Component Sense Blog

Hard-Hit Automotive Electronics Sector Stuck in Neutral

Hard-Hit Automotive Electronics Sector Stuck in Neutral

While some semiconductor sectors are showing signs of recovery, the automotive sector continues to suffer as the pandemic extends into the summer of 2020.

Despite Marvell and several other chip makers showing signs of life, including new 52-week highs for stock prices, the automotive electronics sector remains stagnant. London-based market research firm Omdia forecasts a 16% drop in annual revenue for the hard-hit automotive power semiconductor segment. That equates to approximately $9.1 billion in 2020 revenues.

The contraction reflects declining vehicles sales and plunging auto production, according to analysts. Earlier this year, hopes of a rebound in automotive power semiconductor sales and revenue swiftly evaporated when auto assembly plant closures in China quickly spread (along with Covid-19) across Europe and then North America.

“At the same time, demand for new vehicles has fallen as dealerships were closed and lost jobs and wage reductions in many parts of the world combined to slash demand,” added Kevin Anderson, a lead analyst at Omdia power, automotive and industrial semiconductors practice.

[Source: Omdia, 2020.]

As such, the research group forecasts a 20% annual decline in auto production this year, to less than 70 million units.

The power semiconductor sector was already in decline last year, down about 1% year-on-year, a victim of U.S.-China trade tensions and U.S. tariffs on Chinese imports. The pandemic has made a tough market even tougher.

If vehicle sales rebound in the second half of 2020, Omdia said power semiconductor sales could bounce back, with growth above 20% based on pent-up demand. However, a recovery depends heavily on avoiding a second wave of Covid-19 infections and progress on a vaccine.

Meanwhile, other sectors of the estimated $1.65 trillion global chip industry are bouncing back from pandemic-induced lows, with key sectors hovering just below 52-week highs for stock prices. “Semis are good, but they’ve really lagged the rest of the tech sector,” chip analyst Carter Worth said this week.

Worth highlighted Marvell as a leading indicator of a chip recovery, noting the company is among five semiconductor stocks to achieve 52-week highs. While the global chip sector has so far moved an estimated 43% from its March 2020 low, Worth said Marvell’s stock price has climbed 1.5% above its February 2020 peak.

“We think the breakout by Marvell in late May has legs” after “underperforming” for almost the last ten months, Worth added.

Other chip analysts predicting a recovery expect to revise upward their revenue forecasts by the beginning of July 2020, in anticipation of a semiconductor sector recovery.


Newsletter

Join our mailing list for exciting updates and statistics on popular components

Loading..