Allianz Report Reveals Challenges and Resilience in the Semiconductor Industry

The electronics sector, with a specific focus on the semiconductor market, is facing a significant decline in 2023 after a period of exceptional growth, according to Allianz Trade in Asia Pacific’s latest report. Factors contributing to this decline include weakened consumer electronics sales, inventory surpluses, and ongoing geopolitical tensions.

6 September 2023 – In its latest sector outlook report, Allianz Trade in Asia Pacific has shed light on the current state of the electronics sector, with a particular focus on the global semiconductor market. The industry, largely characterized by semiconductor sales, has encountered headwinds since the second quarter of 2022, with a year-on-year decline exceeding 20% during the early months of 2023.

After achieving a remarkable growth rate of +24% in 2021, semiconductor sales decelerated to +8% in 2022. However, the industry now faces a potentially unprecedented -15% decline in 2023, with the market size expected to contract to US$495 billion. This sharp downturn is a direct outcome of the extraordinary growth witnessed during the 2019-2022 industry cycle, where robust demand for IT hardware, supply shortages leading to price surges, and the introduction of cutting-edge 5nm manufacturing node chips collectively propelled the sector to new heights.

The report attributes the current decline to several factors. Consumer electronics, including smartphones and personal computers, have been adversely affected by inflation-induced consumer spending constraints. Additionally, rising inventories have driven prices down, and next-generation chip production is still in the ramp-up phase. On a positive note, the server segment remains resilient and is benefiting from the growing demand for artificial intelligence applications.

In this complex landscape, geopolitical tensions, particularly between the United States and China, add another layer of uncertainty. Business operators are urged to exercise caution and consider risk mitigation strategies when expanding into new markets or engaging with new customers.

Despite the present challenges and the industry’s cyclical nature, the report underscores the semiconductor sector’s enduring strength, as digitization continues to pervade every facet of society. With an average annual growth rate of +8% since the 1990s, the semiconductor industry is poised for continued long-term growth.

Author: Terry KS

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