Electronic Products & Technology

Semiconductor industry set to rebound from COVID-19

Wakefield Research forecasts the semi biz will emerge stronger than before pandemic outbreak

June 16, 2020  EP&T Magazine

The COVID-19 outbreak has disrupted supply chains throughout the world, with some industries being hit more than others. The semiconductor industry has also been impacted by the virus, as a number of manufacturers and materials suppliers in Asia—including Foxconn, one of the largest electronics manufacturers in the world—halted production throughout January and February to stop the spread of the pandemic.

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Nonetheless, despite some setbacks, Wakefield Research forecasts that the semiconductor industry will emerge from the COVID-19 outbreak stronger than before.

Supply chains are rebounding

The initial work stoppages at Asian semiconductor manufacturing plants and their suppliers—combined with international travel restrictions—caused some supply shortages, but the industry has been able to weather the early storm.

As the pandemic began, key semiconductor manufacturers—like Micron in the U.S.—used stockpiled raw materials to supplement impacted supply chains. With production now resumed across most of Asia, and supply starting to pick back up, much of the early fears regarding supply chain shortages have not been realized.

Production continues at a slower pace

Meanwhile, across the U.S. and much of the western world, semiconductor manufacturers have been classified as essential businesses and remained open, due to the critical role that semiconductors play in electronic equipment and network infrastructure. Even so, despite ongoing operations, the early supply chain interruptions and subsequent schedule adjustments will combined to lower 2020 semiconductor production levels compared with the past.

Demand Will Vary by ApplicationThe shock of the pandemic will also lower worldwide revenue for the broader semiconductor industry by 5% to 20% in 2020. However, demand for semiconductors will vary by application. The recent environment has diminished consumer spending, which is expected to cause a delay in consumers upgrading their phones in 2020 –leading to a drop in demand for semiconductors used in these applications.

Demand for industrial semiconductors rising

However, looking further ahead, the greater prevalence of remote working and rising share of ecommerce should drive increases in bandwidth and processing requirements, which will support some semiconductor providers. Elsewhere, demand for industrial semiconductors used in medical devices such as X-ray machines, ventilators, and diagnostic equipment is rising rapidly as many companies have transitioned to medical device manufacturing. Increased artificial intelligence capabilities, driven by the need for population monitoring, will also be a tailwind.

Even before the COVID-19 outbreak, an oversupply of semiconductors was expected to slow industry growth to 2% in 2020. Historically, the semiconductor market has recovered quickly from past demand shocks.

As economic activity recovers, Wakefield Research forecasts demand for semiconductors to recover quickly as companies begin to renew their investments in cloud infrastructure and as artificial intelligence and connected devices become increasingly commonplace in our society.

 


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