
AI influences all human decision-making processes


Forecasts suggest that the semiconductor market situation in 2019 will not be too bleak.
Jim Feldhan, Chairman of Semico Research Group, said at a press conference for 'Semicon Korea 2019' on the 23rd, “The semiconductor market in 2019 will be somewhat affected by the global economic downturn,” but added, “I am not pessimistic due to growth drivers such as IoT, 5G, and AI.”


US and China to Bring About Global Economic Downturn
Chairman Feldhan predicted that the somewhat uncertain economic conditions in the U.S. and China would affect the global economy, and stated that the semiconductor market would also be impacted.

The gap between U.S. long-term and short-term Treasury yields has narrowed to its lowest level since 2007, leading to speculation that an inversion is even possible. The fact that the yield on 10-year Treasury bonds, a representative safe-haven asset, is not rising is interpreted as a signal that investors are questioning the long-term growth trajectory of the U.S. economy. This is because it means they are steadily purchasing long-term government bonds, judging that market uncertainty is high.

An inversion of the difference between short-term and long-term government bond yields is commonly referred to as a signal of an economic recession. The most recent inversion occurred in 2007, just before the 2008 financial crisis.
China is struggling due to trade disputes with the United States, and its economic growth rate is continuously declining. It is now difficult to expect the same level of economic growth as before.


New Driving Forces for the Semiconductor Market: IoT and Vision Systems
Nevertheless, Chairman Feldhan predicted that the semiconductor market would continue to grow in 2019, although not to the extent of 2018, due to two unprecedented market drivers.

The first driving force is IoT. The bandwidth of 5G networks, which have just begun commercialization, supports this. The era of analyzing data at the edge has begun. Therefore, the demand for semiconductors to be mounted on the edge will increase.
Furthermore, the most critical information will be processed in data centers and cloud servers. This is also a factor contributing to the increased demand for semiconductors.

The second driving force is vision systems that convert images into data. Widely used in the automotive and industrial sectors, vision systems are also recently being utilized in the medical field.


Growth forecast by semiconductor application field
The desktop market is expected to contract by 7.7%, while the mobile market is projected to decline by 1% due to the sluggish performance of high-end smartphones. Conversely, the laptop market, which has been steadily shrinking, is expected to grow by 1%. The previously mentioned server market is expected to grow by 20.3%. The smart speaker market, which recorded record-breaking growth in 2018, is also expected to grow by 45% in 2019.

While the automotive market is expected to grow by only 1%, the demand for semiconductors is projected to increase rather than decrease. In particular, more semiconductors will be adopted in rapidly growing electric vehicles. The electric vehicle market is growing rapidly in the United States, and in China, it is growing at twice the speed.
Cars are now moving electronic devices. AI is assisting the numerous systems within the vehicle. Autonomous vehicles are supporting this trend. Although the adoption rate of autonomous driving in the United States declined following an accident in Arizona in March 2018 where an Uber self-driving car killed a pedestrian, the trend is expected to continue.


Semiconductor Sector Growth Forecast
Gate arrays, which generated the highest revenue in the ASIC sector, are expected to slow down, while revenue from standard cells and FPGAs is projected to increase. Sales of standard cells are expected to rise in the IoT and industrial sectors, while FPGAs are expected to grow in the telecommunications and AI fields.

This year, the average selling price growth rate of DRAM is expected to record -11.78%, while the bit growth rate is projected to reach 36.3%. The average selling price growth rate of NAND flash memory is expected to record -6.8%, and the bit growth rate is projected to reach 58.3%. The increase in smartphone capacity will drive this trend.

In the case of discrete, opto, and sensor semiconductors, there is steady demand in IoT, automotive, industrial, telecommunications, and light sources, so while there may be a slight slowdown, they are not expected to experience negative growth.
Chairman Feldhan stated, “The paradigm of the semiconductor market is shifting from computing to mobile, and now to AI,” adding that this is “the reason why the future of the semiconductor market is not bleak despite the global economic downturn.”