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The SEMI Industry Strategy Symposium Outlook

A look at the prospects for global recovery, the application areas where growth is expected, and how segments have recently performed.

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In mid-January, SEMI organized the two-day Industry Strategy Symposium. Presentations ranged from the outlook for the overall global economy, to purifying gases and materials to parts per quadrillion, to how TSMC took the leading-edge process crown from Intel.

The first day was focused on the economy and business environment, along with its impact on the semiconductor supply chain. The second day was focused on geopolitics in the first half and technology in the second.

Citigroup

One of the early presentations was by Catherine Mann, the Global Chief Economist for Citigroup, titled “Global Prospects 2021: Momentum, Rotation, and Structural Changes in the Real Economy and Financial Markets.” The one-sentence summary is that China has already recovered to pre-pandemic levels, the US is expected to reach that level in Q2 2021, but Europe is not expected to return to pre-pandemic levels of GDP until Q4 of 2022. The smaller economies are riding on the coat-tails of China and technology in general, and have pulled in their forecasts to be more optimistic — but they are small compared to China, US, and Europe. I wondered where India appeared in this chart (Asia I assume). I looked up the numbers and was surprised that China’s GDP is over five times India’s with almost exactly the same population. In fact, one other thing I learned from just looking up these numbers is that India is going to overtake China in population sooner than I expected, since the population in India is growing and in China is declining (India is 1.366B and China is 1.398B).

Catherine summarized the situation as:

The prospects for growth in the global economy in 2021 and 2022 is quite fragile.

Looking at stock markets, I wasn’t surprised at her view is that:

Financial valuations are well-ahead of real-side prospects.

IDC

Mario Morales of IDC brought the focus down from the global outlook to the semiconductor market in a presentation titled “Semiconductor Market Outlook in 2021: Resiliency to Recovery.” He started by pointing out that we’ve all pretty much forgotten that in 2019 we were in an inventory correction and so, pre-pandemic, we were expecting 2020 to be a period recovering from that. Then, as it happened, there has been a lot of investment in infrastructure to sustain the whole economy, and that has driven growth. The PC market, for example, grew robustly driven by work/learn from home. In fact, in Q4 2020, PC growth was 26% YoY, which is incredible, meaning that 92M PCs shipped in Q4. However, mobile overall continued to decline in 2020, although there was robust growth from the 5G transition in that part of the market.

The chart below shows the areas where you can “expect to see the concentration of growth moving forward.” Note that BDA stands for “big data analytics.” I’m assuming you know what IoT and AI are! Note that these are percentage growth numbers, so that those little tiny bars on the left just mean that mobile is pretty much flat, even though it is the largest semiconductor end-market, whereas robotics is growing fast but from a much smaller base.

Here are the forecasts for 2020 and 2021 (2020 is still a forecast since we don’t have Q4 numbers yet). In the memory market, there continues to be strong bit-growth, but accompanied by declining prices leading to a flat forecast.

Mario wrapped up with the trajectory of the industry, from the initial shock and companies retrenching a bit, and then strong end-user demand leading to investment being turned back on and M&A once again taking off (e.g., NVIDIA/Arm or AMD/Xilinx).

His final conclusions:

  • Cloud investments continue despite macro pressures. Businesses see the cloud as a key component of business recovery and resilience
  • Investment in 5G remains on track; transformed norms driving software development
  • China driving 5G mobile volumes but eroding ASPs leave little room for margin
  • Remote working/learning will continue through 2021 until potentially 3Q 21, but lower PC sales than 2020 robust growth
  • COVID-19 will remain a factor in 2021 for automotive sales. Some shortages even though we don’t expect to reach 2019 levels until 2023
  • Industrial continues to improve through 2021, increasing investment in automation
  • Expect higher levels of inventories as companies build in cushions to deal with disrupted supply chains
  • Foundry capacity tightness continues into 1H’21
  • Expect growth to reach 4% or better

VLSI Research

Andrea Lati of VLSI Research presented on “Chipmaking Market Post-Pandemic: Moving into a New Normal with New Opportunities.” Or, as he put it in the abstract to his talk:

One the bright spots in an otherwise dark year was the tech story. The world economy was saved by the technology and the fruits of its innovation. The pandemic is accelerating the digital transformation of the economy with digital replacing physical. The semiconductor industry has been at the forefront of this digital transformation and has seen profound changes over the past year. Semiconductor equipment sales soared to an all-time high in 2020 while semiconductors increased over 8%

The chart below shows how different segments of the semiconductor market performed over the last few years. Memory started 2020 strongly after a major retrenchment in 2019, but then weakened again towards the end of the year. Logic had a similar trajectory but less pronounced. Automotive and analog had a terrible start to the year (nobody was buying cars) but recovered later in the year.

The weekly growth in all segments has now converged into low double-digit territory. The positive here is that the growth is becoming more broadbased which should make the IC reovery more sustainable in 2021.

We saw a decoupling of the IC market from the world economy last year. The world economy dropped 5% last year (a much bigger drop than we saw in the 2008-9 recession). The IC market on the other hand jumped 8%.

The big drivers: Cloud and hyperscale data centers.

Smartphones, and 5G in particular. 5G phones were 200M units in 2020 and are expected to be over 500M units this year, which will drive significant growth in silicon content (5G is at least 50% higher than silicon content of 4G phones).

Most of the rest of Andreas’ presentation was on a detailed breakdown of the equipment market, which is a bit too far out of my wheelhouse. Here is the chart from his summary slide though, showing the growth in the semiconductor equipment market (top) and the overall semiconductor market itself (bottom):

By the early 2030s, the semiconductor market is expected to pass the $1T level, and the equipment market to reach $200B.



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