Silver Lining for Chip Industry Amid Pandemic

Article By : George Leopold

With the exception of chip foundries like TSMC, which may be facing an inventory glut, other chip sectors may actually benefit in the long run from pent-up demand for electronics as the global economy emerges from the pandemic...

A consistent theme is emerging among semiconductor analysts regarding the pandemic’s impact on IC supply, demand, downturns and recovery.

With the exception of chip foundries like Taiwan Semiconductor Manufacturing Co., which may be facing an inventory glut, other chip sectors may actually benefit in the long run from pent-up demand for electronics as the global economy emerges from the pandemic. Jon Peddie, who tracks the GPU market, made that assertion last week, adding he was revising upward his semiconductor revenue forecast range in anticipation of the graphics chip market turning the corner.

So, too, are other analysts monitoring segments like CMOS image sensors. IC Insights, for example, reports this week the sensor market’s decade-old run of success has been ended by the impact of the novel coronavirus. After surging 30 percent last year, 2020 sales are expected to decline for the first time since 2009 to an estimated $17.8 billion.

Nevertheless, the chip market tracker sees a silver lining to the current downturn.

For now, its bearish short-term forecast represents a 4 percent decline in revenues from last year, when image sensor sales reached $18.4 billion—a quadrupling of sales over the past decade. The remarkable 16.9 percent annual growth rate over the last decade was driven by smart phone cameras and a growing list of embedded sensors applications for automobiles and augmented/virtual reality.

Click image to enlarge. (Source: IC Insights)

By comparison, other chip sectors like NAND flash increased at an annual rate of 7.8 percent while the overall chip market expanded at a yearly rate of 3.7 percent. IC Insights said the only chip sector approaching the annual growth rate of the booming CMOS image sensor sector were pressure sensors used in applications like MEMS microphone chips.

Hence, the only thing that could slow the sensor chip market was a seemingly unstoppable virus.

The question now is how long it will take for the sensor market to rebound. A recovery beginning in the second half of 2020 is contingent on containing the coronavirus, stabilization of global supply chains and a general economic recovery. As infection rates increase in nearly two dozen states, we’ll soon find out soon if that represents magical thinking.

Nevertheless, IC Insights believes pent-up demand will restore growth later this year, with the CMOS imaging sensor market storming back in 2021 with sales rebounding by a projected 15 percent to a new record-high of $20.4 billion. That growth curve is expected to continue through at least 2024, with shipments topping 12 billion units, generating sales north of $25 billion.

Among the drivers will be machine vision systems that are beginning to make their way onto factory floors for AI-driven applications like product inspection. Indeed, the revival of the North American manufacturing sector and the need to separate factory workers means that image sensors and other devices trained by deep neural networks could replace many front-line workers like quality control inspectors.

For example, deep learning specialist Neurala introduced vision inspection automation software this week that helps train machine vision to quickly spot product defects.

It’s hard to know at this point whether any of these chip industry forecast will pan out. The uncertainty is reflected in the global stock markets, that surged for several weeks on the assumption that a re-opened U.S. economy would hasten an economic recovery. Reality hit on June 11 when the investors drove down the New York Stock Exchange 6 percent.

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