COVID-19 Recession Threatens Automotive and Semiconductors Globally

Article By : Strategy Analytics

Real GDP Predicted to fall 10% to 15% in 2020 as consumer spending plummets...

New scenario analysis from Strategy Analytics indicates the COVID-19 induced 2020 Recession will disrupt Automotive, Consumer Electronics, Semiconductor, and IT infrastructure businesses worldwide before recovery in 2021.

The impact of the COVID-19 catalyst, demand disruption, loss of consumer confidence, rising unemployment, further decline in corporate balance sheets, and loss of value for consumer equity assets as well as these other factors will be a major recession.

The current analysis by Strategy Analytics indicates that the severity of this recession as measured by change in Real GDP will be unprecedented looking back to the Great Depression.

Global Real GDP Growth (Source: Strategy Analytics)

 

The new scenarios indicate that the damage from the worst economic cycle since the Great Depression, will cause both consumer and B2B businesses to suffer starting with an economic plunge of over 7% in real GDP (33% annualized) in major industrial economies in Q2.

“The entire supply chain for digital products in our homes, our cars, and associated with our mobile lifestyles will experience significant damage during this downturn that is likely to be felt globally over the next three to four quarters,” said Harvey Cohen, President of Strategy Analytics and lead analyst for these scenarios. “Q3 is also expected to show a decline in real GDP of 3% (12% annualized) with no growth in sight until Q2 2021.”

“Globally, automotive sales and the consequent demand for automotive electronics are in free fall since March, with a potential decline of up to 25% for 2020 compared with 2019,” said Ian Riches, VP of Strategy Analytics Automotive Practice.

David Kerr, SVP Wireless and Broadband noted, “Global Smartphone sales will tumble 23% in 2020 before seeing a modest recovery in 2021. The impact on 5G will be significant with services delayed in Europe and consumer appetite for expensive new 5G devices being much less healthy in North America and China. China’s supply chain has recovered but consumer willingness to follow through on their plans to migrate to 5G devices and services is uncertain at best. One relative bright spot is network services. Shelter-in-Home orders are increasing the demand for broadband activity although this will have little impact on operator revenues in the short term.”

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