Uncertainty Plagues Chip Foundries, HPC Sector

By George Leopold

March 23, 2020

Semiconductor market analysts are divided in their assessments of how long and widespread will be the impact of the coronavirus on global foundry revenues and future demand.

The only thing certain is that the worsening COVID-19 pandemic introduces major uncertainties to the chip sector just as foundries were gearing up to meet growing demand generated by 5G wireless and edge computing deployments.

Among the more bullish forecasts was TrendForce, which noted last week that key foundries like Taiwan Semiconductor Manufacturing Corp. (TSMC) benefitted from advanced bookings and previous client demand aimed at stockpiling components. That “stock-up” demand cushioned revenue declines to only 2 percent over the previous quarter.

While the Taiwan-based market tracker noted expanded production capacity at foundry giants like TSMC and Samsung, especially for 5G, Internet of Things and automotive applications, it acknowledged growing uncertainty. Those headwinds could translate into foundry slowdown as western economies grind to a halt as the pandemic spreads.

“The foundry industry now faces major uncertainties on the demand side, possibly slowing the industry’s future growth momentum,” TrendForce acknowledged.

Other analysts were even more pessimistic, citing the widespread impact of travel bans and quarantines on the technology supply chains. Hence, IDC is forecasting a roughly 80-percent chance global chip revenues will contract in 2020, down from early estimates of modest 2 percent growth.

“Despite the growing uncertainty and panic, technology suppliers must continue to focus on their long-term investments, maintain engagement with partners and prospects and look to specific markets for stability,” counseled Mario Morales, IDC’s vice president for semiconductors and enabling technologies.

“Emerging technologies like 5G, the Internet of Things, high-performance computing and intelligent edge will be fundamental to an overall recovery by the technology sector,” Morales added.

Of particular concern is the impact of COVID-19 on China’s supply chain, which is only just now restarting production after two months of draconian restrictions on the movement of people and products. “The timing of the [Chinese] recovery is uncertain,” IDC said.

Uncertainty also pervades the HPC sector, a growing source of semiconductor demand. Hyperion Research said March 18 it expects delayed product shipments, especially from HPC components suppliers in China.

That portends a ripple effect of delays in HPC revenues, orders, product development, Hyperion said. Still, “most vendors expect customers to spend their annual HPC budgets once the COVID-19 threat subsides.”

The other ray of hope for the HPC sector was surging demand for supercomputing horsepower to combat the pandemic. For example, Oak Ridge National Laboratory announced in early March that Summit, the most powerful publicly ranked supercomputer in the world, has been enlisted to understand and mitigate the coronavirus.

While demand for HPC systems by virus researchers is described as “substantial,” Hyperion also noted that generally involves access to existing systems rather than orders for new HPC platforms.

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