Global semiconductor industry likely to grow 1.4 percent in 2020

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Recently, the Semiconductor Industry Association (SIA) announced that global sales of semiconductors were $35 billion in May 2020, an increase of 5.8 percent from May 2019 total of $33 billion and 1.5 percent more than the April 2020 total of $34.4 billion. The monthly sales are compiled by the World Semiconductor Trade Statistics (WSTS) organization, and represent a three-month moving average.

Additionally, a newly-released WSTS industry forecast projects annual global sales will increase 3.3 percent in 2020 and 6.2 percent in 2021. SIA represents 95 percent of the US semiconductor industry by revenue and nearly two-thirds of the non-US chip firms.

Malcolm Penn, founder and CEO, recently presented, regarding the Covid-19 and the semiconductor market. It was prepared before the May WSTS data was published. Future Horizon’s view throughout this crisis was that growth was never going to be as bad and negative, as all the other pundits were saying!

Malcolm Penn.

Even the SIA is now coming round to this way of thinking and forecasting +3.3% growth in semiconductors for 2020! The ‘industry consensus’ of -5% growth Q2 vs. Q1 is, as expected, is going to prove wildly pessimistic!

What Future Horizons said in Jan. 2020 was +9.5 percent growth for global semiconductor industry, with the market set for strong cyclical rebound. This is barring the unforeseen geo-political, economic or financial disasters. The economy was fundamentally OK, and vulnerable to downside risks. The IC units were below long-term average, and rebound was in progress. Th fab capacity saw CapEx cutbacks in play, and no excess capacity. As for the ASPs, they were back, growing. The memory market had bottomed.

As of June 17, 2020, the current outlook was -3.0 / +1.4 percent, driven by weak Q2/Q3, followed by a rebound in 2021. This is barring the second pandemic wave disrupting ‘business as usual’ recovery. The economy has strong pent up demand (goods and leisure holidays). The IC units have been strong. But, some markets are still weak (e.g., automotive). As for the fab capacity, CapEx will remain tight for the rest of the year. ASPs are still growing, with tight supply cushioning price pressure.

IT, connectivity and wearables, etc., are proving very strong (remote working plus health driven). Covid-19 will have an impact on retail, office, commuting, business travel and automotive. However, the impact on non-automotive semiconductors has been negligible. Strong recovery is currently underway. This trend is substantiated by strong near-term spot market in Asia. There is -5 percent Q2 growth, based on chip company consensus forecasts. These could likely prove far too pessimistic. There is +1.4 percent growth forecast, with US$ 420 billion upside, if true.

We are out on a limb again with Covid-19. In March 11, 2020, there was a push out vs. economic crash conundrum. There was potential for strong 2H-2020 rebound, thanks to Apple and game consoles. The forecast range was predicted to be +1.5 percent to +5 percent.

On Jun 17, 2020, at the ExpoElectronica, strong GDP growth rebound has been forecasted, once the Covid-19 uncertainty recedes. Global lockdown had hit the economic growth ‘pause’, but not the ‘crash’ button. Most importantly, the semiconductor market was in good shape, pre-Covid-19. The fundamentals still are!

Most of the other analysts/experts have been forecasting strong negative growth. Future Horizons’ outlook for the global semiconductor industry is -3 percent to + 1.4 percent for 2020. The chip industry has hardly blinked, automotive and smart phones aside! IT and semiconductors are actually enjoying a ‘good’ crisis. All other chip company forecasts are likely to prove far too pessimistic. There is +1.4 percent growth more likely, vs. -3.0 percent, for the global semiconductor industry in 2020.