Lockdown Effect Of The Novel Coronavirus On Semiconductor Industry

An Overview Of Semiconductor Industry Prior To COVID-19 Outbreak: Before the novel coronavirus outbreak, the electronics and semiconductor industry was gaining traction with emerging technological trends, including 5G communications, smart electronics, virtual reality in electronic manufacturing robotics and automation, and IoT has driven technology, among others, making it a profitable market ripe for investors and companies. The semiconductor and sensor markets for IoT are expected to reach a value of USD 114.2 billion in 2025, up from USD 27.6 billion in 2015, with a CAGR of 15.3%. Key semiconductors in IoT applications include controllers, wireless connectivity, and embedded non-volatile memory. The strong growth of semiconductors in IoT devices is driven by the colossal need for more data, with the requirement that the generated data provides value to users. The figure below depicts one of the profitable markets in the semiconductor industrySource: Straits Analysis          Covid-19 Imapct: Europe To Emerge As A Alternative Raw Material Marketplace, Get Insights Effects Of The Novel Coronavirus On China, South Korea, & Taiwan’s Semiconductor Industries: The global economy faces unpredictability in the wake of the COVID-19 outbreak. The pandemic has crippled the manufacturing, technology, tourism, and many other key sectors, indicating an upcoming financial crisis and recession. The figure below portrays the global economic behavior in terms of GDP growth for all key economies. Global Economic Growth SlowdownSource: OECD With all sectors being deeply hampered by COVID-19, let us dig deeper to know about its aftereffects on the semiconductor and electronics industry. The semiconductor industry has managed to escape the direct impact of the COVID-19 crisis till now; however, the situation is not expected to remain the same. The pandemic has led to several lockdowns, creating a shortage of labor and, in turn, halting production. As China is a global manufacturing hub for semiconductor and electronics players, the roll down effect will indubitably adversely impact the semiconductor industry. Foreign semiconductor companies, specifically fabless firms, are the worst hit on account of the halt of flights in and out of the country, which has introduced severe challenges in the import-export scenario. The subsequent delay in the transportation of input materials and finished goods will translate into a lower consumption rate by manufacturing industries till the end of April 2020. South Korea and Taiwan are also expected to observe a significant slowdown in the first quarter, which is attributable to their high dependency on China for chip sales.  There could also be a potential shortage of China-made electronic goods and components, including batteries and LCD screens for smartphones, as key Chinese manufacturers are likely to operate below capacity levels in the coming period. The closure of Foxconn and Pegatron in China is projected to delay the production of iPhones and AirPods, resulting in economic losses. On a global scale, COVID-19’s worsening economic situation has weakened consumer disposable income, affecting the purchase of electronic goods, such as smartphones negatively. Hiroki Totoki, Sony’s Chief Financial Officer, mentioned that the production of smartphones that integrate Sony’s image sensor would experience a steep fall. Additionally, Hiroki also stated that coronavirus could affect the production of its PlayStation 4 gaming hardware. COVID-19 has also led to the decline of major stocks in the semiconductor industry by disrupting the entire supply chain. Broadcom fell by 2.2%, Intel fell by 1.7%, Qualcomm fell by 1.8%, and S&P 500 overall was down 0.3%. China’s tech giant Huawei is also experiencing an overall 15% reduction in the mobile production process.          Could The U.S. Economy Withstand Coronavirus Crisis By Itself, Click Here To Get Insights Asia-Pacific’s Role As The Leader In The Global Semiconductor Market: Asia-Pacific dominates the global semiconductor market at present, with China, South Korea, Japan, Taiwan, and Vietnam as the largest semiconductor producers as well as consumers. With these countries in the lead, Asia’s semiconductor manufacturing market is expected to touch USD 133 billion in terms of value by 2022, registering a CAGR of 8% during the forecast period. From a country-wise perspective, China dominates the global semiconductor industry, and it is expected to retain its market position throughout the forecast period. The country’s fast-growing industrial automation, consumer electronics, IT and communication, and automotive industries drive its semiconductor industry. As per our analysis, China’s semiconductor industry revenue grew from an estimated USD 80 billion in 2018 to USD 120 billion in 2019, recording a 30% growth rate during 2018–2019. Hubei, Wuhan was the epicenter of COVID-19, and the disease’s onslaught prompted a sudden drop in China’s semiconductor industry, causing a disproportion in the overall demand and supply gap. Conclusion: Companies across sectors are turning to other countries for the manufacturing of electronic goods and components, creating a lucrative opportunity for the rest of the world. But this may prove to be a false step as the effects of COVID-19 are far-reaching on a global scale.