"Semiconductor Industry, Speed of Demand Recovery is Key... Focus on Managing Supply Chain Risks"

Samjong KPMG Publishes Report on Changes in the Semiconductor Industry Due to COVID-19

[Asia Economy Reporter Minji Lee] As the novel coronavirus infection (COVID-19) prolongs and concerns over economic slowdown grow, the semiconductor industry is expected to be affected by the speed of demand recovery.

According to the report "Changes in the Semiconductor Industry Due to COVID-19" published by Samjong KPMG on the 23rd, if the COVID-19 situation continues for a long time, shipments are predicted to decrease due to demand contraction in the semiconductor upstream industries. However, by flexibly adjusting supply volume, it is expected that negative impacts such as price declines can be minimized.

The report pointed out that increased time spent at home due to "social distancing" has positively influenced the semiconductor industry through increased demand for media and entertainment. Globally, consumption of content such as games and OTT (over-the-top online video services) is rising, and the expansion of data centers due to increased online traffic is expected to drive demand for memory semiconductors. Additionally, with the expansion of remote education and telecommuting due to COVID-19, demand for related networks, computing, and servers is also anticipated to increase.

On the other hand, as consumer sentiment contracts due to COVID-19, the smartphone semiconductor market (AP, image sensors, NAND flash, etc.), which accounts for a large portion of semiconductor demand, is expected to be negatively affected. Furthermore, the semiconductor market embedded in consumer products such as desktop PCs, smart TVs, and set-top boxes is also expected to be impacted. In fact, semiconductor export value (provisional data based on Korea Customs Service clearance) from April 1 to 20 this year fell by 14.9% compared to the same period last year due to the global demand decline caused by COVID-19.

Instead, domestic semiconductor companies have been continuing production relatively smoothly. The report explained that semiconductor processes are highly automated compared to other manufacturing industries, thus less affected by labor shortages and restrictions on workforce movement. The global semiconductor industry is also actively responding by issuing a joint statement designating semiconductors as an essential industry to ensure uninterrupted production amid the COVID-19 impact.

Samjong KPMG advised that focus should be placed on managing supply chain risks that may arise in the semiconductor industry due to COVID-19. Supply chain risk management systems need to be enhanced to prepare for production disruptions at overseas factories, and supply chains for production equipment, semiconductor raw materials, and components should be inspected. Contingency plans and alternative suppliers should be established in case of supply chain issues.

Additionally, domestic semiconductor companies are urged to swiftly capture changes in the demand market caused by COVID-19 and focus on adjusting production and supply accordingly. The report stated that for server semiconductors, where demand is expected to expand, lineup adjustments to increase production are necessary, while for smartphone and PC semiconductors, where demand is expected to shrink, production should be reduced to focus on price defense.

Seongbae Park, Partner of the Electronics and Information Communication Industry Division at Samjong KPMG, emphasized, "Domestic semiconductor companies should turn the current crisis into an opportunity to widen the technological gap and continue investing in securing ultra-fine process technology." He added, "They should prepare for the 'post-COVID' era by diversifying semiconductor applications through entry into new semiconductor markets such as mobility, mobile, and artificial intelligence, and executing strategies to reduce market risks."

This content was produced with the assistance of AI translation services.