SEMI Equipment Outlook in the wake of Coronavirus

    The Chip Insider®
    Equipment & Emerging Markets
    March 23, 2020
    Semiconductor Equipment Outlook
    The semiconductor equipment outlook has changed dramatically since January 2020. Three forecast scenarios related to Coronavirus recovery: 1) Recovery in 3Q20 as economy returns to normal ranges. 2) Recovery delayed to 4Q20 as economic activity remains depressed beyond 2Q20. 3) Recovery postponed to 2021. VLSI expects Semiconductor Equipment sales to decline 5.1% due to Coronavirus related slowdown. Fundamental drivers, such as 5G, Datacenter, AI, 7nm, and 5nm are still in place and companies are investing in capacity to serve these segments. Roaring recovery is expected in 2021 depending on the depth of 2020.

    WildPhotons: Fear knocked at the door...
    Semi Manufacturing in Wake of Coronavirus
    • WGDP is collapsing from Coronavirus related shutdowns
      • Demand is dropping as populations get stay-in-place or quarantine orders throughout the world
      • 2Q GDP growth projections in U.S. vary wildly from -10% to -25%
        • One thing is clear: consumer and industrial demand is dropping dramatically short-term
    • We expect Electronics and Semiconductor demand dropping in the wake of WGDP collapse
    • However, this forecast is based on the following key assumptions:
      • 1.3B smartphones will be shipped, of which 7% to 15% will be 5G phones and will require 7nm and 5nm capacity
      • 250M PCs will be shipped
      • Datacenter and AI will require additional 7nm and 5nm manufacturing capacity
        • Hyperscale capex at least 2019 level
      • Consumer, Automotive, and Industrial segments will be hit in this crisis

    VLSI's View
    • Key long-term drivers and trends are not changing:
      • Electronics sales running over $2T
      • ICs running at $330B
      • Equipment sales over $70B
        • New applications drive more complex processes, which drive equipment demand
    • Equipment sales are reliant on healthy semiconductor sales, units, and transition to new technologies
    • We have not yet seen substantial reduction in Semiconductor Equipment sales due to Coronavirus
      • The key industry drivers are still intact:
        • 5G Phones and Infrastructure
        • Datacenter
        • PC upgrade cycle
        • AI development
    • But, we expect activity to decline as economic activity collapses from local population movement restrictions
      • Segments likely to be affected most
        • Automotive
        • Industrial
        • Consumer
      • 2Q20 is likely to be substantial down quarter
    • Recovery is still uncertain but VLSI is presenting three different scenarios and how they impact 2020