MICROELECTRONICS Global microelectronics market booms despite pandemic disruption

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Despite the pandemic, the global microelectronics market grew steadily last year. Despite strong U.S. performance, China remains while Europe’s market share slid. For Europe to get ahead, firms need to prioritise the development of key competency areas where it currently lags other markets.

COVID-19 has significantly altered the fundamentals of the global microelectronics market. It has changed customer behavior, disrupted business revenues, and turned corporate operations on their heads.

Despite this, fueled by the growth in crowd computing and demand for devices to support remote working, the market continues to grow. Worldwide semiconductor revenue grew to USD442 billion in 2020, an increase of 5.4 % when compared to 2019 figures, and, according to the IDC, further growth is forecast in 2021.

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Pandemic-driven growth?

Much of this growth was seen in the United States while China and Europe’s shares in the global microelectronics marked declined. This can be in large part contributed to the strong demand for electronics for the home office (PCs, laptops, printers) and consumer electronics (televisions, games consoles, phones) that came about during the emergence of the COVID-19 pandemic. However, autonomous driving systems, electric vehicles, 5G communications infrastructure, and edge processing were all strong growth drivers for the global microelectronics market in 2020.

While there’s great scope for arguing whether the pandemic is indeed responsible for this growth, one thing seems certain: This growth is likely to continue due to the impacts that digitisation, 5G, and the green transformation will have on the demand for semiconductors in the long term.

China still on top

The U.S. market share in the global microelectronics market grew from 19.1 % to 21.7 % in 2020, while China’s share of the market declined for the first time. Owing to its 34.4 % share of the global market, however, China remains the largest localized market for microelectronics despite the strong U.S. growth figures for last year. Similarly, despite a 1.2 % drop in its global market share to 8.5 %, Europe’s position in the world makes it one of the world’s most significant semiconductor markets alongside America, Japan, and Asia-Pacific.

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For Europe to remain a competitive location for microelectronics in the future, however, its research, development, and production prowess must be maintained and expanded. This is the argument of Dr. Sven Baumann, a microelectronics expert at German electrical and electronic manufacturers’ association ZVEI. "The strong position of Asia, including China, as a consumption and production region will not change significantly," explained Baumann. "However, China's good position in particular is largely driven by companies from the USA and Europe who either manufacture there in their own fabs or have their own chips made there by contract manufacturers,” he says.

At present, there are several active initiatives for strengthening Europe’s microelectronics market in a sustainable manner. These include funding programs such as the Important Projects of Common European Interest (IPCEI) and Horizon Europe, the EU’s EUR95.5 billion funding program for research and innovation. At the same time, Europe must also take care of the development of competencies in areas where it’s currently lagging other countries. Only then, argues Baumann, will Europe be able to continue to meet the demand for semiconductors and grow its share of the booming global microelectronics market.

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