Electronics

Strong demand, higher prices and new products to send industry turnover to new highs in 2021

MEDIUM RISK for entreprises

Fragmentation
Internationalization
Capital Intensity
Profitability

Fragmentation
Internationalization
Capital Intensity
Profitability

Updated in July 2021.

Broad customer base (consumer electronics, automotive, telecommunications, industry, etc.)
Powerful long term growth drivers (digitization of the economy)
Technology intensive, innovative industry
Semiconductors: concentrated, high value added, high margin product markets

Commodity electronic components: fragmented, low barrier to entry, low margin product markets
Saturation reached in major client industries (smartphones, computers, etc.)
Volatility, with one major recession every four to five years on average

What to watch ?

Growth momentum in the largest product markets (smartphones, computers, servers)
Tensions on lead times and acute shortages driving prices up

Very strong demand across the main final markets of the semiconductor industry should send global sales up by about +20% in 2021, crossing the USD500bn mark for the first time in history.

The current semiconductor cycle, initiated in early 2020, is firing on all cylinders. Volumes are driven by unusually strong demand for consumer electronics (PCs, smartphones, audio and video equipment, accounting for 80% of final semiconductor sales); prices are increasing because of manufacturing bottlenecks that have resulted in chip shortages across a few segments. Moreover, the 5nm technology, which entered large-scale production in 2020 and allows for more sophisticated and expensive semiconductors, is becoming the standard for advanced computing, memory and telecom chips. This combination of volumes, mix and prices is paving the way for at least one more year and a half of growth – the industry is known for being cyclical and the average cycle lasts four years – sometimes less. 2022 sales should grow by another +8%.

Electronic components can be loosely divided between semiconductors and other active / passive electronic components and sub-systems.

Semiconductors serve different purposes (computing, storage, power management, communication, etc.) and are found in pretty much each and every electronic device. Product markets are generally concentrated and dominated by a handful of global players. The remainder of the industry is far more fragmented and generally more commoditized, with companies manufacturing everything from printed circuits boards to electronic displays through to resistors, capacitors and switches.

Key players

Country	Role	Sector risk
China	#1 manufacturing country	B Medium risk
Taiwan	#2 manufacturing country	A Low risk
South Korea	#3 manufacturing country	A Low risk
Japan	#4 manufacturing country	B Medium risk
Singapore	#5 manufacturing country	B Medium risk