Auto electronics is lagging, but a chip industry recovery led by the likes of Marvell Semiconductor may have legs...
While some semiconductor sectors are showing signs of recovery, the auto segment continues to take a beating as the pandemic extends into the summer of 2020.
With Marvell and a handful of other chip makers showing signs of life, including new 52-week highs for stock prices, the automotive electronics sector remains stagnant. London-based Omdia is forecasting a 16-percent annual revenue decline for the hard-hit automotive power semiconductor segment. That works out to be about $9.1 billion in 2020 revenues.
The contraction reflects declining vehicles sales and plunging auto production, the market tracker said. Hopes earlier in the year for a rebound in automotive power semiconductor sales and revenue quickly evaporated when auto assembly plant closures in China quickly spread along with the novel coronavirus to Europe and then on to North America.
“At the same time, demand for new vehicles has fallen as dealerships were closed and lost jobs and wage reductions in many parts of the world combined to slash demand,” added Kevin Anderson, lead analysts for Omdia power, automotive and industrial semiconductors practice.
Hence, Omdia is foreasting a 20-percent annual drop in auto production this year to less than 70 million units.
The power semiconductor sector was already in decline last year, down about 1 percent year-on-year, a victim of U.S.-China trade tensions and U.S. tariffs on Chinese imports. The pandemic has made a tough market even tougher.
If — and it’s a big if — vehicle sales rebound in the second half of this year, Omdia said power semiconductor sales could bounce back, with growth above 20 percent based on pent-up demand. A recovery depends heavily on avoiding a second wave of Covid-19 infections and progress on a vaccine.
Meanwhile, other sectors of the estimated $1.65 trillion global chip industry are bouncing back from pandemic-induced lows, with key sectors hovering just below 52-week highs for stock prices. “Semis are good, but they’ve really lagged the [rest of the] tech sector,” chip analyst Carter Worth told CNBC this week.
Worth singled out Marvell as a leading indicator of a chip recovery, noting the company is among five semiconductor stocks to achieve 52-week highs. While the global chip sector has so far moved an estimated 43 percent from its March 2020 low, Worth said Marvell’s stock price has climbed 1.5 percent above its February 2020 peak.
“We think the breakout [by Marvell in late May] has legs” after “underperforming” for almost the last ten months, Worth added.
Other chip analysts anticipating a recovery have said they expect to revise upward their revenue forecasts by the beginning of July in anticipation of a semiconductor sector recovery.