Semiconductor sector shakeout continues

The global semiconductor industry has too much capacity, too many players and has had declining revenues since the end of 2018. Market prospects are bleak for the next two years and the recent acquisition of Maxim Integrated by Analog Devices is the latest example of the industry’s shakeout, says GlobalData, a leading data and analytics company.

Central Computer Processor

David Bicknell, Principal Analyst, Thematic Research at GlobalData, commented:“From a high point in 2018, when the semiconductor industry enjoyed an extraordinary year – partly fuelled by an unexpected boom in crypto mining – the industry’s momentum has been slowed by the US-China trade war, overcapacity in the memory chip sector, and, most recently, COVID-19. A dramatic worsening in US-China relations has further dented the industry’s confidence.”

Dependent on the strength of key markets

The Semiconductor Industry Association is expecting a 3.3% annual growth, but that is dependent on the strength of key markets such as smartphones and laptops.

Bicknell continues: “The industry’s continued consolidation includes the analog chip market, which saw Analog Devices acquire Maxim. Texas Instruments (TI) remains the analog kingpin, with nearly 20% market share – twice that of Analog before the Maxim acquisition. That gap is why regulators should be mindful to let this deal through.

“A combined Analog-Maxim entity – once the deal is completed by mid-2021 – has a shot at becoming a necessary counterbalance to TI by 2025, when a 5G-enabled Internet of Things (IoT) of sensor-driven smart devices promises to reshape the industry by moving processing activity to devices through edge computing.”