How the Covid-19 Crisis Has Changed the Development of the Industry

The global semiconductor industry has been the focus for the last 2 years. Overnight, the deciding factor to make the investment for Assembly and Test (in-house or outsourced) changed from just “Low Cost” to how to diversify the supply chain globally.  Regions such as SE Asia, Taiwan and Mexico suddenly come into focus for the Western Semiconductor companies.  With the arrival of COVID-19, another consideration entered the picture.  Supply chain resilience in the time of a pandemic situation is equally critical.  It is fresh on every semiconductor executive’s mind when China implemented locked down in late January, which resulted in a massive supply chain disruption.  As COVID-19 continued to spread to the rest of the world, the supply disruption is felt across all levels.  

Countries which maintain a balanced approach of flattening the curve of infection while ensuring global supply chain are impacted as minimal as possible now found themselves as a possible destination for these semiconductor companies.  While cost is important, the another variable in the equation is the ability to continue manufacturing albeit a lower capacity in time of pandemic.  I have spoken to some semiconductor companies whose manufacturing is centralized in one country and is now moving rapidly to diversify their risk.  Some of the options open to them include: 

1. Tapping into OSATs in a different country

2. Identifying countries that demonstrated resilience during the COVID-19 pandemic  

Outlook of the Industry and New Growth Factors

COVID-19 pandemic and the rise of 5G are going to change the outlook of the semiconductor industry.  And possibly, change for the better.  Let me elaborate each of these points. 

While the landscape of the supply chain movement has changed dramatically, SE Asia, Taiwan and Mexico are major beneficiaries as western companies look to establish another supply chain outside of China.  At the same time, China has increased their investment in semiconductor exponentially so that they can over time reduce their reliance on other countries. You will see the investment made to drive the semiconductor industry in China spill over to the neighboring regions.  Hence, the overall market is set to increase and SE Asia is uniquely positioned to capitalize on the opportunities created by the Western companies as well as from the Chinese companies.

5G is the next big technology.  Countries are ramping up their investment to build the 5G infrastructure and gain leadership positions.  Billions of dollar will be spent in the next 5 years to set up base stations.  As UE manufacturer beginning mass production and as more 5G devices enter the market to drive applications in IIOT, Smart Mobility, Smart Cities and etc.  These will be a key driver in the industry. 

COVID-19 is going to change the world and the way we work and interact with one another.  Tele-commuting may become a norm and the usage of web conferencing will be more prevalent as a result of the COVID-19 and the need to work remotely.  This is going to lead to an increase demand for a more robust core network. Technology such as 400G and Silicon photonics are going to be a key enabler in this area. 

Companies should be agile, adaptable and resilience to stay relevant to these new trends.

ABOUT THE AUTHOR

Mandip Singh Khorana 

Regional Sales Director, 

Japan, Korea, ASEAN & ANZ

National Instruments