Semiconductor Sales Plummet in 2019

The SIA statistics suggest worldwide sales of semiconductors reached $98.2 billion throughout the second quarter of 2019, a small increase on Q1 (0.3%), but a huge 16.8% crash for a passing fancy amount of 2018. Cumulatively, year-to-date shipments throughout the first 50 % of 2019 were 14.5% lower than until the same point in 2018.

“At the midpoint of 2019, the global semiconductor market remains in a period of decreased sales, with revenues through June lagging the mid-year totals from just last year by nearly 15%,” said SIA President John Neuffer.

“Year-to-year sales were down across all major regional markets and semiconductor product categories. One silver lining was that sales through the second quarter of 2019 narrowly outpaced sales throughout the first quarter.”

Taking a look at the data, there is a feeling of history repeating itself.

Even though it just isn’t necessarily easy and simple of graphs to read through, there are many peaks and troughs which can loosely be attributed to significant events.

Beginning with the troughs, each could be related to 2 or 3 various things. Firstly, macroeconomic events which will have impacted purchasing patterns and investor confidence, and secondly, the development of a new ‘G’, therefore a fresh refreshment cycle for devices.

For the two troughs and this can be seen following ’01 and ’09, these could very well be attributed to the burst associated with the dot-com bubble together with 2008 global financial meltdown. Following both these incidents, not only did consumer spending decrease, resulting in fewer device shipments, business confidence in mobile technologies will have been impacted. Naturally, purchases of semiconductors might have decreased dramatically.

Another factor to consider could be the prospect of a unique ‘G’ on the horizon. This evolution could give an explanation for troughs on the graph, but also the surging spikes. Whenever we are to suggest 2G devices achieved mass market penetration in ‘00/01, 3G in ‘04/05 and 4G in ‘11/12, the spikes in semiconductor purchases might be explained by device manufacturers finding your way through flagship launches.

Taking a look at the troughs, these could possibly be explained by consumers delaying the acquisition of the latest devices in anticipation of next-generation launches.

Perhaps this explains the dip which the semiconductor industry is currently navigating at present. Smartphone shipments have been steadily declining year-on-year, whilst the consumer appetite for 4G devices seems to be weakening aided by the prospect of 5G on the horizon. Smartphone manufacturers plus the telcos are hyping up this new ‘G’ so much perhaps we must don’t have a lot of surprise demand for 4G devices is flagging.

Studying the big chip manufacturers, the misery happens to be well spread. At Samsung, the most up-to-date quarterly earnings demonstrated 4% decline in revenues and a 53% crash in net profit. The sluggish semiconductor business, usually the profit driver for the business, has been the scapegoat in 2010. At Broadcom, another significant supplier within the mobile space, revenues connected to the Semiconductor solutions declined 10% year-on-year. For Qualcomm, the CDMA Technologies unit saw revenues decline by 12.7% year-on-year, whilst the Technology Licensing business felt a decrease of 10.5%.

Even though semiconductor industry will never be satisfied with declining revenues, if history has taught us anything, a spike in purchasing is not a long way away. 5G networks have been launched and early adopters have their hands on devices at this time. It could be per year or two before mass market penetration is achieved, but the preparation for flagship launches will take place into the short- to mid-term future. What this means is smartphone manufacturers spending much more on new, and potentially higher priced, components.

The semiconductor industry is heading through a tough period at present, but this appears to be nothing new; a cornucopia of cash might just be just about to happen.