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Worldwide Semiconductor Demand will Accelerate in 2021

The technology sector is a key driver of the U.S. economy. Therefore, components like semiconductors play an important role in America's future. The 'CHIPS for America Act' is a new law that calls for incentives on domestic semiconductor manufacturing and investments in research and development. But these renewed efforts will require years of ongoing commitment.

Meanwhile, despite the impact of the COVID-19 pandemic, the semiconductor market performed well in 2020. However, new demand by industry was uneven throughout last year due to global lockdowns, remote working adoption, and shifts in consumer and commercial buying behavior.

Worldwide semiconductor revenue grew to $464 billion in 2020 -- that's an increase of 10.8 percent compared to 2019, according to the latest market study by International Data Corporation (IDC).

Semiconductor Technology Market Development

IDC now forecasts that the semiconductor market will reach $522 billion in 2021, that's a 12.5 percent year-over-year growth rate. IDC also anticipates continued robust growth in consumer electronics, enterprise computing, 5G telecom, and automotive semiconductors.

That said, supply constraints will continue through 2021. While shortages initially occurred in automotive semiconductors, the impact of component shortages is being felt across the board in semiconductors manufactured at older technology nodes.

Ongoing disruption to the semiconductor supply chain will impact the whole technology sector. The sector will likely continue to struggle to rebalance across different industry segments, while investment in new capacity now will improve the industry's resiliency in a few years.

Looking forward, IDC sees continued strong growth in semiconductor sales worldwide as the adoption of cloud computing technologies and demand for data and services remain unchanged.

According to the IDC assessment, global fiscal and monetary policy remains accommodative and will provide a tailwind for continued capital investments in long-term manufacturing infrastructure.

The market for semiconductors in Computing systems, such as PCs and servers, outpaced the overall semiconductor market, growing 17.3 percent year-over-year to $160 billion in 2020.

"Demand for PC processors remains strong, especially in value-oriented segments," said Shane Rau, vice president at IDC. "The PC processors market looks strong through the first half and likely the whole year." IDC forecasts Computing systems revenues will grow 7.7 percent to reach $173 billion in 2021.

Growth in Mobile Phone semiconductors was resilient in 2020. Mobile phone shipments fell by more than 10 percent in 2020, but mobile phone semiconductor revenues grew by 9.1 percent due to a shift to higher-priced 5G semiconductors, more memory per phone, sensors, and RF support for more spectrum bands.

Outlook for Semiconductor Revenue Growth

IDC analysts believe that  2021 will be an especially important year for semiconductor vendors, as 5G smartphones capture 34 percent of all mobile phone shipments, while semiconductors for 5G phones will capture nearly two-thirds of the revenue in the segment. IDC forecasts mobile phone semiconductor revenues will grow by 23.3 percent in 2021 to reach $147 billion.

The Consumer semiconductor market segment rebounded in 2020. Robust sales of game consoles, tablets, wireless headphones and earbuds, smartwatches, and OTT streaming media devices fueled segment growth by 7.7 percent year-over-year to reach $60 billion.

New gaming consoles from Microsoft and Sony, continued strong sales of wearables from Apple, and the rise in smart home networks managed by Amazon Alexa and Google Assistant will accelerate growth in 2021 to 8.9 percent year-over-year.

Automotive sales recovered in the second half of 2020, but the supply constraints for the automotive semiconductor market for some products will last through 2021. For the remainder of this year, IDC forecasts that automotive semiconductor revenue will grow by 13.6 percent.

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