COVID-19 Chip demand to drop by up to 15% due to the COVID-19 pandemic

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With each passing day comes more and more grim news for the market. Now, some of the latest estimates say that chip demand will drop by another 5 percent to 15 percent in 2020 thanks to COVID-19.

The COVID-19 pandemic is doing a number on the global economy, and it seems as though each new estimation, regardless of which industry or market segment it concerns, is grimmer and more pessimistic than the last. COVID-19’s toll is perhaps best illustrated by estimates from the International Monetary Fund (IMF) who in January said it expected global gross domestic product (GDP) to increase by 3.3 percent in 2020. In mid-April, a new IMF estimate shrunk this by 3 percent. “This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis,” the IMF said.

Now, McKinsey & Company, a management consulting firm that has published the McKinsey Quarterly since 1964, is the latest to publish its estimates for the global chip industry. The firm said in mid-April that it expects sales demand in the global chip market to decline between 5 percent and 15 percent in 2020, with steep declines anticipated for some integrated circuit market segments set to overwhelm the gains forecasted in others. So far, this is the direst market projection.

McKinsey & Co is not the only firm anticipating the worst. Both IC Insights and Gartner have revised their projections downward. For 2020, IC Insights predicts a 4 percent drop while Gartner forecasts a 0.9 percent decline in semiconductor revenue, with areas like wireless communication, automotive, consumer electronics, and industrial being the most affected.

These figures should all be taken with a pinch of salt, however, particularly McKinsey’s relatively wide projection of 5 to 15 percent. This is because the COVID-19 pandemic is entirely unprecedented in the global economy, meaning that experts cannot draw on past crises to measure its potential impact. No crisis in living memory, including the 2008-2009 Global Financial Crisis, comes close to causing problems that are anything like those caused by COVID-19—widespread global lockdown and the shutting down of businesses, actions which have caused a sudden shock to global supply and demand.

With electronics companies like Samsung and LG both warning that, despite relatively unaffected Q1 2020 financial results, the worst financial impact of COVID-19 is yet to come, things will likely continue to get worse before they get better.

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