AES Semigas


3 April 2020

COVID-19 pandemic’s impact on global high-tech industries

As the COVID-19 pandemic continues to accelerate and cause damage to the global economy and consumers’ purchasing power, market research firm TrendForce has compiled its latest report on the statuses of key electronics component and downstream industries, with data last updated on 26 March.


LED chip makers did not stop operations across the board during the Lunar New Year; some personnel remained at the factories, which manufactured small batches. So, their work resumption has been relatively smooth. However, due to concerns about possible shortage of upstream raw materials, especially sapphire substrate, manufacturers raised their capacity utilization rate for LED epitaxy processes in March to above 70%, in order to increase their inventory in response to the impact of price hikes. In contrast, the work resumption rate of the LED chip segment has been relatively low, mainly because existing LED chip inventory is high, and demand from clients has not increased significantly. Currently, apart from a slight increase in prices of a small number of low-end LED chips, other LED chip prices remain unchanged.

The LED packaging industry places high demand on manpower. Although the Chinese government has issued a request for manufacturing sites to fully resume work, many people in the affected areas are currently unable to return to the factories. Even workers returning from areas unaffected by the pandemic need to be quarantined for a period of time before they may enter production lines, once these people have arrived at the factories. The work resumption rate in March has hence been sitting at 50-60%. However, due to the weak demand for end products, LED suppliers have enough inventory to supply market needs, with a few exceptions, which are applications requiring precise specifications.

In terms of the peripheral materials, sapphire substrate factories place a high demand on manpower, so they are also facing the issue of work resumption. The current supply of sapphire substrate is therefore slightly tight. Because long-term sapphire substrate prices have been sluggish, many suppliers hope to take advantage of the tight supply by increasing prices. In terms of chemical gases and liquids, the biggest challenge facing LED makers is the delivery of chemical materials needed for manufacturing. However, transportation problems have been gradually resolved, at the Chinese government’s strong insistence on work resumption.


With the global economy being battered by the coronavirus pandemic, the overall demand for consumer electronics is expected to decline sharply. Currently, the impact of the pandemic on the smartphone market is mainly on the demand side. Consumers worldwide will most likely defer purchasing new smartphones this year, lengthening the device replacement cycle and pushing down the overall average selling price (ASP). Furthermore, rising costs across the supply chain (such as labor cost, cost in connection to a change in the exchange rate, etc) will weaken the profitability of smartphone brands.

Dramatic shifts in performances among brands could also lead to a reshuffling of the industry in terms of market share. Considering that the scale of the pandemic continues to grow, the forecast of this year’s smartphone production has again been revised. Worldwide smartphone production volume is now projected to fall by 7.8% from 2019 to 1.29 billion units in 2020. The downward correction is attributed to the recession that follows the pandemic as well as the downgrade in shipments (sell-ins) in Europe and North America, which are now the most hard-hit regions of the world.

The current financial crisis that accompanies the pandemic has produced a lot of uncertainties and could surpass the financial crisis of 2007-2008 in scale, says TrendForce. Hence, the general economic outlook for second-half 2020 could become even gloomier as the pandemic is not expected to be brought under control in the short term. TrendForce is not discounting the possibility of further contractions in smartphone demand.


The pandemic has now caused further damages to the auto industry. Previously, it primarily affected non-China markets by causing material shortages, with several factories in South Korea, Japan and Europe halting operations. More recently, after work resumption gradually took place in China, the pandemic has rapidly spread throughout Europe and North America, causing a corresponding spread of material shortages – along with plant shutdowns and similar large-scale impacts – for automobile suppliers globally.

As Italy and Spain went into lockdown, other European countries and the USA have begun to follow suit, with many auto makers closing factory operations in Europe and North America starting from 16 March. Most of these shutdowns are 1-2 weeks long, during which manufacturers will decide on future developments.

Due to the pandemic’s impact and the recent stock market crash triggered by the Russia-Saudi Arabia oil price war, characteristics peculiar to the automobile industry (namely the need for customers to make purchase in person and the high retail price of automobiles) are expected to result in deferred or even eliminated market demand. Global auto sales in first-quarter 2020 are hence expected to decline by 24% year-on-year. Because many countries other than China are still experiencing peak pandemic activity, their auto markets will likely face considerable impact from the pandemic as well, in turn deferring most of the market demand to second-half 2020.

Tags: LED market Smartphone shipments



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