Why Global Semiconductor Sales Could Top $521 Billion In 2021
One might assume that chip makers are taking a beating in revenue because of the global shortage of silicon, but that is not the case. Semiconductors are selling as fast as manufacturers like TSMC can make them. It's the reason why AMD and Intel both recently posted strong earnings, and looking at the semiconductor business as a whole, market research firm IDC predicts it will reach $522 billion this year.
That is not an outrageous prediction by any stretch. According to IDC, worldwide semiconductor revenue grew to $464 billion in 2020, a gain of 10.8 percent compared to 2019, despite the impact of COVID-19. If it reaches $522 billion this year, as the research firm believes it will, then it will have grown another 12.5 percent year-over-year.
This does not mean the shortage is about to end. TSMC recently stated that it might not be until 2023 that supply shortages ease up, so don't expect things like graphics cards to suddenly be in stock after being persistently sold. IDC echoed this notion to an extent, saying supply constraints will continue for the rest of the year.
"While shortages initially occurred in automotive semiconductors, the impact is being felt across the board in semiconductors manufactured at older technology nodes. Much like a traffic jam and the ripple effect, a disruption on the semiconductor supply chain operating close to capacity will impact across the supply chain. The industry will continue to struggle to rebalance across different industry segments, while investment in capacity now will improve the industry's resiliency in a few years," IDC said.
Indeed, TSMC and Intel are both pouring billions of dollars into the expansion and upgrade of fabrication facilities, including a $3.5 billion New Mexico fab expansion. It will take some time for these investments to have an impact on supply, but hopefully it means we won't go through another situation like this for a long time.
As for the here and now, however, there are multiple reasons why semiconductor revenue is skyrocketing. One of them is a growing market for PCs and servers. The market for semiconductors in computing grew 17.3 percent year-over-year to $160 billion in 2020, and is expected to remain strong in 2021, "especially in value segments." More specifically, IDC reckons it will grow another 7.7 percent to $173 billion this year.
The research firm also pointed to growth in the mobile phone chip market, in terms of revenue. Smartphone shipments actually decline in 2020 by more than 10 percent, but revenue was up more than 9 percent because of the higher costs associated with 5G semiconductors, as well as manufacturers cramming more memory into their handsets.
"2021 will be an especially important year for semiconductor vendors as 5G phones capture 34 percent of all mobile phone shipments while semiconductors for 5G phones will capture nearly two thirds of the revenue in the segment," said Phil Solis, researcher director for Connectivity and Smartphone Semiconductors at IDC.
Add to the pile robust sales of game consoles, tablets, wireless headphones and earbuds, smart watchers, and streaming media devices, and it becomes clear why semiconductor revenue is climbing.