Report: Global semiconductor market to contract in 2020

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Gartner reports component market down due to coronavirus.

June 17—TrendForce reported the global semiconductor market, aside from the memory chip segment, will contract by 1.3 percent year-over-year to $301.9 billion in 2020. The Taiwanese analyst firm explained the coronavirus pandemic’s negative impact on the automotive and smartphone chip sales precipitated the decline.

The group’s original forecast for the sector was growth by 3.4 percent this year, with a reach of $317.5 billion in annual revenue.

TrendForce’s Negative Near-Term Outlook

TrendForce attributes the yearly decline in worldwide component revenue due to two key factors.

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First, the firm posits semiconductor income, buoyed by surging data center and commercial PC chip purchases in the March period, will fall as workers and students complete their remote operation transitions.

Second, TrendForce believes manufacturer uncertainty about consumer behavior in the holiday quarter could result in an inventory glut in Q3. As such, chipmakers could experience a drop off in revenue because of forced pricing changes. In particular, the analyst organization sees a second half drip in automotive and commercial electronics semiconductor sales because of the viral outbreak’s effect on the global economy.

Since those sectors represent 50 percent of the global component industry’s production value, their contraction will hurt the broader field.

However, as consumers are grappling with financial anxiety, the group’s projection of soft vehicle and smartphone sales makes sense. Indeed, analytics organization Omdia recently predicted a 16 percent year-over-year decline in automotive chip revenue for the same reason.

Against the Tide

Although TrendForce’s 2020 outlook is broadly negative, the firm did highlight a few potential growth areas in the semiconductor sector.

The organization predicts demand for microelectronics used in Chromebooks and servers will surge in the back half of the year. The group’s estimate regarding Google laptop sales accords with a recent DigiTimes report about its mounting popularity as an educational tool. Also, Microsoft’s recent announcement about its plans to increase its cloud computing capacity supports TrendForce’s forecast.

There’s also the open question of consumer interest in ninth-generation video game consoles. Earlier this year, newly homebound players made the Nintendo Switch a surprise bestseller. Conceivably, the economy could recover enough for buyers to take an interest in the PlayStation 5 and Xbox Series X.

Unfortunately, as TrendForce’s report indicates, the coronavirus pandemic has made the global marketplace disconcertingly volatile.

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