Semiconductor Industry Association

SEMI has urged government representatives around the U.S. and world to designate the semiconductor industry as an essential business so operations at companies across the chip supply chain can continue without interruption as the spread of COVID-19 continues. SEMI President and CEO Ajit Manocha assured the U.S. and global officials that SEMI members – the device makers and suppliers of chemicals, materials, components, design tools and equipment at the heart of chip manufacturing – “are employing all measures necessary to maintain the health and safety of their employees and local communities” to help contain the virus. Manocha last week sent letters to the governors of 16 states and the chairs of the National Governors Association, U.S. Conference of Mayors, National League of Cities, and National Association of Counties requesting consideration of the semiconductor industry as an essential business if shelter-in-place or similar orders are issued to curb the spread of COVID-19. More than half of U.S. states have imposed shelter-in-place or stay-at-home orders in the past month. The designation would allow SEMI members to maintain continuous operations to ensure that manufacturing of components for critical infrastructure equipment, the defense industrial base, and other vital technological products and services is not jeopardized. Semiconductors are the foundation of modern electronics and information technology and are critical in helping health workers effectively treat COVID-19 symptoms, Manocha told the officials. The devices also play a central role in containing its spread by enabling artificial intelligence (AI), data analytics, digital communications, telemedicine, robotics, remote health monitoring, telecommuting, online shopping and other digital services.Manocha urged state and local officials to follow guidelines issued on March 19 by the Department of Homeland Security (DHS) Cybersecurity Infrastructure Security Agency (CISA) identifying “manufacturers and supply chain vendors that provide hardware and software, and information technology equipment (to include microelectronics and semiconductors) for critical infrastructure as ‘essential critical infrastructure workers.’” Most states issuing shelter-in-place or stay-at-home orders have followed the DHS guidelines and/or separately designated the semiconductor industry an essential business. Likewise, other nations have recognized the power of technology in effectively containing COVID-19 and similarly designated the semiconductor industry an essential business.On March 27, SEMI, the Semiconductor Industry Associations in China, Europe, Japan, Korea, Singapore, Taiwan and the U.S., as well as several other trade associations in Asia issued a statement “calling on all governments to specify semiconductor industry operations as ‘essential infrastructure’ and/or ‘essential business’ to allow continuity in operations.” The global semiconductor supply chain forms a highly intricate network consisting of research, design and manufacturing operations. Operating restrictions in one region can compromise production in others, leading to inefficiencies and breakdowns that cascade across the supply chain.With semiconductors underpinning vital sectors of the global economy, the chip associations called on all global governments at all levels – central, states, provinces and localities – to help protect the uninterrupted operations of domestic semiconductor companies and their suppliers by applying the essential infrastructure or essential business designation.Joe Pasetti is Vice President of Global Public Policy and Advocacy at SEMI.

With all major global electronic equipment OEMs having now reported their third quarter financials, we estimate that combined equipment sales increased 0.4 percent in 3Q’19 versus 3Q’18 and 2 percent sequentially from the second versus the third quarter of this year.

There is a glimmer of light at the end of the tunnel. But most electronic industry time series will likely struggle at least though autumn.

Electronic EquipmentGlobal electronic equipment production is in its traditional “fall busy season” as the consumer driven end markets ramp up for the holiday season (Chart 1). Both normal seasonality and organic growth are driving this year’s upturn. September 2018 electronic equipment output was up almost 10% over the same month last year. This actual year-over-year growth when overlaid on an autumn seasonal upturn is providing a nice end of year finish. Source: Custer Consulting Group based on regional data American Electronic Supply ChainChart 2 shows the annualized (12/12) and 3-month (3/12) growth of the U.S./North American supply chain. Aside from the computer sector, all the domestic end markets are expanding driven by defense, electromedical, instruments and control equipment. Total domestic electronic equipment orders were up 8.2% in August 2018 versus August 2017.For components there are clear indications of slowing growth. Printed circuit board orders eased to a +2.7% expansion rate on a 3-month basis and passive component orders contracted 0.2%.The semiconductor industry appears to be coming down from its recent bubble as domestic SEMI capital equipment growth cooled to +3.8% and chip shipments to North America also slowed (to a still respectable) +15% on a 3-month (3/12) basis. Source: Custer Consulting Group based on U.S. Department of Commerce, IPC, SIA/WSTS and SEMI data Geographic ShiftsSemiconductors and semiconductor capital equipment shipments provide good insight into the changing center of gravity of world electronic production.Chart 3 shows semiconductor shipments to each region. This is not regional production but rather consumption -- an indication of regional demand. It effectively measures electronic assembly activity by area. In August over 62% of the world’s chip value was consumed in in Asia/Pacific with another 8.1% used in Japan. Europe consumed 8.5% and North America 21.9%. Chart 4 shows geographical shifts over time for semiconductor capital equipment. Although more volatile month-to-month than semiconductors, the SEMI Capex shift to Asia is obvious. Source: SIA and WSTS Walt Custer of Custer Consulting Group is an analyst focused on the global electronics industry.