Near the start of the COVID-19 pandemic, many experts feared that the semiconductor industry would be destined for a harsh battering and lengthy recovery. Fortunately, overwhelming demand for new technologies related to remote work, artificial intelligence (AI), and the Internet of Things (IoT) have powered the chip sector to a successful first half the year.
The second quarter built on the growth of the first quarter despite uncertain market conditions. Notably, the world’s top ten chipmakers continued growing their revenues at a rate of 2.4 percent in the frame. That puts the likes of Intel, Samsung, SK Hynix, and more in a good position heading into the final stretch of 2020.
Leading from the Front
Many original equipment manufacturers (OEMs) are expecting strong holiday sales this year. The holiday season will bring major releases of new smartphones, laptops, gaming consoles, and connected gadgets of all shapes and sizes.
In anticipation of these sales, OEMs are aggressively purchasing chip inventory. This may be at least partially driven by the COVID-19 pandemic and fears of a second lockdown this winter. Even so, the increase in buying led to a profitable quarter for the chip sector.
As a whole, the industry grew by 1.1 percent quarter-on-quarter. It also experienced an 8.3 percent rise year-over-year.
Meanwhile, the industry’s top performers strengthened their grip on the majority of the market share. Ron Ellwanger, a senior research analyst at Omida, says, “The top-10 semiconductor companies continue to control more of the semiconductor market. They have gained nearly 3 percentage points share of the total market versus the same time last year (55.6 percent to 58.5 percent).”
Intel once again topped the chip sector in terms of revenue, raking in $19.4 billion during the second quarter. Samsung followed with $13.9 billion of its own revenue. The other eight companies in the top ten combined to bring in $31.8 billion.
While the top nine companies remained the same, there was a change in the tenth spot. Infineon surrendered its place in the top ten to KIOXIA, formerly Toshiba Memory, after a 10.1 percent decrease in revenue for the quarter. That loss can be attributed to its automotive chip segment since the vehicle industry is struggling in the wake of COVID-19.
A few companies actually saw their revenue shrink in Q2 despite it being positive for the top ten as a whole. Intel, Qualcomm, Texas Instruments, and KIOXIA posted negative figures.
Memory in High Demand
The second-quarter success for the chip industry was largely driven by memory chips. Demand for data center silicon and DRAM chips for consumer devices has skyrocketed. DRAM revenues were up by 15.9 percent in Q2 while overall memory chip revenues grew by 10.1 percent.
Thanks to the demand for SSDs—largely driven by Microsoft and Sony for their next-gen consoles—NAND revenues also grew in the second quarter. That segment saw a 4.9 percent quarter-by-quarter increase.
Michael Yang, research director of manufacturing components at Omida says, “In 1H20, hyperscale data centers resumed its buildout and the demand for DRAM significantly ramped up compared to a year ago. The server DRAM module ASPs surge started in 1Q20 and continued to ascend in 2Q20, powering the DRAM market to USD 16.8 billion in revenue.”
It will be interesting to see if the chip industry can continue this powerful run through the back half of 2020 and beyond. Unfortunately, a retraction is likely incoming as OEMs return to relying on their existing supply.