Chip sales are set to grow nearly 10% in 2022 under a riskier backdrop: Report
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On Tuesday March 16, 2021, employees in cleanroom suits walk underneath Automated Material Handling Systems vehicle robots. They move on tracks along the ceiling of the GlobalFoundries semiconductor manufacturing plant in Malta.
Getty Images| Bloomberg | Getty Images
In the pandemic era of the Pandemic, chipmakers emerged as clear winners. According to Euler Hermes’ Monday report, the momentum in semiconductor technology will continue to grow well into 2022.
Analysts at Euler Hermes stated that the current semiconductor cycle “has been firing on all cylinders ever since the industry recovered from its worst recession of 2019”.
The analysts forecast that Semiconductor sales would grow an additional 9%, and surpass $600 billion by 2022. This is in addition to the predicted 26% rise to $553 Billion in 2021.
A months-long semiconductor shortage during the pandemic impacted a wide-range of industries — from automobiles to gaming consoles — as chipmakers struggled to keep up with unprecedented demand as global economic activity bounced back from the Covid crisis.
Major chipmakers, such as TSMCAlthough they have announced their plans to increase capacity already, these facilities usually take years to come online. TSMC’s Taiwan listed shares have soared by more than 80% within two years.
Euler Hermes analysts said that sales have risen due to three key factors. These factors are:
- Insatiable CustomersConsumer electronics: Unusually high demand
- PricesTight supply and high demand can cause an increase in the prices
- Mix of products improved:Higher priced, new-generation chips bringing about further improvements in semiconductor product range.
Risques for the chip industry
Analysts predict that these same market drivers will ease in the coming year as demand growth slows down and new production capacity comes online at an increased pace.
Four risks are also being identified by analysts in the semiconductor sector.
- After strong growth in 2020-2021, hardware sales took a bigger-than-expected hit due to demand normalization.
- Demand for semiconductor products being hit due to prolonged manufacturing activity freezes, and supply chain disruptions caused by the pandemic.
- There is a “stop” in the battle between China and America for technology supremacy. However, there are still restrictions on Chinese companies purchasing critical U.S. equipment and tech.
- A “growing frequency of unusually severe climatic events”, which is becoming a significant challenge to the semiconductor sector’s profitability, has been a problem.
Aurelien Duthoit (sector advisor, technology retail, Euler Hermes) said several other factors could also set the tone in 2022’s chip sector.
Duthoit found other reasons than normalization in demand for areas like computers or servers. He also pointed out factors such “unpredictable, random events” that were affecting major semiconductor manufacturing sites such as Taiwan and South Korea.
He said that new developments in technology “Cold War”, between China and the U.S., could prevent some semiconductor technology experts from selling to Chinese firms.
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