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The State of the Semiconductor Industry

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The semiconductor industry is constantly in flux, changing as technology evolves and driving the electronics industry. Now, it operates primarily via e-commerce sites and grows cyclically with high volatility. Thus, key players in the industry like the United States, South Korea, Taiwan, Japan, China, European Union, Israel, Malaysia, and Singapore must adjust to products that frequently have a short life cycle.

Because the semiconductor industry enables technology and is a driving force in the electronics value chain, people pay attention to it. So what is happening now?

 

Decreasing Sales

 

According to recent statistics from the Semiconductor Industry Association, sales are down worldwide, decreasing 15.9% from August 2018 to July 2019, perhaps thanks to a drastic decrease in DRAM and NAND flash memory pricing that began in 2018 as the result of an oversupply of components.

With this decrease in sales, however, there is promise. The same study found that month-to-month sales increased in consecutive months for the first time in a year in the Americas, Asia Pacific/All Other, China, and Japan.

Experts aren’t necessarily worried, given the onset of 5G technology, though they are cautious — the possibility of a US/China trade war or the economic recession is at the forefront of many people’s minds.

 

Reasons for Optimism

 

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Chip stocks are showing gains, and chipmakers and fabless chip designers rose over 10% and 6%. Year to date, chipmakers have gained 50%, and chip-gear companies and fabless firms are up 30%. Analysts expect the industry to recover, just a bit after the late 2019 recovery they had once predicted.

Chief Financial Officer at memory-chip maker Micron Technology David Zinsner believes it is all a matter of supply and demand in balance. “It’s hard to say exactly when things recover, but I do think that a lot of the elements around a recovery are starting to take shape,” he said in an interview with Investor’s Business Daily. Zinsner’s analysis is backed by IHS Markit, who predicts a plunge in 2019, followed by a rebound in 2020 with a revenue increase to $448 billion over 2019’s $422.8 billion.

 

Planning a Recovery

 

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5G could be the answer to problems plaguing the industry. According to a press release by IHS Markit, 5G will be the primary factor in a full industry recovery, in part because of renewed growth, but also thanks to the increased positive impact of wireless technology on business and economies across the globe.

 

The release sites 5G’s ability to build new service opportunities for mobile network operators and the mobile industry’s shift toward “a robust and pervasive platform that fosters the emergence of new business models and transforms industries and economies around the globe.”

 

A Widening Impact

 

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5G is expected to disrupt many industries, including mission-critical services, fixed wireless access, augmented reality, and the internet of things (IIOT) — all of which use semiconductors. Smartphones alone will account for much of the growth so that microchip companies will be affected in a very real way, up around 7% in 2020, after a 22% drop in 2019.

 

The semiconductor industry is expected to see a recovery that should be in full force by the second half of 2020. Data centers, industrial, automotive, and IoT will also grow and drive industry demand, meaning there is nothing to fear, especially if you are working tirelessly in the wireless industry. With collaborative tools such as Autodesk’s Fusion 360, working in such industries has become a much smoother process.

 

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