The latest data from market research firm IHS Markit shows that the global semiconductor industry’s revenue in 2019 will fall by nearly 13% compared with last year, which means that the recession trend of the industry continues to worsen. But researchers at IHS Markit believe that 5G has the potential to reverse all that.
Len Jelinek, senior director of semiconductor manufacturing at IHS Markit, said that in the history of the semiconductor industry, every market downturn will end with the arrival of a certain innovative technology or product, and new technologies and innovative products can always stimulate a substantial increase in market demand. Such as the World Wide Web, iPhone, etc. Len Jelinek believes that 5G will take up this important task next. As the impact of 5G will extend far beyond the technology industry, it will change all aspects of human society, stimulate new economic activities, and drive the growing market demand for semiconductor chips.
IHS Markit expects that the global semiconductor market revenue will rebound in 2020, from $422.8 billion in 2019 to $448 billion, an increase of 5.9%. This may be a relief to the world’s top semiconductor companies such as Intel, Samsung, TSMC, Qualcomm, Broadcom, etc.
For the decline of global semiconductors in recent years, IHS Markit believes that it is mainly caused by the sharp drop in the prices of DRAM and NAND memory. Samsung also pointed out in an announcement that since the end of 2018, there has been a global oversupply of semiconductor components, which has led to declining industry profits. Samsung Electronics expects operating profit of around $6.5 billion in the third quarter of 2019, down 56 percent from $14.7 billion a year earlier.
However, the decline in 2019 should only be temporary, and the situation will be reversed in 2020. IHS Markit said that with the launch of 5G commercial services in major global markets, 5G smartphones will usher in a period of rapid growth, which will drive the semiconductor industry to resume growth. Smartphones are the largest consumer of the semiconductor industry, with global revenue expected to be $87.7 billion in 2019.
For the smartphone market, institutions such as IDC and Gartner agree with IHS Markit’s judgment that the market size will continue to decline in 2019 and return to growth in 2020. IDC expects the smartphone market to maintain a three-year downward trend in 2019, with a decline of about 2.2%, although 2020 will see a growth of 1.6%. Gartner believes that global smartphone sales in 2019 will be around 1.5 billion units, a year-on-year decrease of 2.5%. However, as 5G services enter the stage of large-scale commercial use in 2020, smartphone sales are expected to resume growth.
According to IHS Markit, the impact of 5G will be all-round, not only will it bring about an increase in smartphone sales, but also promote the development of new business models and support the digital transformation of all walks of life around the world, thereby bringing the semiconductor industry more opportunities. In the report, IHS Markit estimates that by 2035, 5G will generate $1.3-1.9 trillion in economic output in the U.S. alone — nearly as much as U.S. consumers spent on cars in 2016.
Of course, in addition to semiconductor and smartphone manufacturers, there will be more companies benefiting from the development of 5G, such as telecom operators. Operators such as Verizon and AT&T in the United States are actively deploying 5G networks, hoping to gain more opportunities for growth. Verizon expects spending on 5G to have a “significant” impact on its revenue as early as 2021.
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