IDC: Coronavirus will shrink global semiconductor market by 6 percent

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Evercore predicts bleak future for semiconductor industry

On March 18, the International Data Corporation (IDC) released a new report on the impact the coronavirus outbreak has had on the global semiconductor industry. The market research firm admitted it’s difficult to make precise forecasts as the pandemic is still ongoing. However, the organization did offer insight regarding how COVID-19 will affect the industry and how a potential near-term recovery is possible.

The Takeaways

  • Report indicates 80 percent chance that coronavirus will cause component sales decline by 6 percent ($25.8B loss in 2020)
  • However, 1 in 5 possibility component industry will make a swift recovery (possible scenarios outlined below)
  • Semiconductor manufacturers should concentrate on emerging technology (5G, Intelligent Edge, IoT) to enable a swift market recovery

Coronavirus Prompted Market Contraction

Before the coronavirus outbreak reached pandemic proportions, IDC projected 2020 global semiconductor revenues would grow by two percent year-over-year. However, the firm now forecasts an 80 percent chance the disease will cause a market contraction. Specifically, the organization predicts worldwide component sales will fall by six percent from 2019.

IDC also estimates COVID-19 will cost the global semiconductor industry $25.8 billion this year.

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Last week, The Burn-In published a report examining the coronavirus pandemic’s impact on the Asian, European, and U.S. semiconductor industries. In brief, component makers that have significant production capacity in the Chinese mainland have faced drastic production and delivery delays. Also, while manufacturing is returning to normal in some Sino facilities, truck driver and port worker shortages are still causing logistics slowdowns.

In response, some nation-states and corporations like India and Samsung are airlifting components out of China to avoid bottlenecks.

Potential for Positive Outcomes

Although many of the insights IDC presented in its world semiconductor industry report are distressing, it also provides a few optimistic predictions. For example, the organization believes there is a one in five possibility the sector will make a swift recovery from COVID-19 this year.

In its report, IDC outlines four potential scenarios regarding the semiconductor market’s performance in 2020, two of which feature positive outcomes.

According to the report, the longer the coronavirus pandemic disrupts global technology supply and demand, the worse the annual financial results will be. However, if worldwide tech sector production, delivery, and ordering recovers within three to nine months, semiconductor revenue will increase by 2 percent from last year. If the recovery phase takes only one to three months, the firm predicts component sales will rise by six percent from 2019.

IDC also states if semiconductor manufacturers direct their resources to produce components that enable certain emerging technologies, a market resurgence becomes more likely. The firm named 5G, intelligent edge, Internet of Things, and high-performance computing as being critical to a potential recovery.

Supply Chain & Procurement Solutions

The COVID-19 outbreak has had a deleterious impact on the semiconductor market. But the industry possesses the ingenuity and resilience to affect a rapid return to near-term growth.

One area this is readily seen is within supply chain and procurement solutions. Various platforms exist in this digital age allowing buyers to continue timely work at home. With more companies shutting down offices for the sake of employee health, such platforms will become ever more important in the semiconductor industry’s daily work.

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