Earlier this month, the Semiconductor Industry Association (SIA) published sales figures for global chip sales for August 2019. On the one hand, the report indicated component purchases had fallen by 15.9 percent from the same time last year. However, it also revealed worldwide semiconductor sales have risen for the second month in a row.
Continued Sales Declines
According to data compiled by the World Semiconductor Trade Statistics (WSTS) organization, chipmakers sold $34.2 billion in semiconductors in August. Consequently, the sector saw a year-on-year shortfall of $6.5 billion. The SIA notes the Americas experienced the highest drop in sales, by region, falling 28.8 percent from 2018.
The ongoing U.S.-China trade war, the slowdown of the smartphone market, and a glut in chip inventories have caused a yearlong decline in chips sales. Indeed, in May, IHS Markit reported the semiconductor industry experienced in a 10 year low in Q1 2019. However, while the sector is still plagued by sluggish sales and underpricing, it appears the worst might be over.
In addition to the year-on-year declines, the SIA reported modest month-to-month growth. As the WSTS recorded $33.4 billion in semiconductor sales in July 2019, chip sales rose by 2.5 percent since last month. Moreover, August is the second month in a row in which the sector has grown rather than contracted.
Even better, global chip purchases increased by 0.8 percent from July to August.
The semiconductor space’s modest recovery is attributable to a few factors. One, electronics makers are increasing their orders in response to the forthcoming holiday season. Indeed, Apple recently asked its suppliers to increase iPhone 11 production due to stronger-than-expected demand.
Another factor is that U.S. companies are finding ways to increase their Chinese sales despite Trump administration sanctions. For instance, Micron resumed selling specific components to controversial Sino corporation Huawei despite it being blacklisted by the federal government. Doing so helped the company beat analyst estimates in its fiscal fourth-quarter results. Qualcomm followed suit last month, which suggests it will experience a similar modest boost in sales next quarter.
Without a resolution to the trade war, the semiconductor industry won’t hit the record highs of 2018 anytime soon. But with the global deployment of 5G technology, and the accompanying release of new handsets and Internet of Things devices, the sector’s recovery should continue apace in 2020.