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Mid-Year End Market Recovery Plus Continued Autumn Semiconductor Strength

Although the semiconductor chip and capital equipment markets performed well in the first half of 2020, many of the electronic equipment end markets struggled globally. World electronic equipment sales declined almost 10% in 2Q’20 vs. 2Q’19 (Chart 1).

Better Mid-Year End Market Demand

However, world business conditions are improving. The global purchasing managers index, a measure of broad manufacturing activity, rose to 51.8 in August, its highest point since November 2017 (Chart 2).

The automotive industry, hit hard by the COVID-19 pandemic and resulting plant shutdowns, is recovering. In the United States automotive production rebounded sharply in August to its highest level of car and truck output on record (Chart 3). Admittedly, the industry was playing catch-up following the pandemic plunge but factory output has resumed.

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Autumn Busy Season

The computer industry has also rebounded (Chart 4), thanks to work-at-home and study-at-home driven demand for desktops, notebooks and media tablets and strong second-quarter server shipments.

The global electronic equipment industry is now in its very predictable fall busy season driven by pre-holiday inventory buildup of consumer-driven goods. Global electronic equipment shipments were up 5.5% in August 2020 vs. August 2019 (Chart 5) and will likely peak in November or December.

We are not out of the woods but things are looking brighter.

 

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Semiconductor Industry Growth Continues

SEMI capital equipment is having a decent year. Shipments were up 26% globally in the second quarter of 2020 vs. 2019 (Chart 6).

Chip industry activity remains positive. The Taiwan wafer fabs registered record sales in August (Chart 7) and the entire semiconductor supply chain continues to expand (Chart 8).

 

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Looking Forward

Global political and trade issues coupled with high unemployment and ongoing pandemic and climate concerns combine to cloud the outlook for the coming months. The outlook is okay but not crystal clear.

Keep watching the monthly numbers!

Walt Custer of Custer Consulting Group is an analyst focused on the global electronics industry. He can be reached at walt@custerconsulting.com.

Topics: semiconductor supply chain , manufacturing , United States , Global Purchasing Managers Index , semiconductor capital equipment , semiconductor industry , electronics , semiconductors , PMI , Global PMI , Purchasing Managers Index , electronic equipment , Coronavirus , pandemic , COVID-19 , servers , semiconductor chips , automotive industry , study at home , desktop PCs , notebook PCs , media tablets , electronic equipment shipments , computer industry , work at home

 

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