Analysts See a GaAs Rebound Amid Uncertainty

Article By : George Leopold

Chip industry trackers continue to hedge their bets despite a few bright spots...

The consensus on a post-pandemic global semiconductor recovery is that there is no consensus.

Case in point, a recent take by SEMI, the industry association for electronics manufacturers: “An Imminent Recovery …or a Deep Recession?” SEMI’s blogger went only so far in late April to say, “The next 30 days should be telling.”

By that reasoning, we may have some clarity by the end of May about when a chip industry recovery will begin, and what it might look like (as in “V”, “U” or “L” shaped.)

For now, SEMI notes that Chinese chip manufacturing made up all of its earlier losses based on the industry group’s global purchasing managers index. Taiwan-listed OEMs also rebounded in March while still lagging year-on-year.

Hence, SEMI sees a mixed outlook, with China and Taiwan stabilizing as western economies slowly reopen. Unaddressed is what global demand will look like one or two quarters down the road.

Source: SEMI

Speaking of China and Taiwan, one unfolding story to watch is China’s ongoing efforts at self-sufficiency in semiconductor manufacturing, efforts that have taken on greater urgency as the world’s two largest economies “decouple.”

Semiconductor Manufacturing International Corp. (SMIC) is turning to alternative funding sources to raise more than $3 billion in investment capital after last year’s delisting from the New York Stock Exchange. As Alan Patterson reports, analysts suspect Beijing is attempting to shore up SMIC in anticipation of Huawei losing access to Taiwan Semiconductor Manufacturing Co.’s (TSMC) leading-edge production technology. SMIC is currently three generations behind TSMC.

Other industry sectors may have more clarity. For example, the market for pricey GaAs-based RF components is expected to be slowed by a projected 21 percent decline in smartphone shipments this year, according to Strategy Analytics. Based on handset forecasts and the market tracker’s internal models, the GaAs revenues are seen contracting for the second consecutive year by as much as 12 percent.

Despite the impact of Covid-19 on vulnerable global supply chains and the bearish smartphone forecast, Strategy Analytics nevertheless reckons that other GaAs applications may fare better. “Our current [GaAs] device forecast shows a quick, sharp rebound,” analyst Eric Higham noted in an early May.

“I think looking at the uncertainty in the broader electronics market and the silicon juggernaut helps put developments in the compound semiconductor world into better perspective,” Higham added.

Once supply chains are reconstituted, demand returns to relative normal and 5G rollouts accelerate, GaAs revenues are seen recovering from a 2020 slump. Other potential drivers of a compound semiconductor recovery include a spike in data center connectivity and growing demand for medical testing equipment.

“The silver lining in that dark cloud [cast by Covid-19] is that difficult times in the GaAs component industry should be short-lived,” Higham predicted.

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