For the first time, the incredibly robust microelectronics market is decoupling from a declining global gross domestic product. And this is not just despite the pandemic. Instead, the emergency situation is fueling the demand for chips in some areas.
The global market for microelectronics seemed undeterred by the coronavirus crisis last year. According to the current 2021 microelectronics trend analysis by ZVEI, it rose to USD 440 billion—an increase of 6.8 percent compared to the previous year. And that’s despite a strong decline in the global economy.
The increase was mainly due to the demand for electronics for the home office (such as PCs) and entertainment (such as gaming consoles and TVs). But growth drivers also include autonomous and electric driving, edge processing and 5G communications infrastructure. And chances are good that the trend will continue in the longer term, because the shift to digital and the green transformation will likely provide ample momentum for growth in the future.
However, demand for microelectronics clearly exceeds supply at the moment. For example, coronavirus boosted sales of IT technology and consumer electronics, while rapidly recovering car sales are now being halted by the chip shortage. Added to this were pandemic-related production stoppages, especially at Asian chip manufacturers, storms in Texas (Samsung, NXP and Infineon), fires in Japan (Renesas) and earthquakes in Korea (Shin Etsu, the world’s largest manufacturer of silicon wafers).
This has not changed the balance of power in the global microelectronics market, however. Although America’s share rose sharply last year from 19.1 percent to 21.7 percent and China suffered losses for the first time, China still holds the lion’s share of the semiconductor pie at 34.4 percent. In the same period, the European microelectronics market fell by 1.2 percent to 8.5 percent and remains one of the world’s four most important semiconductor markets, along with America, the Asia-Pacific region and Japan. According to the ZVEI, the strong position of Asia (incl. China) as a consumption and production region will not change significantly. However, China’s outstanding position is largely due to companies from the U.S. and Europe, which either manufacture there in their own production facilities or have their own chips produced by contract manufacturers.
Europe remains the leader with a global market share of 30 percent for power semiconductors. And according to current estimates by ZVEI, this will triple by 2030, six times as fast as the entire semiconductor market. This is because power semiconductors are indispensable for the transformation into a climate-neutral and digital society. There will be a tremendous increase in demand, particularly in the industrial, renewable energy and automotive sectors and in the coupling of these sectors.
But the ZVEI growth forecast to 2025 shows that the picture will not change with regard to the overall microelectronics market. Asia (including China) is expected to account for 62 percent of the market by 2025, with a volume of around USD 372 billion, with China alone holding 34 percent with USD 202 billion. America will remain virtually unchanged at 21 percent and a market volume of USD 129 billion. And shares for Europe and Japan is expected to be USD 52 billion and USD 48 billion (9 and 8 percent, respectively).
However, massive subsidies in the USA and Europe could at least bring some movement into the rankings in the future. For example, Biden’s trillion-dollar investment program provides USD 100 billion for the infrastructure of “critical goods”—including microelectronics.
In Germany, the BMBF will provide EUR 400 million to fund research in microelectronics for the next three years in the federal government’s framework program “Microelectronics. Reliable and sustainable. For Germany and Europe”. According to the ZVEI, the “Important Projects of Common European Interest” (IPCEI -II) funding program is also likely to provide a long-term boost to microelectronics production in Europe.
Meanwhile, the “Electronics Components and Systems for European Leadership” (ECSCEL) initiative launched in 2014 will expire in 2025. With added content in the current EU research program “Horizon Europe,” the initiative is to continue under the name “Key Digital Technologies” (KDT). European-level negotiations on this are almost finished; the official launch is scheduled for January 2022 at the latest.