Semiconductors Global Semiconductor market: Where we are and where we are headed
To say that 2019 was a difficult year for the global semiconductor market would be a bit of an understatement. Was it the beginning of the semiconductor market's downfall or a temporary bump in the road? In this article, we're taking a look at what the future holds for semiconductor manufacturers.
The year of 2019 was a rough one for the semiconductor market. It was a year of contraction, with the US-China trade war having a big part to play in creating economic uncertainties for the entire industry. As an example of just how meek things were, August 2019 semiconductor sales were down 15.9 percent to $34.2 billion from the August 2018 total of $40.7 billion.
Despite this, however, the industry is poised for strong growth as we head into 2020, with developments in artificial intelligence (AI) piling on demand for next-generation silicon and technological innovation taking place at breakneck speed across the globe.
With constant and significant tech innovations driving the growth and demand of silicon, sales are expected to continue growing (admittedly, at a slower rate) and reach $572 billion by the end of 2022.
The industries most fuelling growth
The semiconductor industry is expected to be driven by the huge and growing demand for silicon that is capable of handling the next generation of powerful AI applications, with a lot of the demand coming from the industrial and automotive markets.
Automotive especially is the market expected to grow the fastest over the next few years as automakers plow ahead with the design and development of autonomous vehicles, advanced driver-assistance systems (ADAS), and graphics processing units (GPUs). At present, automotive represents approximately 10 – 12 percent of the chip market.
It is not only the automotive sector that will help to break the semiconductor market’s 2019 fall, though.
The introduction of 5G and related technologies are also going to drive the use of more powerful semiconductors across the communications market. At the same time, new televisions, handheld devices, games consoles, and digital set-top boxes will continue to drive demand for more powerful semiconductors for consumer electronics.
5G won’t affect the market too much, however. While it will provide something of a boost, we are still early in the rollout of 5G systems. We may need to wait until 2021 or 2022 before we see 5G having a noticeable impact. Until then, 4G LTE will remain as the dominant cellular generation.
Still, the smartphone industry is and will remain the largest consumer of semiconductors, continuing to dwarf the demand of other market segments. This year, following a two-year downturn, the smartphone business is expected to return to annual unit shipment growth. This rise will boost semiconductor market revenue, with smartphone chip sales increasing by around seven percent after a 22 percent fall in 2019.
What about foundries?
It is thought by some that chip foundries are performing inefficiently. Is this true, though? While this is open to debate, it would seem that foundries in China and Taiwan are performing very well and are contributing massively to the market.
As we know, TSMC is the dominant foundry in the region and a major player worldwide. With the company’s leadership in advanced manufacturing, including next-gen packaging, others may struggle challenge it this year as the company continues to grow and . TSMC’s main rival Samsung clearly recognizes this, too; Samsung has planned a $115bn boost for its logic chip business to try and surpass TSMC as the world leader in this area.
In China, government-supported initiatives like ‘Made in China’ are supporting the growth of domestic foundries to not only boost global competitiveness but to also guarantee the availability of semiconductors in wake of the US-China trade war. Although Chinese foundries are behind Taiwanese foundries, the gap is quickly being closed.
Throughout 2020 and beyond, Asia Pacific is likely to continue leading the global market and will remain the largest contributor to industry revenues. However, China’s position as the biggest importer of chips may change as domestic foundries continue their growth.
What we do know is that it is AI that will be the catalyst for the semiconductor market’s growth, with automotive representing the fastest demand growth area as vehicles become smarter, more connected, and automated.