Allianz Trade in Asia Pacific published its third sector outlook report of the year focusing on the electronics sector. The report highlighted the sector, which is most characterised by global semiconductor sales, has been in negative territory since Q2 2022 and decreased by more than 20% year-on-year in the first months of 2023. The report looks into the strengths and weaknesses of the sector and the factors that could help the industry flourish in the next business cycle.
After growing by a record +24% in 2021 and subsequently slowing to +8% in 2022, global semiconductor sales are projected to fall by as much as -15% in 2023, bringing the market size down to US$495 billion. The magnitude of such unprecedented decline is a product of the remarkable growth registered in the 2019-2022 industry cycle, where all growth engines were firing on full blast: volumes driven by booming IT hardware sales, prices soared on the back of supply shortages and product mix improved by the launch of new generation chips using the 5nm manufacturing node.
However, after the great pandemic binge, these drivers are now muted with consumer electronics deep in the red, rising inventories sending prices down and next generation chips only in their ramp-up phase. Among the key segments, smartphone sales slid -15% in Q1 2023 due to consumer spending pressured by persistent high inflation; personal
computer shipments fell -29% in the same quarter and should end the year at -13% year-on-year; as for TVs, sales dropped by -4% last year and are expected to decrease by -3% further this year on the back of the cost-of-living crisis in some of the world’s largest consumer markets.
Speaking of this sector’s prospect, Paul Flanagan, Regional CEO of Allianz Trade in Asia Pacific, says, “Despite their boom-and-bust cycles of every three to five years, the digitization of every aspect of society is a powerful and long-term driver for the semiconductors industry, which has grown by an average of +8% per annum since the 1990s. While segments mentioned above are facing strong headwinds, servers remain a fast-growing and resilient segment benefitting from the high demand for artificial intelligence.
Geopolitical tensions are another key theme in this space, particularly between China and the US. Business operators are advised to exercise caution and consider risk mitigating tools when formulating business expansion plans to new customers and new markets.”
