Covid-19 Induced 2020 Recession to Impact Semiconductors Business

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  • Several semiconductor companies have already revised their market outlooks
  • Gartner had predicted memory category of semiconductors to grow in 2020

The Covid-19-induced 2020 recession will disrupt automotive, consumer electronics, semiconductor and IT infrastructure businesses worldwide before recovery in 2021, reckons Strategy Analytics in a scenario analysis report ‘Covid-19 – Catalysts for Economic Disruption’.

The new scenarios indicate that the damage from the worst economic cycle since the Great Depression will cause both consumer and B2B businesses to suffer, starting with an economic plunge of over seven per cent in real GDP (33 per cent annualised) in major industrial economies in second-quarter of 2020.

“The entire supply chain for digital products in our homes, our cars, and associated with our mobile lifestyles will experience significant damage during this downturn that is likely to be felt globally over the next three to four quarters. Q3 is also expected to show a decline in real GDP of three per cent (12 per cent annualised) with no growth in sight until Q2 2021,” said Harvey Cohen, president of Strategy Analytics and lead analyst for these scenarios.

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Semiconductor companies have revised market outlooks

Several semiconductor companies have already revised their market outlooks citing uncertainty arising out of coronavirus outbreak. NXP Semiconductors (NXP) had recently updated its performance expectations for Q12020, keeping business impact caused by the novel Coronavirus (Covid-19) in picture.

“The impact to our first quarter results due to COVID-19 were more significant than we anticipated on March 2. While the supply chain disruption experienced post Lunar New Year in China appears to be subsiding, the end market demand trends in the rest of the world have started to significantly deteriorate,” stated NXP CEO Richard Clemmer recently.

He added, “We continue to be vigilant in the management of our distribution channel, aligning channel inventory to the sales out of the channel, and expect channel inventory to be consistent with prior periods, in the 2.4 months of supply range.”

Gartner predicted memory category of semiconductors to grow

Semiconductor memory revenue, as per Gartner, will account for 30 per cent of the total worldwide semiconductor market in 2020. The memory market is forecast to reach $124.7 billion in 2020, an increase of 13.9 per cent, while the non-memory revenue market is on pace to total $290.6 billion, a decline of 6.1 per cent year over year.

Due to the impact of the coronavirus on semiconductor supply and demand, the overall worldwide semiconductor revenue is forecast to decline 0.9 per cent in 2020, according to Gartner, Inc. This is down from the previous quarter’s forecast of 12.5 per cent growth.

“Non-memory semiconductor markets will experience a significant reduction in smartphone, automobile and consumer electronics production and be heavily impacted across the board,” said Richard Gordon, research practice vice president at Gartner.

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Mukul Yudhveer Singh
Mukul Yudhveer Singh
Mukul Yudhveer Singh is an Editor at EFY. He’s an experienced business journalist who is both an enthusiast and a cynic of technology. Believes in data, as well as hunch-based journalism. He defines journalism as- reporting facts which help the audience take their own decisions, not ones that influence them!

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