Semiconductors and the Pandemic – What Is the Connection?

The virus against the chip – How the Semicon industry prevailed and how it is forging ahead

Work became truly flexible in 2020. With the whole world going into lockdown and practicing social distancing, businesses facilitated work-from-home for their employees. So much so that tech giants such as Facebook and Google have even offered their employees a permanent work from home option1. Work from home, social distancing, and others are now commonplace terms that have become so embedded in our vocabulary that they are now a part of the Oxford English Dictionary.

A significant deal off this change can be attributed to technology, specifically communication technology that has been foundational in disseminating ideas. Technology – in whatever form, has helped to alleviate the many pain points of this global disruption. It has helped to prevent the spread, educate, forewarn and empower (frontline workers) to minimize the impact of the pandemic. Misinformation – one of the biggest threats that can impact a global health scare of this magnitude, was a big aspect that technology has helped to curb. Misinformation about fatalities, diagnosis, spread, etc., could all be controlled with the help of technology – companies such as Google, Facebook and YouTube are working tirelessly to provide only verified information.

Leading at the forefront are technologies that facilitate secure access to data, cloud conferencing, virtual reality and various other applications, which has ensured that business as usual is possible.

Unsung heroes of technology

Semiconductors have always played a background role in the world of technology. They work behind the scenes and power everything from simple toys to cellular devices to automobiles and more. In more recent times, semiconductors have helped to enable the application of artificial intelligence and machine learning, greatly transforming life and businesses. As the world hops on the digital transformation journey, more advanced chips will be required with increased computational power and memory.

At the heart of the turmoil

According to the International Monetary Fund’s predictions, there would be a decrease in the global GDP by up to 4.4 percent owing to the pandemic, despite the various measures taken by governments and businesses alike to mitigate the impact.

There has been a significant impact on the demand for laptops, smartphones, IT applications and other devices as work from home was enabled. And all these devices rely heavily on the semiconductor industry. Data centers have also been central to this turmoil. Increased data activity (owing to media streaming, work from home, education going online) has been the biggest influencer in this industry.

Impact on semiconductors

It was observed that during 2020, there was a decline of 5 to 15 percent in the semiconductor industry when compared to 2019. While some industries such as laptops, wireless communication have contributed to the growth of this industry, low demand from the automobile sector has had a hand in contributing to a decline. This decline can be attributed to cyclicality in product pricing, sluggish demand from various industry segments and trade unrest that was experienced globally.

The new normal for semiconductor industry

With limited visibility of the future, businesses have addressed current operational challenges. However, thriving in the new normal is equally important. It is essential for firms to plan for getting their businesses back to normal, find the right direction and scale quickly when conditions are conducive. To handle the mounting demand for chips, spurred on by increasing amounts of data, semiconductor firms should adapt their business strategies to figure in the new ways of operations; beyond just the factory ties.

How can firms do that? Semiconductor firms must live in the future and ace their game. The effects of the pandemic have made it important to shorten the production time and hasten the time-to-market. It is important for leaders to monitor the changes in the market, identify potential markets that would showcase growth and focus on those segments.

They should further focus on building ecosystem resilience by shifting to an agile supply chain network model. Evaluation of supply chain trade-offs between stability and cost, while also factoring in probable risks to strengthen short term resilience and drive long-term supply chain restructuring will be required.

What does the future impose?

In the very near future, the market is hot with a strong funding environment for the semiconductor industry. With many venture capitalists looking to invest, this is the right time for semiconductor entrepreneurs to ‘cash in’ on this surge. It is expected that chips sales will grow to 8.4 percent in the next year, touching a revenue of $469 billion. These sales will be influenced by the inflections in the technologies of 5G, AI and ML.

The shift to the cloud by many organizations has spurred this investment round. Many companies are moving from their own infrastructure to the cloud environment, with only 10 percent of this arena being explored. The semiconductor industry has been able to pivot the way business was conducted by enabling mass work from home.

Semiconductors can grow to be a core competency for many companies, with the industry having a lot of room to grow. There is so much potential for the semiconductor industry that the U.S. is contemplating to declare the semiconductor industry as an ‘essential infrastructure’ or ‘essential business’.

Wireless communication will contribute significantly to the growth of the semiconductor industry as this segment will grow to achieve a CAGR of 15.4% by 2025. Demand for wireless sensor networks, increase in the penetration of the internet, significant growth in the adoption of IoT, large sections of employees continuing to work remotely and virtual learning has contributed to the growth of the wireless communication industry, which will in turn have a positive impact on the semiconductor industry. Medical electronics, power and energy products and eco-friendly lighting solutions will also further the growth of the semiconductor industry.

In a world furthered by electronics and technologies, semiconductors have come a long way, and the future holds even more unchartered territory to explore. Cerium Systems IBU of Tech Mahindra is one of the contributors to this ever-expanding industry. With a 1100 strong team, Cerium has been a gamechanger in chip design for many leading organizations across the world.

References:

• Article in YourStory
• Article in BBC
• Article in EE Times
• Article in Electronics B2B
• Article in Investors
• Article in Spectrum
• Article in Economic Times
• Article in Global News Wire