How COVID-19 Is Affecting Various Chip MarketsApril 15, 2020 by Gary Elinoff
How will different semiconductor sectors weather the COVID-19 storm?
As the world hunkers down at home, the fortunes of different market segments, including the IC market, are fluctuating radically. While some semiconductor giants continue to prosper, others are seeing a drastic dip in chip sales.
A Glance at the Overall Semiconductor Market
While technology, in general, had a great year last year, it wasn’t all roses for IC sales. Although IC sales plummeted 15% in 2019, IC Insights reported in January this year that chip sales would see an 8% increase for 2020. But that all changed with the financial effects of COVID-19.
As depicted in the image below, by March, the overall growth prediction edged down to a gain of only 3%, and now in April, an actual decline of 4% is expected.
COVID-19 drastically lowers IC growth rate predictions for 2020. Image (modified) used courtesy of IC Insights
IC Insight’s pessimism is largely based on a prediction of a minimum 2.1% drop in global GDP, which matches the plunge from the “Great Recession” year of 2009. IC Insights points out that the last time the global GDP went negative was in 1946.
However, not every prediction is quite so dire. Gartner, for example, predicts an overall decline of 0.9%. They base their prediction in part due to an expected 13.9% increase in memory chip sales.
How Chips in Different Markets May Fare
Gartner’s expected pickup in memory sales is based largely on the expectation of a 40% increase in NAND sales, based on shortages persisting from 2019. With COVID-19 forcing people to work and entertain from home, it is expected that there will be an increase in DRAM demand from cloud service providers. This will be offset by the decreased demand from smartphone producers.
Gartner also predicts a 6.1% decrease in sales of non-memory chips in 2020.
Forecast of worldwide semiconductor revenue in billions (U.S. dollars). Image used courtesy of Gartner
Richard Gordon, research practice vice president at Gartner, explains, "Non-memory semiconductor markets will experience a significant reduction in smartphone, automobile, and consumer electronics production and be heavily impacted across the board."
He continues, "In contrast, the hyperscale data center and communications infrastructure sectors will prove more resilient with continued strategic investment required to support increased remote working and online access."
Views from Around the Industry
While most industries have been hard hit by the pandemic, it isn't all doom and gloom for chipmakers. True, all semiconductor players have been significantly affected in one way or another, but some are still firing up chip production.
According to MarketWatch, Intel broke the $20 billion quarterly sales mark for the first time in January 2020. This is largely due to a 19% surge to $7.2 billion for data center chips used by the likes of Amazon, Microsoft, and Google. The same stay-at-home mandates also pushed demand for chips for laptops and PCs.
The Intel logo at a previous Mobile World Congress. Image used courtesy of Sergio Perez, Reuters
Marketwatch analyst Wallace Witkowski supposes “With PC, server and data-center sales representing the majority of Intel’s business, there’s little question that the chip giant could benefit from a sales surge thanks to all those dynamics.”
Samsung reports an optimistic outlook, despite the COVID-19 situation as well—despite the major dip in sales in 2019 for the industry. In a Sammobile news article, the company reported its “plans to start the mass production of 5nm chips by the end of this year and then solidify the development of 3nm chip production technologies."
Samsung will also purportedly develop and produce 5G SoCs and high-resolution camera sensors. Although smartphone sales will inevitably drop in the midst of COVID-19, Samsung still plans to make more 5G phones in 2020.
Taiwan Semiconductor Manufacturing Company (TSMC), is the world’s largest semiconductor foundry. The company reported that March 2020 revenues exceeded those of March 2019 by a whopping 42.4%, completely bucking industry trends.
TSMC March revenue report. Image used courtesy of TSMC
As reported in Reuters, TSMC’s Chief Financial Officer, Wendell Huang, stated that “Moving into first quarter 2020, despite mobile product seasonality, we anticipate our business to be supported by the continued ramp-up of 5G smartphones.”
However, Computer Business Review attributes much of the company’s latest success to the fact that its customers, such as Apple and Broadcom "may have been driven in part by judicious stockpiling among chipmakers concerned about future supply chain disruption resulting from the pandemic’s impact."
Just as purveyors of bottled water, frozen vegetables, and toilet paper are seeing an uptick in sales, might TSMC’s latest success also be due to COVID-19 stockpiling?
Economic forecasts in 2020 are an even more tenuous enterprise than usual due to a totally unpredictable, non-economic variable: the COVID-19 virus. On these bases, it seems that the future for various chipmakers is uncertain, save for those in-demand chips headed to data centers.
Learn More How COVID-19 Is Affecting the Industry
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