Despite the destabilizing economic impact of COVID-19, semiconductor exports from Taiwan and South Korea increased last month, reports Bloomberg. The publication noted East Asian exports of chips and chip-making equipment is rebounding while the area’s other industries are declining.
However, the region’s mid-term component market growth will depend on consumer behavior and international commerce stability.
East Asian Semiconductor Sales Rising
The coronavirus pandemic had the effect of disrupting industry on a global scale, the semiconductor sector included. In addition to shuttering production facilities and disconnecting supply chains, the outbreak also suppressed demand. But according to Bloomberg, chip sales are beginning to recover in East Asia, in part because of COVID-19 digitization efforts.
The South Korea trade ministry recorded an uptick in component shipments in May and a 168 percent spike in component manufacturing equipment.
Similarly, the news agency noted Taiwanese technology exports, including semiconductors, totaled $10.2 billion last month, up 13.2 percent from 2019. However, the nation’s overall shipments fell by 2 percent, indicating the segment’s resurgence amid broader economic contraction. Taiwanese Semiconductor Manufacturing Company (TSMC) Chairman Mark Liu commented, “The tech industry seems to have decoupled from the overall economy somewhat.”
Natixis SA senior economist Trinh Nguyen told Bloomberg a global push toward digitization is driving component segment growth. As corporations and schools are initiating remote work and learning programs to halt the spread of COVID-19, consumer electronics manufacturers have upped their chip orders to meet demand. However, East Asian semiconductor exports may drop off in the second half of this year because of two significant factors.
Potential Second Half Headwinds
The International Data Corporation (IDC) recently published a report estimating smartphone sales will drop by 11.9 percent in 2020 year-over-year. The organization explained worldwide job losses caused by coronavirus related lockdown orders have made consumers wary of making large purchases. As a result, global handset shipments plunged by double digits during the first quarter.
Since mobile device manufacturing is a major contributor to overall chip sales, declining smartphone demand will hurt the East Asian component market.
Besides, mounting trade tensions between the United States and China could also negatively impact the worldwide component market. Recently, the U.S. Department of Commerce tightened export controls on products derived from American technology, which prompted TSMC to stop taking orders from Sino conglomerate Huawei. Subsequently, the firm asked its memory vendors Samsung and SK Hynix to reaffirm the status of their business relationships out of concern of losing more of its supply chain.
If the White House issues more decrees that affect Huawei’s component purchasing capability, its partners will take a big hit.
Although the East Asian semiconductor industry is facing significant mid-term challenges, its long-term future is bright. The region is home to many leading component manufacturers who will play a key role in fostering worldwide digital transformation. While COVID-19 and international trade tensions could make 2020 a down year for the local chipmakers, 2021 should mark a return to consistent growth.