Monday, April 20, 2020

Choppy Waters for Shipping $50B of Semiconductor Materials in 2020

Risky Sailing on the Global Supply-Chain Seas

San Diego, CA, Apr 17, 2020:TECHCET announces that:
 
• 2020 global material revenues in semiconductor manufacturing forecasted to decline by 3.0% year-over-year (YoY) despite growth in 1Q2020,
• Impact of COVID-19 pandemic on the global economy is creating choppy waters for shipping and supplying critical materials, as highlighted in recent Critical Materials Council (CMC) monthly meetings, and
• With a return of global economic growth by 2021, compound annual growth rate (CAGR) through 2025 is forecast at 3.5% as shown in the Figure (below).
 
 

“From our market research, materials suppliers are increasing production and sales to ensure safety-stock throughout the supply-chain in case there are further disruptions due to COVID-19 cases,” remarked Lita Shon-Roy, TECHCET President and CEO. “Even without further disruptions, we can already see leading economic indicators such as unemployment levels, metal prices and container shipping indices point toward a significant decline in global GDP.” This is supported by the International Monetary Fund’s (IMF’s) current outlook on 2020.

Currently, almost all chip fabs appear to be running at normal levels, with a few exceptions. During this difficult period, YMTC in Wuhan, China reportedly has maintained R&D and grown production of 3D-NAND chips. However, chip fabs in Malaysia report that the government required companies to request permission to continue operating at 50% staffing levels. One company in France had to temporarily reduce production due to their labor union insisting on temporary workforce reductions.

Significant value-added engineered materials including specialty gases, deposition precursors, wet chemicals, chemical-mechanical planarization (CMP) slurries & pads, silicon wafers, PVD/sputtering targets, and photoresists & ancillary materials for lithography are reporting healthy orders and in some cases will see better than expected revenues for 1Q2020 and April 2020. However, more than 60% of all materials are expected to be negatively impacted before year-end.

Overall demand for commodity materials, such as silane and phosphoric acid, is expected to decline YoY in 2020 by an average of 3% due to softening of the global economy. Average selling prices (ASP) for electronic-grade commodities may drop due to cost reductions in feed-stocks; for example, the global helium (He) gas market which had been forecasted to be in shortage with high ASPs throughout 2020 has already improved due to COVID-19 slowing down helium demand.

DRAM, 3D-NAND, and MPU chips for server / cloud-computing applications are now in high demand for virtual meetings and remote work. It is yet unclear how much of an increase in materials shipments will be needed to support this segment, however from TECHCET’s modeling of prior cycles it will likely be >7%. Despite such an increase in the materials used to make leading-edge ICs to build out data centers, shipments in support of legacy node IC fabrication are expected to decline this year.

Consequently, cloud-computing growth may not compensate for overall reduced semiconductor materials demands caused by economic downturns this year. By 2021 the global economy and all chip fabs should return to healthier growth, with materials markets for all IC devices expected to increase at a CAGR of +3.5% through 2025.

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