Analysts say disruption caused by the coronavirus outbreak will result in a contraction of the worldwide semiconductor market.
Many governments around the world have issued restrictions on the movement of citizens, with people asked to work from home and only travel when essential.
This has had an inevitable effect on demand for technology, with sales slumping. Just 61.8 million smartphones were sold in February 2020, down from 99.2 million last year. This 38 per cent decline is the biggest decline in the history of the market.
Semiconductor market decline
Combined with disruption to the supply chain, this has led to lower demand for components such as semiconductors.
Gartner had predicted that semiconductor revenue would increase by 12.5 per cent to $470 billion in 2020. However, it has now reduced this by $55 billion to $415.4 billion – a figure which represents a 0.9 per cent decline.
“The wide spread of COVID-19 across the world and the resulting strong actions by governments to contain the spread will have a far more severe impact on demand than initially predicted,” said Richard Gordon, research practice vice president at Gartner. “This year’s forecast could have been worse, but growth in memory could prevent a steep decline.”
Although memory semiconductor revenue accounts for just 30 per cent of the market, it is set to increase by 13.9 per cent. This is in part due to stable prices for NAND flash memory caused by a lack of supply and through demand for server DRAM from cloud service providers seeking to cope with demand caused by remote workers.
However this growth will fail to offset a 6.1 per cent drop in the rest of the market, caused in part by low demand and falling prices for smartphones.
“Non-memory semiconductor markets will experience a significant reduction in smartphone, automobile and consumer electronics production and be heavily impacted across the board,” added Gordon. “In contrast, the hyperscale data centre and communications infrastructure sectors will prove more resilient with continued strategic investment required to support increased remote working and online access.”
Suppliers will hope that a predicted upturn in demand for smartphones in 2021 will return the market to growth. CCS Insight says delayed purchases and the wider availability of 5G are set to see sales increase by 12 per cent in 2021, outpacing 2019 by four per cent, while in 2022 there will be a growth rate of 13 per cent, leading to sales surpassing 2 billion.