Posted on Jan. 27, 2020, 5:38 p.m.Updated on Jan 27, 2020 at 7:02 p.m.
The sky is clear for the founders of electronic chips that give life to smartphones, computers and other connected objects. After a catastrophic 2019, the semiconductor sector has much better hopes for 2020. A relief for the Korean Samsung, the Taiwanese TSMC or the Franco-Italian STMicroelectronics.
According to the World Semiconductor Trade Statistics (WSTS), the statistical body of this high precision industry, the sector’s revenues should resume growth this year. With an anticipated increase of 5.9%, they should reach $ 433 billion over twelve months, against $ 409 billion in 2019 and a decline of 12.8% never seen in ten years.
Change of tone
Companies are already confirming the good news to their investors. Heavily penalized in 2019 by
the sharp fall (-45%) in the price of memory chips
(which store the data), the American Micron Technology was the first, in mid-December, to speak of a recovery for 2020.
TSMC, which manufactures more than half of the semiconductors on the planet, quickly followed, hoping to generate between 10.2 and 10.3 billion dollars in revenue for its first quarter, against 7.1 billion in the same period l last year. Confident,
STMicroelectronics expects growth of 13.7% over the same quarter.
The tone changed completely within a few months. In early fall, a boss in the sector still justified the revision of his annual objectives as a consequence of “The most serious crisis in the sector since the financial crisis”.
An exceptional combination of events had plunged the sector into pessimism. “The macroeconomic environment became more complicated in 2019 with the slowdown in growth in China and the sluggishness of smartphone sales, recalls Frédéric Yoboué, sector analyst for Bryan, Garnier & Co. Thedemand fell all the more abruptly as sector customers over-ordered the year before, in anticipation of a shortage of components. Ultimately, the electronics manufacturers found themselves with far too many chips in stock. “
In this already delicate market environment, trade tensions between the United States and China or
between Japan and South Korea
also posed the threat of a ban on sales to major customers, such as Chinese Huawei.
As better than expected end-of-year 2019 results already indicate, the salvation of the sector will undoubtedly come from 5G. The new generation mobile network could indeed push consumers to buy compatible smartphones.
“This is promising for the semiconductor industry which realizes 30% of its revenues from phone brands », underlines Frédéric Yoboué. Better yet, the new 5G smartphones should come with chips with higher added value, sold at a higher price.
Long term trend
In parallel with the deployment of 5G, chip manufacturers will keep an eye on the billions of dollars invested by the online computing giants (“cloud computing”) in their data centers. Semiconductors, including processors, are ubiquitous and
derive record revenues from the American Intel.
Certainly the demand of the automobile market,
become a big consumer of chips for the electronisation of the cockpits and the electrification of the batteries,
should stay at half mast. Not enough to discourage the sector, for whom 2019 could thus be just a faux pas quickly forgotten. “The underlying trend for the next ten years is always more semiconductors as objects, including cars, will connect to the cloud and 5G”, rejoices the boss who has found a smile.