Analyst firm Gartner Inc. is forecasting a prosperous year for global semiconductor manufacturers, with revenues set to rise by 7.2 percent in 2017 from last year.

The market could certainly do with a boost. In 2016, semiconductor revenues totaled $339.7 billion, a slight 1.5 percent increase from 2015. But Gartner said in its Semiconductor Forecast Database, Worldwide, 4Q16 Update report that revenues would jump by 7.2 percent to $364.1 billion in 2017, driven by increased demand for dynamic random-access memory chips and application-specific standard products for the Internet of Things and related markets.

Evidence of this renewed appetite from semiconductor buyers could be seen in the latter half of 2016, Gartner said. “After a poor start to the year, characterized by inventory burn-off, the second half of 2016 was fuelled by inventory replenishment and improved demand and pricing,” said Adriana Blanco, senior research analyst at Gartner. “Overall, semiconductor revenue for the second half of the year was much stronger than the first half, reflecting the strengthening memory market and continued inventory replenishment, as well as inventory build for both the iPhone 7 and the holiday season.”

Somewhat strangely, despite the low growth recorded in the industry overall, the top 25 semiconductor manufacturers saw their combined revenues increase by 7.9 percent compared with 2015, accounting for 75.9 percent of the market. Gartner offered the following chart listing the top 10 companies, with Intel Corp. leading the way with $53.9 billion revenues and a 15.9 percent share of the market. Samsung Electronics Co. Ltd. and Qualcomm Inc. are the familiar faces rounding out the top three.

Earlier in 2016, the semiconductor industry was swamped with oversupply of both DRAM and flash memory chips that kept prices low. But by the end of the year the market was under-supplied, forcing prices up, and that trend is set to continue through 2017, said Ganesh Ramamoorthy, research vice president at Gartner.

“The worst is now over with a positive outlook emerging for 2017 driven by inventory replenishment and increasing average selling prices in select markets, particularly commodity memory and application-specific standard products,” he said.

Some of those select markets to watch include the industrial, automotive and storage sectors, which Gartner said are growing rapidly despite representing only a small portion of the overall market. Those emerging market segments are likely to take on increasing importance in 2017, as Gartner forecasts more sluggish growth in store for traditional markets such as smartphones and personal computers.

“This implies that semiconductor product managers who have depended upon these categories must now continue to look for adjacent opportunities in new emerging applications in the IoT and in areas like industrial, storage and automotive markets,” Ramamoorthy said.

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