Chip Industry Suffers the Worst Slump in 2 Decades
Last year, the semiconductor industry suffered its worst downturn since the dot-com bubble burst in 2001, causing industry sales to plunge by 32%. According to the Semiconductor Industry Association (SIA), 2019 was the industry’s worst annual slump in nearly two decades, with a 12.1% year-on-year drop in revenue to $412.1 billion.
“Amid a confluence of factors, including ongoing global trade unrest and cyclicality in product pricing, worldwide sales of semiconductors were down considerably in 2019, falling 12% year-to-year,” commented John Neuffer, president and CEO of the SIA.
Q4 2019 showed more promise, with a slower rate of decline in comparison to the previous three months. The trade rift between the US and China was one of the key drivers behind the slump, and it is hoped that recovery will be aided by the two countries building on last the phase one trade agreement signed last month.
“The global market rebounded somewhat during the second half of 2019, increasing slightly from Q3 to Q4, and modest annual growth is projected for 2020. Policies that promote free trade and ensure open access to global markets are needed for continued recovery in the coming months,” said Neuffer.
All regions were affected by the decline in demand. According to the SIA, sales dropped the most in the Americas at 23.8%, followed by a 10% decline in Japan. China, which accounts for over one third of the global consumption of electronic components, suffered an 8.7% drop in sales. Europe witnessed a 7.3% decline in sales, and Asia Pacific/All Other saw a 2.2% decline.
Investors have been betting on a 2020 rebound for the industry, backed by analysts forecasting a year of recovery for semiconductors, driven by 5G spending on both smartphones and network upgrades.