COVID-19

One of the surprising side effects that came out of the COVID-19 pandemic is the acceleration of the digital transformation of global economies, which has driven a structural shift and propelled the already mature semiconductor industry to record highs.

In 2020, the global semiconductor materials market expanded 5% to reach $55.3 billion in revenue to set a new industry record. The momentum in growth is expected to continue throughout 2021 despite the lingering pandemic.

The global semiconductor industry is on track to register a rare three consecutive years of record highs in fab equipment spending with a 16% increase in 2020 followed by forecast gains of 15.5% this year and 12% in 2022, SEMI highlighted in its quarterly World Fab Forecast report.

Sales of critical subsystems for use in semiconductor manufacturing equipment will exceed $12.2 billion in 2020, a 6% increase over the previous record of $11.5 billion reached in 2018. What makes this such a remarkable feat is they achieved this despite unprecedented disruptions to the supply chain.The key to critical subsystems suppliers’ success was a swift and efficient response to the initial local shutdowns due to COVID-19 in February and March. Within four to six weeks, most vendors had secured their supply of raw materials and put the required measures in place to ensure the safety of their workforce and reduce the risk of being shut down themselves. Most were reporting a return to high volume manufacturing by May. There were no significant holdups reported, which means everyone stepped up their response to enable the semiconductor equipment industry to deliver double-digit growth. It also helped that before the pandemic, most suppliers expected 2020 to 2023 to be healthy growth years and already had plans to add capacity this year. Those plans are being accelerated, and delivery is no longer an issue for most vendors in the near term. This is just as well as OEMs are advising their suppliers to cope with a 20% surge in orders in any given quarter in 2021.While the overall growth rate for critical subsystems in 2020 is on track to beat 19%, some suppliers had to deal with extraordinary growth. Suppliers of vacuum valves, chillers, and optical fiber thermometry are likely to grow above 35%, while suppliers of process power subsystems are looking at increasing around 30%. The extra demand can be explained partly by the very low inventories of these products held by customers at the beginning of the year, which needed replenishing. However, the main reason for the above-average growth is that these segments have been outgrowing the overall critical subsystems industry for several years due to semiconductor manufacturing becoming more vacuum intense.Critical Subsystems for Semiconductor Applications in Billions of DollarsNext year is shaping up to be another record for critical subsystems with growth rates in the high single digits predicted. The next cyclical downturn is forecast to be 2024, but these are unprecedented times, and the risk of a downturn in 2022 cannot be excluded. Whatever the future holds, the critical subsystems supply chain has proved they can raise their game when the chips are down… or up.For more information about critical subsystems and VLSI Research, please visit our website.John West is managing director at VLSI Research Europe.

The global economy has started down a gradual path to recovery from COVID-19 in recent months as the world continues to combat the virus. Yet one sector – semiconductors – has shown impressive growth powered by a transformation hastened by the pandemic across industries ranging from education and work-from-home to healthcare.Semiconductor sales increased 12% in September to mark a second consecutive month of double-digit growth, and year-to-date semiconductor receipts as of September jumped 5.5% compared to the same period in 2019, according to SIA/WSTS.While this upward trajectory is encouraging, it pales compared to 2020 semiconductor equipment billings growth, with results from SEMI showing worldwide global chip equipment billings in September soaring to a new high of $7.6 billion this year. During the first nine months of 2020, aggregate equipment billings logged a 23.6% rise compared to the same stretch in 2019, surpassing $51 billion. Better still, the total semiconductor equipment market in 2020 is on track to beat the previous high of $64.5 billion set in 2018.Investments in China, Taiwan and Korea are fueling the chipmaking equipment spending surge. With big domestic and international fab projects in the works, China this year is projected to become the world’s largest capital equipment market for the first time, surpassing Taiwan, which will follow at a close second. Korea will rank third in equipment investments. Taiwan and Korea growth will come on the strength of equipment spending for manufacturing leading-edge semiconductors.Equipment billings in North America and Europe declined year-over-year as the automotive and industrial sectors suffered the heaviest blows from COVID-19. Investment momentum in both regions is expected to pick up in 2021 after automotive production recovers to pre-pandemic levels while factory automation will boost industrial demand.For more information about monthly equipment billing trends by region and equipment segment, please see the SEMI Equipment Market Data Subscription.Clark Tseng is director of Industry Research and Statistics at SEMI.

Global business conditions continued to improve through October although the rate of improvement slowed a bit as pandemic concerns increased (Chart 1).Electronic Equipment Shipments RecoveringThird-quarter world electronic equipment shipment growth showed a big improvement over the second quarter but was still down an estimated 1.4% compared to the same quarter in 2019 (Chart 2).Based on regional electronic equipment shipment data, October 2020 sales were up 3.5% versus October 2019 and up 6.1% sequentially versus September 2020 (Chart 3). As the traditional autumn busy season winds down, the key impediment to a strong recovery is the rising COVID-19 infection rates, especially in the United States and Europe. The world awaits the deployment of a much-needed vaccine.Semiconductor Growth May be EbbingSemiconductor chip shipments continue to increase but their global rate of growth has leveled off to mid-single digits (Chart 4). Wafer foundry sales growth also appears to be peaking (Chart 5), pointing to slower chip growth in coming months.SEMI Equipment ShinesSemiconductor capital equipment shipments continue to outshine both electronic equipment and semiconductors. Third-quarter 2020 SEMI global sales were up a whopping 31% compared to the same quarter in 2019 and up 16% versus the second quarter of 2020 (Chart 6). SEMI equipment shipments are definitely outpacing semiconductors on a 3/12 growth basis (Chart 7).SEMI Outpaces Electronic Supply ChainGlobal electronic supply chain growth is improving but the semiconductor sector is clearly the winner this autumn (Chart 8).Looking Forward, Pandemic Spread is Biggest WorryBusiness conditions definitely look brighter. Even stronger growth is likely if we can get COVID-19 under control.Walt Custer of Custer Consulting Group is an analyst focused on the global electronics [email protected].

Although the semiconductor chip and capital equipment markets performed well in the first half of 2020, many of the electronic equipment end markets struggled globally. World electronic equipment sales declined almost 10% in 2Q’20 vs. 2Q’19.

So far the semiconductor industry is outperforming most other manufacturing sectors. Semiconductor capital equipment shipments were up 23% globally in 2Q’20 vs. 2Q’19 and semiconductor chip 3/12 growth is still in positive territory. However there are signs of slowing.

COVID-19 has forced all the players in the semiconductor manufacturing supply chain to reassess how much inventory they need to hold.

2020 still looks to be a very difficult year. How we manage the pandemic, the global economy and international relations remain major challenges but there are glimmers of light near-term and a likely much brighter future in 2021 and 2022.