POWER ELECTRONICS INDUSTRY Power electronics market 2020: Winners, losers and opportunities

Related Vendors

Rogers Corporation

PCIM Europe

EA Elektro-Automatik GmbH & Co. KG

Würth Elektronik ICS GmbH & Co. KG

MESAGO Messe Frankfurt GmbH

more less

onsemi

less

The power electronics industry’s onward direction is driven by diverse vertical market factors, now with the added impact of COVID-19. Despite everything, there are opportunities as well as challenges – so how is the industry responding?

According to a Research And Markets report released in July 2020, the global power electronics market size, after COVID-19 is factored in, is projected to grow from USD 35.1 billion in 2020 to USD 44.2 billion by 2025, at a CAGR of 4.7 %. This growth is dominated by three contributors: renewable energy across the globe, growing adoption of power electronics for electric vehicle manufacturing, and increasing use of power electronics in consumer electronics.

expert CASE STUDY

Accelerate power electronics development - Choose your tools wisely

Each of these three markets is influenced by both its own industry-specific issues and the massive impact of COVID-19. This article provides an overview of these markets and factors, and reveals some industry winners and losers; it then comments on the key semiconductor components consumed by these markets, and some of their major manufacturers.

We then provide comments from the top five of these manufacturers, to compare their position and expectations under the prevailing market conditions. We complement this with some bigger picture context, by reviewing some key mergers and acquisitions activity that has taken place during 2020.

Renewable energy

According to the World Economic Forum, lockdown measures have caused global energy demand to drop precipitously to levels not seen in 70 years . The International Energy Agency (IEA) has estimated that this demand contracted by 6 % and energy-related emissions will decrease by 8 % for 2020. Oil demand is expected to drop 9 % and coal 8 % for this year, while crude oil is at record-low prices.

This change represents a radical shift that seems to be more than a temporary short-term drop in demand for fossil fuels, at least in the power sector. With the fall in demand, renewable sources (mainly wind and solar) saw their share in electricity substantially increase, at record levels in many countries. In less than 10 weeks, the USA increased its renewable energy consumption by nearly 40 % and India by 45 %. Italy, Germany, and Spain set new records for variable renewable energy integration to the grid.

BASIC KNOWLEDGE - SMART GRIDS

The smart grid – what it is, and why we need it

Note that renewable energy was increasing its market penetration for several reasons, even before the pandemic. Renewables have been supported by favorable policies in many countries, which give priority to cheaper and cleaner sources. In fact renewables have become the cheapest energy source; the International Renewable Energy Agency (IRENA) recently reported that the cost of solar had fallen by 82 % over the last 10 years , while BloombergNEF states that renewable energy is now the cheapest energy source in two-thirds of the world .

During the COVID-19 pandemic, governments introduced full-lockdown measures that depressed electricity demand at historical lows (15 %-30 %) in many countries, and generated an oversupply of available power capacity. As the crisis hit, grid operators sought the cheapest (and cleanest) supply source to balance the lower demand. Therefore, weaker electricity demand increased the share of renewables in the system while sending the more polluting and costly carbon fuels to the back of the queue. This effect happened even at a time of historically low fossil fuel prices, making carbon the biggest loser in the pandemic.

Overall, COVID-19 has had a game-changing effect in accelerating the clean energy transition in the power sector. Businesses and investors can play a role in boosting clean investment, both by promoting low-carbon supply chains and by grasping the opportunities of clean energy markets.

Electric vehicles

With unprecedented scale and speed, the pandemic has caused business closures, stopped factory outputs, and disrupted global manufacturing industries and their supply networks. The EV market has been caught up in all of this, and remains vulnerable due to its relative youth and dependence on global supply chains for its core technology: batteries.

However, prospects are improving. China, as the global battery manufacturing powerhouse, has seen over 90 % of its businesses resume production, with manufacturing heartland, Guangdong, almost back to normal as over 6 million workers return to work.

While Europe and the States are further behind in their fight against the virus, car manufacturers are gearing up so that when they get the green light, they can move quickly to meet the strong consumer demand for EVs that exists. And demand does remain high. While overall UK car sales have dropped by a third, sales of pure electric vehicles have more than trebled.

ELECTRIC VEHICLES

Electric vehicle market sales to fall to 24 million in 2020

A range of data shows that by staying indoors and off the roads, pollution levels have almost halved in the UK – and similar patterns can be seen across Europe, the United States and China. The Copernicus Atmosphere Monitoring Service has been tracking pollution levels using satellite data and ground-based measurement systems, and has attributed falling pollution to a reduction in vehicle usage arising from the pandemic.

This is in an incredibly exciting and compelling proposition – and the changes we are seeing in our environment are clearly capturing the attention of customers.

A recent study shows that 45 % of people have reconsidered their electric vehicle ownership plans because of the radical improvement on air pollution seen across the globe thanks to the demobilization of transport. A further 17 % said it reaffirmed the decision they had already made to make the switch to an EV.

As we eventually move towards a recovery phase, the desire to avoid returning to the old world of fossil fueled cars and dangerously polluted cities will hopefully remain strong. Falling oil process should not be allowed to undermine the wants and needs for a cleaner, greener future.

BEYOND COVID-19

What the road ahead could look like for electric vehicles after COVID-19

Consumer electronics

Consumer electronics, along with renewable energy and electric vehicles, is considered as a major channel for power electronic devices. However, we need to break this sector down further, as it comprises subsectors that have fared very differently in the face of the pandemic.

The pandemic has led to a huge increase in students and employees working from home; this shift immediately created a sudden spike in sales for laptops, tablets, printers and monitors. Conversely, with reduced incomes and worries about the future, consumers are prioritizing purchase of necessities like food and cleaning products over non-essential, big ticket purchases like LCD TVs.

Nevertheless, some spending will continue, particularly to the benefit of companies like Xiaomi which offer low-cost, value for money goods including smartphones, laptops, and home appliances. Additionally, Apple will not be severely impacted as the company has a loyal following of affluent fans.

sponsoredPCIM EUROPE 2020

SiC power module for high-temperature automotive application

Consumers will also continue to spend money on products they deem to be important, such as smartphones, or ones that offer convenience and value for money, like wireless speakers.

With most of the major production markets in lockdown, supplies of components and finished goods will be affected. However, with most electronic products being highly commoditised, consumers will not see any major cost hike.

Supply chain issues

Although the above three sectors are diverse in their activities and the factors that affect them, they are all vulnerable to supply chain issues that are being created by the pandemic.

According to data from a Statista March 2020 survey, 40 % of the global electronics manufacturers and suppliers surveyed reported they believed that consumer electronics were likely to be the most impacted industry due to the coronavirus outbreak. A further 24 % of respondents claimed they expected industrial electronics to be most impacted, with 19 % suggesting that the automotive electronics segment would be hardest hit.

Power Supplies

11 skills you need to design switch-mode power supplies

Within the renewables industry, supply chain and logistics delays are also expected to impact both wind farm and solar power projects.

Power electronics supply side: impact of the pandemic on hardware manufacturers

Above, we referenced a forecast of global power electronics market growth to USD 44.2 billion by 2025, with a CAGR of 4.7 %. This is in spite of COVID-19 driving down demand for end-products, and various world governments implementing a range of regulations to deal with the pandemic, such as completely shutting down manufacturing facilities, or limiting production and staffing levels.

These negative influences are counteracted by activity in the three driver markets discussed, plus growing industrialization in developing economies. The increasing use of GaN & SiC products in various applications such as electric vehicles, UPSs, photovoltaics, and wireless charging is also projected to create lucrative opportunities over the period to 2025.

COUNTERFEIT DETECTION STRATEGIES

Tools for effective counterfeit protection

Of the power electronics device types, power module sales are predicted to grow at the highest CAGR during the forecast period. Modules are used in various applications, including motor control and drives; hybrid-electric solutions for construction, commercial, and agricultural vehicles; solutions for solar energy systems; Uninterruptible Power Supplies (UPSs); room air conditioners; high frequency and switching applications; dc/dc converters; auxiliary inverters; hybrid electrical vehicles; and inductive heating and welding.

Low voltage device sales are also expected to grow rapidly from 2020 to 2025. This is due to the growing adoption of such devices in the automotive, consumer, and industrial sectors. The majority is used in low voltage applications ranging from adapter and charger SMPS, battery-powered applications, motor control and drives, battery management systems, inverters, computing and mobile applications, industrial power supplies, industrial UPSs, energy storage, refrigeration, fans, pumps, room air conditioners, automotive applications, high frequency and switching applications, DC/DC converters, auxiliary inverters, hybrid electrical vehicles, and inductive heating & welding.

UPS DESIGN

Which type of uninterruptible power supply gives the best data protection?

How the key manufacturers are faring

Much of the above information about hardware sales performances is drawn from the MarketsandMarkets report: Power Electronics Market, published June 2020. The report is based on 20 key market players, led by Infineon Technologies (Germany).

The other enterprises include ON Semiconductor (US), STMicroelectronics (Switzerland), Mitsubishi Electric (Japan), Vishay Intertechnology (US), Fuji Electric (Japan), NXP Semiconductors (Netherlands), Renesas Electronics (Japan), Texas Instruments (US), Toshiba (Japan), ABB (Switzerland), GaN Systems (Canada), Littelfuse (US), Maxim Integrated (US), Microchip (US), ROHM (Japan), SEMIKRON (Germany), Transphorm (US), UnitedSiC (US), and Wolfspeed, A Cree Company (US).

Sensor

Infineon & Blumio - developing radar-based blood pressure sensor

Below are some comments from the top five of these manufacturers, which combine to give a picture of the current power electronics landscape from the semiconductor manufacturers’ perspective.

Infineon Technologies: "Some of our target markets, especially the automotive sector, have recovered better than expected since the summer. In addition, the structural transformation towards electro mobility is accelerating, particularly in Europe. Other markets are showing weakness, like traction or government identification, or are still a long way from recovery, such as factory automation. All in all, we are cautiously optimistic for the fiscal year that has just begun. However, the coronavirus pandemic, the geopolitical situation and prevailing macroeconomic conditions all remain challenging”

ON Semiconductor: “2020 third quarter revenue was USD 1,317.3 million, down approximately 5 % compared to 2019 third quarter revenue. 2020 third quarter revenue was up approximately 9 % as compared to 2020 second quarter revenue.

“These strong third quarter results, together with significantly improved margins, are due to normalization of our operations following the initial COVID-19 pandemic impact and growth in our revenue. Fundamentals of our business remain strong with accelerating momentum in automotive, industrial, and cloud-power end-markets and strong operating leverage from revenue growth.

"We expect to see above seasonal demand trends across most end-markets in the near term, as global business activity continues to normalize.”

SOLAR APPLICATIONS

ON Semiconductor's SiC power modules selected by Delta to support its solar PV inverters

STMicroelectronics: “As we announced on October 1, 2020, our Q320 net revenues increased 27.8 % sequentially, coming in 690 basis points above the high end of our outlook range. This revenue performance was due to significantly better than expected market conditions throughout the quarter. Demand for Automotive products, and our engaged customer programs in Personal Electronics, as well as Microcontrollers, were the main factors that contributed to this result.”

Vishay: “The second quarter has been strongly impacted by the lockdowns in many countries due to COVID-19, in particular the shutdown of automotive plants in Europe and the Americas. Asia, especially China, having gone through a lockdown already in the first quarter, showed a quick recovery whereas revenues in Europe and the Americas were steeply lower. The weakest end market was automotive with revenues lower by 34 % compared to the first quarter.”

Mitsubishi Electric: “Revenue for fiscal 2020 decreased by 57.4 billion yen from the previous fiscal year to 4,462.5 billion yen due primarily to a decrease in revenue of Industrial Automation Systems segment; despite that, revenue increased in Information and Communication Systems, Home Appliances, Energy and Electric Systems, and Electronic Devices segments. In the Industrial Automation Systems segment, revenue for the factory automation system business decreased due mainly to stagnant demand for capital expenditures worldwide and revenue for the automotive equipment business decreased due to a slowdown in demand for new cars worldwide.

UNIQUE SENSOR SOLUTIONS

New collaboration in the field of sensor technologies

Other factors that caused the decrease in revenue include the yen appreciating against foreign currencies and the impact of COVID-19 in the fourth quarter.”

Mergers and acquisitions

Not surprisingly, 2020 was on track to be one of the lowest years for semiconductor industry mergers and acquisitions. An IC Insights report shows that in Q1 2020, USD1.8 billion in acquisitions had been announced, but this dropped significantly in Q2 2020 to USD165 million in the wake of widespread pandemic-related disruption and economic stalling.

The report also credits the U.S.-China trade war and intervention by government agencies to protect domestic semiconductor firms as discouraging some firms from attempting larger acquisitions.

However, this picture became entirely distorted by just two megadeals: NVIDIA's USD40 billion deal in September to acquire Arm from SoftBank and Analog Devices’ USD21 billion deal in July to acquire Maxim Integrated Products. Together, these two deals alone account for roughly 97 % of the current dollar value for this year.

The report accounts for purchase agreements for semiconductor companies, business units, product lines, chip IP, wafers, and fabs but excludes software and system-level businesses. It comments: “Given existing uncertainty surrounding the ongoing coronavirus pandemic, the likeliness of seeing larger M&As grows slimmer by the day.”

electronics and semiconductor markets

Semiconductor company stakeholders come together and reveal financial reports to illustrate COVID’s impact

Winners and losers

When we look at the three key power electronics market sectors, it is fairly easy to see which are emerging as the winners from the pandemic’s traumatic disruption, and which are the losers – although we have to be a little more granular for the consumer electronics sector.

Accordingly, we can draw some overall conclusions. Renewable energy, for example, has benefited from the pandemic. As costs reduced, and pressure for cleaner energy grew, it was already gaining ascendency over carbon-based fuels – and Covid has accelerated this trend.

The pandemic is similarly accelerating the move from internal combustion to electric vehicles. As vehicle use has been forced down by lockdowns across the planet, people can experience the effects of reduced pollution for themselves, and are motivated to buy electric vehicles to keep the levels down, avoiding a return to polluted and toxic city environments.

AI

The impact of artificial intelligence on the semiconductor industry

The consumer electronics market is a little more complicated. While laptop computer and related products have enjoyed a sales boom as people set up their home offices, more leisure-oriented, big ticket items like LCD TVs have seen sales reductions.

For the semiconductor manufacturers, the Covid impact has been highly specific to each enterprise. It depends both on the mix of products that they sell, and the geographical areas they are supplying into. The comments from the top five manufacturers, as included above, reveal this mix of factors. Some have seen revenues fall, but others have seen growth.

The situation is also volatile; a month can make a significant difference in how the landscape looks. Additionally, specific events – especially the vaccine success announcements by Pfizer, Moderna and hopefully soon Oxford/Astra Zeneca – can give everyone reason for optimism. Just maybe, the markets will perform better than expected.

(ID:47030840)