Fearless Chip Forecasts For 2021

It’s been a roller coaster ride in the semiconductor industry.

In early 2020, the semiconductor business looked bright, but then the Covid-19 pandemic struck, causing a sudden downturn. By mid-2020, though, the market bounced back, as the stay-at-home economy drove demand for computers, tablets and TVs. The chip market ended on a high note in 2020, but the question is, what’s in store for 2021.

To get some insights here, Semiconductor Engineering separately talked to Bob Johnson, vice president at Gartner; Handel Jones, chief executive of IBS; Andrea Lati, vice president of market research at VLSI Research; and Bill McClean, president of IC Insights. What follows are excerpts of that conversation.

SE: What is the outlook for semiconductors for 2021? How did 2020 end?

Johnson: Semiconductor revenue: 2020: +7.3%, 2021: +11.6%.
CapEx: 2020: +7.6%, 2021: +6.3%.
WFE: 2020: +13.9%, 2021: +7.8%.

Jones: Growth of the semiconductor market in 2021 will be 12.1%. Growth in 2020 was raised from 5.55% to 6.8%.

Lati: The IC market jumped 8% in 2020 and this year we are forecasting ICs to increase 11%. Semiconductor equipment sales surged 17% in 2020 and this year we are forecasting an 11% increase.

McClean: For 2021, we have the IC market increasing 12% to $441.5 billion and the O-S-D (optoelectronics, sensors/actuators, and discretes) market increasing 8% to $92.1 billion. The total semi market is forecast to increase 11% this year to $533.6 billion. In 2020, the IC market increased 10%, the O-S-D market dropped by 1%, and the total semi market was up by 8%.

SE: How do you see 2021 playing out for semis?

Johnson: The semiconductor industry should show strong growth in 2021 driven by strong demand for 5G wireless and the associated networking equipment. The automotive segments will show some of the highest percentage growth (+25%), although they only represent about 9% of the total market. For equipment, we expect investment growth by memory companies to return in 2021 and also high growth levels in advanced logic by the top three companies–Intel, TSMC and Samsung. The recent announcement by TSMC will strengthen this area.

Jones: Key drivers for growth are 5G smartphones, data centers and automotive. The key problem in 2021 is lack of wafer and substrate capacity for many products.

Lati: The IC market was in a recovery mode last year, but there was a bifurcation, especially in 1H20. Auto and industrial, in particular, had a rough first half. The recovery became more broad-based in 2H20, so we have started 2021 with strong momentum. There are several drivers at play for ICs in 2021–the continuing economic recovery; 5G proliferation; Cloud expansion; and the buildout of the IT infrastructure. Moreover, the overall market conditions for ICs are fairly tight as we start the year, so expect to see a healthy price environment in 2021. Meanwhile, semiconductor equipment has outperformed ICs for five years and we are forecasting 2021 to be another strong year. The biggest drivers for 2021 are the 5nm ramp and the continuing recovery in memory spending.

McClean: We see 2021 as being a good growth year for the semiconductor market, driven by a 4.8% increase in worldwide GDP, its highest growth rate since 1976. Drivers for growth this year include shipments of 5G smartphones, which we expect to more than double this year from 230 million in 2020 to 500 million in 2021. Also, the automotive market will be hot as the global economy picks up and prices increase for increasingly scarce automotive components. High-performance computing (HPC) will also continue to be a big driver.

SE: How does the memory business (DRAM and NAND) look for 2021?

Johnson: DRAM will exhibit strong revenue growth (+28%) in 2021 as it moves out of an oversupply condition, and prices firm. In contrast, NAND growth will slow in 2021, to 9% from 2020’s 24%, as capacity catches up with demand and prices erode.

Jones: The NAND market will grow 20.2% in 2021. The DRAM market will grow by 17.2%. Smartphones and data centers are key growth drivers.

Lati: The DRAM recovery hit a few bumps last year, but the momentum has improved considerably in the last few months. We expect DRAM sales to increase by the high teens this year. DRAM ASPs are rising due to strong demand and tight supply; therefore, sales will be strong this year. NAND fundamentals are not as strong as those of DRAM at the moment. Inventories remain elevated and pricing remains under pressure. We expect the NAND market to increase in the low-teens; however, that will depend greatly on the supply growth management from the major suppliers. HPC and 5G will be the biggest drivers for both DRAM and NAND this year in terms of bit demand.

McClean: The drivers I mentioned above will all help spur good growth in the DRAM and NAND markets this year. For 2021, we are forecasting an 18% increase in the DRAM market to $76.8 billion and a 17% increase in the NAND market to $64.0 billion.

SE: What about the foundry business for 2021?

Johnson: Foundry will exhibit another strong year in 2021 driven by increasing demand for 5G phones and high-performance computing. The recent announcement by TSMC signals strong interest in bringing 3nm products to market earlier than originally projected, and also that TSMC is confident that its 3nm process can be ready for risk production late this year and initial volume production next year.

Jones: The foundry market will grow by 15% to 20% in 2021. The key limitation is not being able to get enough wafer processing equipment.

Lati: The foundry business is booming and we are seeing capacity shortages there. At the leading edge, TSMC and Samsung are spending big to capture the growth from HPC and the 5G proliferation. We expect the sales of these two companies to increase by the high teens this year. The other foundries are also doing well on the back of a broader IC recovery.

McClean: The foundry business is expected to continue to be strong as some of the lagging-edge technologies are under capacity pressure. Also, TSMC and Samsung will continue to drive a very strong leading-edge foundry market. Our forecast is for a 16% increase in the pure-play foundry business this year.

SE: Any other thoughts?

Jones: Working from home and studying from home has been very positive for the electronics and semiconductor industries. Some segments, such as notebook computers and televisions, will have lower growth in 2021 compared to 2020. The overall market demand is very strong. Expect demand to also be strong in 2022.

Lati: This should be another strong year for ICs and equipment despite the ongoing uncertainty from the pandemic and the U.S.-China tech war. As for potential disruptors, the biggest one is fallout from the U.S.-China decoupling and also the potential for a ‘Made in China’ capacity glut.

McClean: The semiconductor market posting an 8% growth rate last year in the face of the worst global economic downturn since 1946 was very impressive. A recovery in the global economy over the next few years should help keep semiconductors in high demand and drive good market growth.