The onset of the COVID-19 pandemic cast a global shadow of uncertainty across multiple markets, including the semiconductor industry. Concerns were initially raised over the reliability of critical silicon supply chains, as well as a dip in demand. Fortunately, both concerns have been assuaged by booming chip sales and shipments, along with $110 billion of semiconductor M&A in 2020.
Memory Chip Sales
Indeed, the World Semiconductor Trade Statistics (WSTS) research firm recently said it sees chip sales increasing 5.1% to $433 billion in 2020. For 2021, the analyst group predicts chip sales will accelerate to 8.4% growth, reaching a total of $469 billion. According to John Neuffer, Semiconductor Industry Association (SIA) president and CEO, global semiconductor sales in October increased year-to-year by the largest percentage since March – and continued to demonstrate the global semiconductor market’s resilience to headwinds caused by the pandemic and other macroeconomic factors. Perhaps not surprisingly, memory chip sales are expected to increase 12.2% in 2020 to $119 billion, outpacing all other groups. Seen as the fastest-growing category, memory chips remain on track to achieve 13.3% growth in 2021.
A key trend driving semiconductor growth is the global AI chip market. Valued at $9.29 billion in 2019, the AI chip market is estimated to garner $253.30 billion by 2030 (at a CAGR of 35.0% between 2020 and 2030). According Research and Markets, the demand for AI silicon is rising due to the increasing adoption of AI in every industry. These include applications such as voice recognition, object detection, medical and military simulation, intelligent routing, and autonomous driving. AI chips, says the analyst firm, are multifunctioning and can process vast amount of data, identify underlying patterns, interpret trends, and utilize the feed to achieve specific goals. Depending on the application, AI systems can be expected to employ high-performance memory types such as HBM2E and GDDR6.
Edge Network Infrastructure
According to IDC’s Shane Rau, the COVID-19 pandemic has highlighted the need to build out infrastructure to serve a more distributed user base, such as individuals working and learning at home. This includes edge infrastructure servers closer to endpoints that enable distributed computing and reduce latency. As Rau observes, companies like Google and Amazon understand that data should be processed closer to the end user.
Indeed, Google Cloud recently announced that it was partnering with 200 application developers whose services will now be available from data centers closer to business customers. By expanding edge computing, reports Chris O’Brien of VentureBeat, Google is hoping even more enterprises choose the cloud for their computing needs. The move, says O’Brien, will take advantage of the rollout of 5G networks, which promise increased speed and a higher number of connections. By processing data at the edge, in closer proximity to end users, Google can further optimize functionality.
2020: The Year of Semiconductor Mega-Deals
In addition to booming chip sales, 2020 was also the year of mega-deals for the semiconductor industry. According to Bloomberg, AMD’s $35 billion purchase of Xilinx pushed 2020 toward a “record year” for chip deals. In total, there were $110 billion of deals announced in the semiconductor industry during 2020, which saw NVIDIA bid for ARM, as well as Analog Devices court Maxim. As Bloomberg reporters Amy Thomson and Liana Baker note, the semiconductor industry “stand[s] out” in an otherwise sluggish deal market, as global mergers and acquisitions in all sectors dipped to approximately $1.9 trillion down 23% from the same period last year.
Although 2020 was a year like no other, the semiconductor industry successfully overcame unprecedented supply chain challenges to fulfill the demands of multiple applications such as edge computing and AI. To be sure, chip sales are projected to increase 5.1% to $433 billion in 2020, with memory chip sales expected to surge 12.2% in 2020 to $119 billion. Seen as the fastest-growing category, memory chips remain on track to achieve 13.3% growth in 2021. Along with booming chip sales and shipments, 2020 also marked a record year for semiconductor M&A with $110 billion of deals announced.