A quick recovery for the global chip market seems unlikely...
Grim global semiconductor forecasts agree on a pandemic-driven market contraction, with the only variable being how steep and for how long chip demand and revenues will decline.
As the unrelenting spread of the novel coronavirus and the resulting lockdown slow consumption and hobble global supply chains, forecasters continue to slash their growth forecasts across market sectors and applications. Demand for medical electronics was among the few bright spots. Continuing strong demand for memory chips could soften the pandemic’s economic impact, analysts said.
Despite slashing its 2020 semiconductor growth forecast, market tracker Omdia nevertheless predicts a “V”-shaped recovery later in the year. For now, Omdia is forecasting a 5-percent decline in annual chip revenues, excluding memory ICs. With memory chips included, annual revenues are predicted to rise by 2.5 percent to $439.3 billion, driven in part by the embrace of all-flash memory in datacenters to crunch data-driven workloads.
Overall, “demand is weak in every region and almost every market,” said Myson Robles-Bruce, Omdia’s semiconductor analyst.
“The pandemic has negatively impacted supply chains and market demand across all component categories.”
While demand for medical electronics for burst manufacturing of ventilators is expected to drive healthcare-related chip demand by 6 percent, other sectors like wireless account for much of the chip revenues declines. Wireless chip demand is forecast to decline 4.7 percent year-on-year as the pace of 5G and other wireless rollouts slow.
Omdia said the automotive sector also represents a “major drag” on the global chip market as shelter-in-place orders restrict travel. Vehicle production has plummeted by more than 12 percent this year, driving down automotive chip sales by 7.5 percent year-on-year.
Separately, Omdia forecast a 6.9-percent decline in the power semiconductor market in 2020 as a result of the coronavirus. Power IC revenues in 2020 are pegged at $23.4 billion, a forecast that wipes out most of the market segment’s gains since 2016.
Among the wild cards for the global semiconductor market is whether healthcare technologies like telemedicine can compensate for big losses in other sectors. Omdia said the medical electronic sector could make up for at least some of the declines in the wireless and industrial sectors. That will go far in terms of whether global chip recovery is “V”- or “L”-shaped.
“The medical semiconductor segment will continue to grow faster than the overall industrial semiconductor market in 2021 and beyond, driven by long-term trends such as the aging population, the increasing use of telehealth, the move to portable and wearable devices and the rise of AI,” Omdia said.
Just a month ago, by contrast, Gartner was forecasting a mere 0.9 percent decline in global chip revenues, underscoring the breadth and depth of the Covid-19’s sudden impact over the last month on global supply chains and economic activity. Gartner was betting that expected gains in memory revenues, which account for 30 percent of the global semiconductor market, would offset much of the pandemic-induced declines.
In early April, it projected the memory market would reach $124.7 billion in 2020, up a healthy13.9 percent, offsetting a projected decline of 6.1 percent in non-memory segments.
As revised forecasts underscore, those hopes are fading fast, as are hopes for a quick chip recovery as new wave of Covid-19 infections hit the United States.