"Favorable market conditions for memory sectors that gained momentum in the second half of 2016 prevailed through 2017 and look set to continue in 2018, providing a significant boost to semiconductor revenue," said Ben Lee, principal research analyst at Gartner. "Gartner has increased the outlook for 2018 by $23.6 billion compared with the previous forecast, of which the memory market accounts for $19.5 billion. Price increases for both DRAM and NAND flash memory are raising the outlook for the overall semiconductor market."

However, these price increases will put pressure on margins for system vendors of key semiconductor demand drivers, including smartphones, PCs and servers. Gartner predicts that component shortages, a rising bill of materials (BOM) and the resulting prospect of having to raise average selling prices (ASPs) will create a volatile market through 2018.

Despite the upward revision for 2018, the quarterly growth profile for 2018 is expected to fall back to a more normal pattern with a mid-single-digit sequential decline in the first quarter of the year, followed by a recovery and buildup in both the second and third quarters of 2018, and a slight decline in the fourth quarter.

On January 3, a security vulnerability that spans all microprocessor vendors was revealed, impacting nearly all types of personal and data center computing devices. While this is an obscure security vulnerability that is difficult to achieve, the potential of a high-impact security issue cannot be ignored and must be mitigated.

"The current mitigation solution is via firmware and software updates, and has a potential processor performance impact. This may result in an increased demand for high-performance data center processors in the short term, but Gartner expects that in the longer term, microprocessor architectures will be redesigned, reducing the performance impact of the software mitigations and limiting the long-term forecast impact," said Alan Priestley, research director at Gartner.

Taking the memory sectors out of the equation, the semiconductor market is forecast to grow 4.6 percent in 2018 (compared with 9.4 percent in 2017) with field-programmable gate array (FPGA), optoelectronics, application-specific integrated circuits (ASICs) and nonoptical sensors leading the semiconductor device categories.

The other significant device category driving the 2018 forecast higher is application-specific standard products (ASSPs). The predicted growth in ASSPs was influenced by an improved outlook for graphics cards used in gaming PCs and high-performance computing applications, a broad increase in automotive content and a stronger wired communications forecast.

The mixed fortunes of semiconductor vendors in recent years serves as a reminder of the fickleness of the memory market," said Mr. Lee. "After growing by 22.2 percent in 2017, worldwide semiconductor revenue will revert back to single-figure growth in 2018 before a correction in the memory market results in revenue declining slightly in 2019."