While the semiconductor market remained strong across the world in 2019, shipments didn’t match the record levels of the previous year. In fact, silicon wafer suppliers reported high inventories of eight-inch wafers early in the fourth quarter as shipments and orders continued to slow.
The Reason Behind The Decline
Analysts attribute the decline to on-again, off-again threats of tariffs by the United States and China – which spends more on importing semiconductor chips than on foreign oil — as well as product manufacturers looking to prop up their balance sheets by relying on existing inventories where possible. The eight-inch wafers are commonly used in automotive electronics and household consumer products, making production and sales data a barometer for general economic conditions.
Semiconductor Equipment and Materials International, a global industry organization, reported in November 2019 that third-quarter shipments slipped 1.7 percent from the previous period to 2.932 billion square inches. That was almost 10 percent lower than the third quarter of 2018 and consistent with projections cited by a trade publication in Taiwan. The dip was mitigated to some extent by an uptick by silicon wafer suppliers in shipments of 12-inch wafers, more commonly used for handsets and memory chips.
What This Means Looking Forward
Reduced recent consumption could drive down costs In Western nations if production isn’t scaled back, a possibility because the market is so fractured and competitive. That could be good news for consumers in the market for anything from memory sticks to big-ticket home appliances.
The wildcard by most accounts will be China, which has multiple silicon wafer suppliers scheduled to come online in 2020 in that country’s never-ending bid to catch up to the United States in manufacturing. The challenge the Chinese face is that their research and development program has struggled to gain ground on the rest of the world, where chip computing power doubles every other year and has meant having to import more than 80 percent of the necessary semiconductors.
No one really knows what the future holds for China and the semiconductor market, but it is safe to say that the world will be watching, especially those who love tech gadgets, to see what happens in 2020.