According to the latest data released by the American Semiconductor Industry Association (SIA) and the World Semiconductor Trade Statistics Organization (WSTS), the total global semiconductor sales in 2019 was US$412.1 billion, which was a 12.1% decrease compared with 2018 (US$468.8 billion). The biggest decline in the global semiconductor industry since 2001.

Divided from the category of semiconductor products, memory and logic components are the two largest categories. Among them, memory sales in 2019 reached 106.4 billion U.S. dollars, but compared with 2018, the decline was the most severe, reaching 32.6% (although the average unit price has declined severely, the memory capacity is still increasing), of which DRAM fell by 37.1%, and NAND Flash memory fell 25.9%. The third largest category is microprocessor chips, with sales of 66.4 billion US dollars in 2019. The highlight of last year's growth was optoelectronic components, with sales increasing by 9.3%. In short, sales of semiconductor products other than memory fell only 1.7% in 2019.

From a geographical perspective, the Chinese market accounts for the largest proportion of semiconductor sales, reaching 1/3 of the world's, equivalent to the sum of the United States, Europe, and Japan, but the sales of Chinese local chip manufacturers are only about 40 billion US dollars. China is a global manufacturing center, especially for electronic products such as computers and mobile phones, which consume a lot of chips, but the end products are sold to the global market. The semiconductor market in all regions showed a decline in sales in 2019, which were Europe -7.3%, Japan -10.0%, Americas -23.8%, China -8.7%, and Asia Pacific/Other regions -9.0%.

                                    Figure 1: Trends in global semiconductor revenue.
Judging from the overall development trend of the global semiconductor industry in the past 24 years (as shown in Figure 1), the year-on-year rise or fall has changed greatly. For example, sales in December 2019 reached 36.1 billion U.S. dollars, a decrease of 5.5% from the same period in 2018. , But the overall sales scale is growing steadily, and the trend of change tends to be consistent with changes in global GDP.

Entering 2020, will the semiconductor industry continue to decline, or will it rebound? SIA/WSTS forecasts moderate growth. The market growth rate is expected to be 5.9% in 2020 and 6.3% in 2021. However, this forecast is based on the following macro and micro factors, including the first phase of the Sino-US trade agreement, the United States-Mexico-Canada (USMCA) free trade agreement, the cyclical adjustment of memory prices and the 5G network driving semiconductor demand Wait.

Three factors affecting the growth or decline of the global semiconductor industry in 2020
In addition to the two major factors of international trade and the cyclical adjustment of the memory industry, the sudden outbreak of the new coronavirus (COVID-19) epidemic in China has also brought uncertainty to the development of China and the global semiconductor industry. These three factors have negative and positive impacts on the sales of semiconductors and chips. However, the overall effect for the entire industry is still uncertain. It may not be clear until the middle of this year; the overall trend and industry of the semiconductor market in 2020 Whether the sales performance will eventually continue to decline or grow is still unknown. The following author attempts to analyze some of the influences of these three factors.

1. Novel Coronavirus Outbreak

On the eve of the Chinese Lunar New Year holiday, an unexpected outbreak of novel coronavirus pneumonia broke out... Emergency measures such as delays in resuming work after the Spring Festival holiday and urban traffic blockade caused a series of chain reactions. The first thing that bears the brunt is the delay in the replacement of 5G mobile phones-Tianfeng Securities analyst Guo Mingchi pointed out in a report that China's mobile phone market shipments fell by 50% during the Spring Festival in 202060%, there are currently nearly 60 million units in stock on the market. Mobile phone manufacturers affected by the epidemic are expected to see a 10% drop in shipments in the first quarter of 2020; in view of the lower-than-expected demand for 5G replacement and the negative impact of the pneumonia outbreak on consumer confidence, Guo Mingchi predicts that mobile phones will be released in the Chinese market in 2020. The volume will drop by 15% compared to 2019, about 3.1330 million pieces.

5G mobile phone sales are not as good as expected. In addition to affecting mobile phone manufacturers such as Huawei and Xiaomi, it also drags down chip suppliers. In addition to 5G chip suppliers such as Qualcomm, MediaTek and Ziguang Zhanrui, there are also numerous component suppliers for RF front-ends, power amplifiers, cameras and image sensors, fingerprint recognition, display driver ICs, and power management. Suffered a decline in sales.

The delay in resuming work caused by the epidemic has less impact on the operations of foundries such as SMIC, Hua Hong, and TSMC who do not stop work during the Spring Festival holiday. This is because the expensive semiconductor manufacturing equipment depreciates quickly and if the utilization rate is not saturated It will make contract manufacturers lose money, so they will avoid any non-routine shutdowns. However, semiconductor packaging and testing companies generally have normal holidays and shutdowns. Delays in resuming work will inevitably affect operations and delay delivery to customers.

As for the research and development of new products by IC designers, the impact may not be significant, but existing products that have been mass-produced and supplied to the market will be dragged down by the overall supply chain. Reduce the order situation.

However, the impact of the epidemic on the semiconductor industry is not all negative. For example, the slow-growing medical equipment market suddenly exploded, causing infrared body temperature detectors, forehead thermometers, blood oximeters, mobile DR, PCR testing instruments and ventilators, etc. The shortage of medical equipment is in short supply, which makes some electronic parts used in medical equipment frequently out of stock. It can be expected that the medical equipment and related semiconductor component markets will also experience rapid growth in the future.

2. Sino-US trade friction

China and the United States signed the first phase of the economic and trade agreement, which is good news for the global economy and the semiconductor industry. A recent commentary by the World Economic Forum (WEF) pointed out that although the agreement is far from completely resolving the Sino-US economic and trade disputes and its main threat to the world trading system, the agreement at least gives the trade dispute a temporary “truce”.

Global trade has stagnated amid rising uncertainty, which has led to a slowdown in world economic growth. The semiconductor industry, which is closely related to the global economy, has also fallen into uncertainty and slowed growth. So far, the two important goals of the United States in provoking economic and trade disputes-reducing the Sino-US trade deficit and returning manufacturing to the United States-have not made much progress, and the United States has not achieved significant results in restricting Chinese companies from acquiring sensitive US technologies.

Although the U.S. Department of Commerce has included about 200 Chinese companies on the list of entities, and the U.S. Committee on Foreign Investment has strengthened its review of China’s foreign investment, the policy has yet to see any obvious effect. The US restrictions on Huawei have also stimulated China's "domestic substitution" boom; for example, the proportion of American chips in Huawei's mobile phones has dropped sharply, and the proportion of Chinese-made components has begun to rise. Although there are still many uncertain factors in the global semiconductor supply chain, the total sales of China's IC design industry in 2019 is less than one-tenth of the world's, and this proportion is expected to continue to grow in the next few years.

3. Periodic adjustment of memory output and price

Memory occupies about a quarter of global semiconductor sales, and its price decline directly affects the overall growth trend of global semiconductors; it is expected that the market trends and price fluctuations of DRAM and NAND Flash in 2020 will still have a great impact on global industries, and China Although the production capacity of the memory industry is not high in the world, it will bring greater pressure to the world's top three memory manufacturers.

According to the latest survey by DRAMeXchange, a memory research department under TrendForce, a market research organization, from the perspective of overall supply and demand in the DRAM memory market, after five quarters of inventory adjustments, the DRAM market is still slightly oversupply in the fourth quarter of 2019 , Even if the DRAM pull situation in the first quarter of this year may be in the off-season, the supply and demand situation will not reverse until the middle of the year.

TrendForce predicts that the price of NAND Flash will continue to rise in the first quarter of 2020. From the perspective of user-side demand, data center customers are actively preparing for new demand in 2020, and the momentum for pulling goods is better than expected. It is expected that the contract price in the first quarter of this year will increase. Supported by. On the supply side, since suppliers have been at break-even and even at a loss since the second quarter of 2019, they have to reduce their capital expenditures in 2020. The schedules for capacity expansion and 3D layer increase are more conservative than before. According to the statistics of various factories, the output growth of memory capacity in 2020 will only be slightly higher than 30%, which is the low point of the planned goal over the years. In addition, the supply capacity in 2019 has been revised down due to the power failure event, which is two consecutive years. The output growth rate is less than 35%, which will make the whole year of 2020 even more tight.

From the perspective of original memory factory investment, take Samsung as an example. As the global economic recession is still continuing and the demand for memory semiconductors from large IT customers has not recovered as expected, the company will The investment plan is adjusted: including the extreme ultraviolet (EUV) dedicated production line in Hwaseong, South Korea, the Memory 2 factory in Pyeongtaek, and the NAND 2 factory in Xi'an, China, are all affected. Some industry analysts predict that Samsung Electronics' investment in semiconductor equipment this year may be similar to 2019, and it is unlikely to exceed 30 trillion won (about 176.8 billion yuan / 765.4 billion Taiwan dollars).

Will China's memory capacity be affected by the new coronavirus epidemic? From the perspective of DRAM supply, the Chinese DRAM manufacturer Changxin Storage is located in Hefei, Anhui. The factory is still operating normally and the expansion plan is still in accordance with the progress, and will not be affected by the epidemic in the short term. In addition, only SK Hynix's Wuxi plant of the world's top three memory companies is located in China, far from Wuhan, which has little direct impact and the production line is operating normally. On the whole, the current DRAM production has little real impact, but we still need to observe whether the overall logistics and transportation system is affected by the epidemic and has a shortage of materials.

From the perspective of NAND Flash supply, at this stage, Yangtze River Storage and Wuhan Xinxin are still operating normally and strictly controlling the entry and exit of personnel according to the annual festival. However, due to the impact of Wuhan's lockdown measures, full resumption of work may be dangerous. Yangtze River Storage's Wuhan plant currently only accounts for about 1% of the overall NAND Flash industry investment volume, which has limited direct impact on market supply, but if the epidemic prolongs, it may affect the expansion plan originally scheduled to start in the second quarter.

Conclusion
The semiconductor industry, with a revenue of more than 400 billion US dollars, is the leader of the global high-tech industry and even the global economy. Its development trend has an increasing impact on global GDP, and it is also more sensitive to changes in the global macro economy; The sudden outbreak of the novel coronavirus epidemic, or the long-lasting Sino-US trade friction, will have an immeasurable impact on the development of global semiconductors. These impacts are not all negative, and they will have different impacts on semiconductor companies in different countries/regions or industries. Looking forward to 2020, the overall semiconductor market will continue to decline or stop falling and recover. It is still too early to answer. For those in the industry, it is still possible to turn negative effects into positive factors by calmly responding to these changes.