Looking at the fortunes of some of the major players in the semiconductor market, this is a segment which looks like it might need a bit of luck. Fortunately, 5G is just around the corner.
AMD’s latest results saw revenues take a dive 13%, Samsung has just forecast a 56.17% year-on-year decline in profit for its next quarter and Intel’s latest three-month financials saw a revenue dip of 3% year-on-year. These are only a few examples, but the market has had somewhat of a torrid 2019, however change is on the horizon.
“Throughout the history of the semiconductor industry, every market downturn has ended with the arrival of a technical innovation that spurred a major increase in demand,” said Len Jelinek, Senior Director at IHS Markit Technology.
“In the past, these innovations have had momentous impacts, such as the advent of the world wide web or the introduction of the iPhone. Now another historic innovation is set will take its place among these advances; 5G.”
With every new 5G network which is launched by a telco around the world, the future looks a little bit brighter for the semiconductor industry. The more widespread the 5G connectivity euphoria, the more likely adoption of 5G smartphones. The introduction of 5G networks could force consumers towards a refreshment cycle, and in turn, this will reinvigorate the semiconductor segment.
According to the latest Application Market Forecast Tool report from IHS Markit, the semiconductor market revenues plunged by 12.8% over the course of 2019, though this will rebound with 5.9% growth in 2020. Total revenue could rise to as much as $448 billion next year, up from $422.8 billion in 2019.
However, this might only be the beginning. While 4G encouraged the mass market adoption of mobile broadband, 5G is about connectivity everywhere and anywhere, in anything and everything. The prospects of the semiconductor industry are not only buoyed by increased smartphone sales, but the idea of connectivity and intelligence being embedded within almost every product you could imagine. TVs, fridges, lampposts, cars, toilets, shipping containers, vending machines. If you can think of it, it might have a chip in it.
It is of course early days in the 5G era, and there is plenty which can still go wrong, but for those executives who are dreading the ear-bashing from shareholders, market recovery might not be that far away.