MCU market revenue is expected to increase by 0.2 percent in 2019 compared to 2018. This represents a much better result than the larger semiconductor business, which is expected to post its worst performance in a decade in 2019, with a 7.4 percent drop in sales. However, it is a considerable disappointment for MCUs compared to their 13.6 percent growth in 2017 and their 5.4 percent increase in 2018.

Semiconductors are corrected

The growth of the MCU market is being affected by the same factors that affect the semiconductor business in general.

Prior to 2019, the semiconductor industry was booming, with a compound annual growth rate (CAGR) of 11.7 percent from 2015 to 2018. The excitement surrounding new technologies, such as artificial intelligence (AI) and advanced driver assistance systems (ADAS), generated huge amounts of activity in the chip business, attracting new competitors and stimulating the creation of numerous new products, such as application-specific integrated circuits (ASICs) geared toward the automotive market.

However, the geopolitical situation has negatively impacted demand for automotive chips. This decline in sales has resulted in an accumulation of excess chip inventory, which must be cleared throughout 2019. This will force suppliers to reduce production and lower prices to liquidate their stock.

Geopolitical factors are accumulating

A series of major geopolitical events are now suppressing the growth of semiconductor and MCU sales.

The year 2019 began with the longest government shutdown in US history. Then came growing signs of an economic slowdown in mainland China, the world's largest MCU market. Meanwhile, tariff and trade battles between the US and mainland China have added to market uncertainty.

Automotive market stalls

The automotive market declined overall in 2018 and continues to decline in 2019. Given that the automotive industry accounts for more than 30 percent of the global MCU market, this market stagnation is driving an expected 3 percent year-over-year decline in automotive MCU revenue for 2019.

Wait until 2020

Despite the current economic and geopolitical challenges facing the industry, the semiconductor and MCU markets are expected to return to normal growth in 2020, with revenue expansion of 4.9 percent per year.

By Christopher Morris, senior research analyst, processors, technology, media and telecoms, IHS Markit