2020 Market Outlook from Semicon West
At the Semicon West 2020, held virtually from July 20-23, Clark Tseng, Director, SEMI, presented the market outlook for semiconductor equipment and materials:
Major economies’ GDPs are likely to contract this year. The trends for equipment and devices for year-to-date are interesting. For equipment, China is leading at 42.3 percent, Korea at 29.9 percent, North America at 16.7 percent, Japan at 14 percent, and Taiwan at 11.2 percent, respectively, on a year-to-year basis. However, Europe is at -22 percent and the rest of the world (RoW) at -34.6 percent. For devices, Americas lead at 24.8 percent, followed by China at 5.2 percent, Asia Pacific/all other at 2.9 percent, and Japan at 1.2 percent. Europe is behind, at -8.2 percent.
The 2020 industry headwinds are Covid-19, along with trade and geopolitical tensions. Covid-19 has had negative impact across most end-markets in 2Q20 and 3Q20, except data centers.
New US export restriction to China adds fresh uncertainty to the semiconductor supply chain. However, as countries/states are starting to lift the restriction, we can expect the recovery of the supply chains and re-opening of the markets. Covid-19 has accelerated digital transformation of the many businesses and services throughout the world.
There are strong cloud and server markets, and better than expected PCs. However, there are weak smartphones and automotive markets. Cloud services, server and PC demand are boosted by WFH and remote learning. Laptop demand strength is likely to continue into 2Q/3Q, and Intel’s CPU shortage has alleviated.
The memory market has been stable, supported by server demand. Cloud/server memory demand has been strong, while mobile demand has been soft. The 2H20 ASP trend shows both DRAM and NAND could see mid-single digit declines in 3Q20/4Q20. The key indicators to watch are recovery of mobile market and sustainability of cloud/server demand in 2H 2020. China and Asia could lead the economic recovery, post Covid-19.
Looking at the semiconductor equipment market, the wafer fab equipment market size has expanded from ~$30 billion in the first half of 2010s to ~$50 billion in the past three years. The equipment billings in 2020 remains strong, supported by advanced logic and foundry investment. The 2021 WFE market is projected to grow double-digit to set a record of $61 billion driven by memory spending recovery, leading-edge and China investments.
The overall WPE market is expected to show healthy growth in the next few years. 2021/2022 WPE market size will surpass $60 billion and is projected to exceed $65 billion in 2023. DRAM and NAND spending are expected to increase ~20 percent in 2021 and remain stable in the following years. Foundry and logic spending are likely to reach ~$30 billion in 2022 and 2023.
Test and assembly/packaging equipment
A glance at the test and assembly/packaging equipment market reveals that the 2020 test equipment market is likely to grow 13 percent and continue the momentum in 2021.
Test equipment growth is primarily driven by 5G, which is the multi-year driver of the industry. Assembly and packaging equipment is forecasted to grow 10 percent and 8 percent, respectively, in 2020 and 2021, driven by advanced packaging capacity build-up.
SEMI has revised up the 2020 forecast from $60.8 billion to $63.2 billion, given the strong 1H20 equipment billings. Foundry and logic remain strong in 1H20, while memory is expected to improve in 2H20. China spending has been robust in 1H20 and shall continue into 2H20. Year 2021 is expected to see double-digit growth driven by strong investment in China, Korea and Taiwan.
Looking at the semiconductor materials market, and the silicon wafer shipment trend, 2019 shipment declined 7 percent YoY to the level of 2017. The 2Q 2020 shipment showed a rebound of 8 percent QoQ and increased 4.5 percent YoY, driven by various demands pick-up and partially for the safety stock build-up.
Wafer shipment is expected to remain stable in 2H20, although uncertainty remains. The inventory is normalizing and expected to stabilize in 2H20 if demands continue to improve.
The total semiconductor materials market will likely have a stable 2020 and record 2021. The materials market exceeded $50 billion since 2018, driven by shipment growth and advanced process requirements in wafer fab and packaging facilities.
The overall materials market has been flat in 2020, with wafer fab material likely to decline 1 percent, while packaging materials are likely to grow 1 percent. SEMI expects ~6 percent growth to new record high in 2021, surpassing $55 billion.
Wafer fab materials are projected to decline 1 percent in 2020, but rebound 6 percent in 2021. The silicon wafer market is under pressure this year, and shall see improvement in shipment and revenue in 2021. Most other materials are seeing growth this year with stronger growth expected in 2021 from photomask, wet chemicals, sputter targets and CMP.
Packaging materials will grow 1 percent in 2020 and 5 percent in 2021. Substrate continues to show strength driven advanced packaging adoption. Leadframe is forecast to decline 5 percent this year, but rebound 5.3 percent in 2021. Ceramic packages and encapsulation resins will also see soft 2020 and recovery in 2021.
2020 forecast revisions
The WGDP growth this year will be in the negative territory of -5.2 percent with all major economies (except China) showing even worse declines. Electronics forecasts remained unchanged at -5 percent. IC sales forecast has been upgraded to +2 percent from -4 percent on the back of stronger pricing in 1H20. Capex has been revised down from +1 percent to -2 percent.
The total equipment sales have been upgraded from -5 percent to +6 percent on the back of strong billings in 1H20. Wafer fab equipment strength is led by advanced logic and foundry, and supported by improving memory spending in 2H20. Test and A&P equipment forecast have also been upgraded, driven by 5G and advanced packaging activities. The semiconductor material market is expected to be flat this year.
Semiconductor sector seems to be relatively immune to Covid-19 in 1H 2020. ICs are running +10 percent YoY. Equipment sales has been over $30 billion in 1H20, a mid-teen percent growth YoY. Advanced logic and foundry continue to invest in more complex processes, which drive equipment demand.
Growth for WFE is expected to continue in 3Q20. However, as logic and foundry spending are likely to abate in 2H20, memory will need to improve further to fill up the gap.
Visibility in the 4Q20 is limited! The key indicator to watch for the memory market is the recovery of the mobile market and the sustainability of cloud/server demand in 2H2020. China market remains a bright spot.
The resurgence of Covid-19 cases will greatly slow down the re-opening of the economies. The ongoing trade and geopolitical tensions (US-China, China-India) and the US elections will contribute to regulatory uncertainty that could persist for years to come.
Datacenters and 5G are still the key industry drivers. Laptop/server demand strength is expected to continue into 3Q. 5G adoption may be slower than expected this year, except China. Massive government stimulus packages will boost the recovery.