The Semiconductor Industry Association (SIA) recently reported global electronic components sales of $39.41 billion in November, a 7 percent year-over-year increase. That means the worldwide chip market experienced its largest yearly expansion since the first quarter of 2020 last month. The organization also predicts full-year global semiconductor sales in 2020 will exceed 2019’s total despite COVID-19 related disruption.
In addition, the SIA’s data suggests post-coronavirus pandemic developments in China and the Americas will shape the wider component marketplace in 2021.
China’s Chip Market Growth Driven by EV Sales
China led the world in chip revenue with $13.86 billion, up 6.5 percent from 2019. The revitalization of its domestic automotive sector is driving the country’s semiconductor market growth phase. In particular, the nation’s car buyers have prompted a spike in component sales due to their increasing preference for electric vehicles (EVs).
In recent years, automakers have increased their fleets chip content to accommodate new digital safety and infotainment innovations. EVs, by virtue of their electrified powertrains, require even more semiconductors than fossil fuel-powered personal transports. As it happens, China’s EV sales are predicted to rise by 8 percent annually in 2020.
Since China is the world’s largest auto market, its consumers opting to go electric has had a global impact.
But why did Chinese drivers buy more EVs last year than they did in 2020? The trend is the result of government subsidies, the buildout of the region’s charger network, and new vehicle options from local carmakers.
The China Association of Automobile Manufacturers (CAAM) believes the nation’s EV purchasing trend will pick up strength in the future. CAAM expects local new energy vehicle sales to reach 1.8 million in 2021, a 40 percent year-over-year increase. Research firm S&P Global Platts anticipates Chinese non-gasoline powered transport purchases will reach 6 million units by 2025.
The country’s demand for EVs is so strong, it recently contributed to a global automotive semiconductor shortage. Thankfully, leading vehicle chipmakers have moved to address the shortfall by expanding their production capacity. Regardless, Chinese EV sales will continue fueling the worldwide electronic components industry growth throughout 2021 and beyond.
Post-Coronavirus Digitalization Wave Boosts Chip Sales in the Americas
The Americas’ semiconductor sector grew the most from 2019 last month. The SIA recorded local chip sales totaling $8.46 billion in November, up 12.5 percent from last year. The organization further noted the area’s component market experienced 11 consecutive months of growth in 2020.
So why did the Americas’ electronic components sector grow in the wake of the coronavirus pandemic while other industries shrank? The region’s chipmakers showed great resiliency in the face of the health crisis, and demand skyrocketed in the aftermath of the outbreak.
First, market-leading U.S. providers like Intel and Nvidia mitigated the impact of the COVID-19 storm by reacting quickly. Both firms used their technological expertise to pivot to remote operation. That operational flexibility enabled them to meet strong demand generated by newly homebound workers and students.
Certain American semiconductor manufacturers also got a boost from Apple, Sony, and Microsoft launching hotly anticipated new electronic devices in the 2020 holiday season. Unfortunately, manufacturing lockdowns in Q1 2020 and greater than expected consumer demand led to limited product availability. As those technology giants rushed to increase their output, their U.S. chip suppliers, like AMD and Qualcomm, saw significant revenue spikes.
Currently, governments are distributing multiple coronavirus vaccines around the world amid a global rise in infection rates. However, inoculating billions of people will be a time extensive undertaking. That means North, Central, South American quarantine mandates will probably remain in place for the foreseeable future. As a knock-on effect, leading electronics manufacturers will continue ordering parts in large quantities from the region’s top vendors.
That development, coupled with the Chinese EV boom, could affect semiconductor pricing and availability well into the New Year.