As the coronavirus pandemic pushes the global economy into unchartered territory, the semiconductor market is sizing up the impact of a potential downturn.
Although China’s chip foundries are now whirring back into life, inventories are running low on the other end of the supply chain, and new shipments are forecast to drop to unprecedented levels.
This supply shock is expected to be matched by a demand shock, as companies and individuals trim non-essential spending until the pandemic passes. Reduced consumer confidence will mean less demand for iPhones, Xboxes, and other consumer goods, and also less call for semiconductors from companies creating innovative consumer goods like smart lighting and semi-autonomous vehicles.
Some segments of the chip market however, are likely to be bolstered by demand from industries playing a key role in the new virus-stricken economy.
As companies move to distributed working and more people are instructed to stay at home, datacenters and networking companies are reporting record usage. US analytics and broadband company OpenVault reported on March 19 that broadband consumption in business hours had risen by more than 41%, and across the pond in Frankfurt, the Deutsche Commercial Internet Exchange (DE-CIX) has set a new world record for data throughput. Meanwhile, both Amazon and Netflix have been forced to reduce streaming quality in Europe as networking infrastructure feels the strain of the additional demand.
So while less critical semiconductor applications like smart lighting might be set for a downturn, data processing chips for cloud-based storage and big-data analysis could benefit from the vast numbers of people working and playing at home.
Integrated-circuit sales increased 79% year on year in January, according to IC insights, and although a knock to production could stall growth, boosted demand is likely to continue benefiting the leading datacenter chip providers AMD, Intel and NVIDIA.