COVID-19: Building resilience for semiconductor companies
June 12, 2020
COVID-19’s disruptive impacts are being felt in the near term and the full long-term impacts are still unknown. No industry is immune, and the semiconductor industry must quickly evaluate and react to impacts on three fronts: supply chain, market demand and workforce.
Semiconductor companies have exhibited resilience in previous economic downturns, but in the short term 2020 semiconductor revenue projection has been reduced by $55.0 billion, to $415.4 billion, and annual growth for 2020 has been reduced from 12.5% to 0.9%.
Build resilience now, prepare for next
Companies must act now to weather the immediate storm and be prepared to outmaneuver uncertainty in the future.
Semiconductor companies operate in a complex ecosystem, working across the value chain with numerous raw material, assembly, test, package and equipment suppliers and partners globally – all of whom face demand disruption.
And every subsector of the semiconductor industry faces disruption too:
Automotive
Demand has been hit hard, with a slowdown in production and limited sales.
Computing & storage
Benefits from increased use of data centers as more people work from home, but face vastly decreased demand for small business and consumer systems.
Consumer
Electronics and mobile phone demand has dropped due to quarantines and loss of income.
IoT & industry
Huge rise in medical device demand, but face reductions in capital budgets and delays in planned projects.
Networks & comms
Demands for greater bandwidth and data center upgrades due to vast numbers working and streaming from home.
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To address the effects of COVID-19, companies must adopt a ‘War Room’ mindset to understand how their global supply bases are impacted, and push and pull in manufacturing accordingly in each step in the direct manufacturing process.
Companies should look beyond their immediate supply base and comprehend staggered disruptions to indirect components and suppliers.
Finally, companies should consider shifting customer requirements and revise product schedules to meet immediate needs.
Coronavirus & semiconductor companies: what's next
Semiconductors are typically strong leading indicators of recovery from recession, but the recovery from COVID-19 will likely follow several quarters of depressed results and be driven by future technology drivers, such as 5G.
To be prepared for these quarters, and the ramp up in demand, semiconductor manufacturers should aim to:
Diversify
Diversify supply chain to mitigate dependencies on specific countries.
Invest
Invest in smart manufacturing capabilities and expand remote access capabilities, particularly in OSATs.
Explore
Explore alternative revenue streams (aaS, subscription).
Expand
Expand into ecosystem solutions to bring demand planning and technology portfolio planning together.
Create
Create a more digitally enabled elastic workforce, especially in field services and customer support.
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Those who plan for resilience now will be best positioned to outmaneuver uncertainty in the future.
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