In 2020, Taiwan manufacturing output will decline by about 5%, but the semiconductor industry will maintain positive growth. Semiconductor refers to a material whose conductivity can be controlled. The upstream of the semiconductor industry chain is IP and IC design, the midstream is IC, wafer, mask or chemical manufacturing, and the downstream is the packaging and testing industry.
Semiconductor industry scale
Semiconductor refers to a material whose conductivity can be controlled. The conductivity is between metal and insulator. By injecting impurities, the conductivity of semiconductors can be precisely adjusted. The invention of semiconductors has a considerable impact on the development of human information technology. This material is universal Applied to the core of electronic products, the upstream of the semiconductor industry chain is IP and IC design, the midstream is IC, wafer, mask, or chemical manufacturing, and the downstream is the packaging and testing industry.
According to statistics from the World Semiconductor Trade Statistics Association, in 2019, the global semiconductor sales prices fell, with sales decreased by 7.2%, product average selling prices also fell by 5.3%, and total output value decreased by 12.1%. Taiwan's semiconductor industry performed relatively brightly in 2019. According to TSIA statistics, the total output value of Taiwan's IC industry in 2019 was 2.66 trillion yuan, an annual increase of 1.7%. Among them, the output value of the IC design industry was 692.8 billion yuan, an annual increase of 8%, the best performance.
Affected by the decline in the memory manufacturing industry, the overall IC manufacturing output value was 1.47 trillion yuan, a year-on-year decrease of 0.9%, making it the worst-performing sub-industry in 2019. The output value of the IC packaging industry was RMB 346.3 billion, an annual increase of 0.5%; the output value of the IC testing industry was RMB 154.4 billion, an annual increase of 4%. The sharp correction of memory prices in 2019 is the main reason for the decline in the output value of the global semiconductor industry. Taiwan's memory size is small, and the impact of the decline in memory prices is relatively limited. This is a key to Taiwan's IC industry output value performance better than the global semiconductor industry. With the effective depletion of the market inventory and the improvement of the memory market, the global semiconductor industry is expected to rise this year. Taiwan's overall IC industry output value will also have the opportunity to rise simultaneously with the optimistic outlook of Taiwan Semiconductor Manufacturing and other players.
According to ITRI statistics, the output value of Taiwan’s IC industry in 2019 reached NT$2.665 billion, an increase of 1.7% from 2018. Among them, the IC design industry output value was NT$692.8 billion, an increase of 8.0% compared to 2018; IC manufacturing was NT$1.4721 billion, a 0.9% decline from 2018, of which foundry was NT$1.312.5 billion, compared with 2018 Annual growth of 2.1%, memory and other manufacturing was NT$159.6 billion, a decline of 20.4% from 2018; IC packaging industry was NT$346.3 billion, an increase of 0.5% compared to 2018; IC testing industry was NT$154.4 billion , An increase of 4.0% compared to 2018.
The Industrial Technology Research Institute (ITRI) released the forecast results of Taiwan’s manufacturing boom in 2020, predicting that the manufacturing output value in 2020 will be NT$18.59 trillion, and the output value growth rate will be -5.05%. After the US-China trade war, the COVID-19 epidemic hit the world in 2020, and the leading indexes of major economies have mostly declined. The international economic prosperity is facing severe tests, which put pressure on Taiwan's manufacturing output growth. ITRI also recommends that in the post-epidemic era, it is necessary to actively assess supply chain risks, adopt a “headquarters value” thinking, strengthen the resilience of the supply ecosystem, and accelerate the digital transformation of enterprises.
The ITRI forecasting team stated that due to the spread of the COVID-19 epidemic, governments of various countries have adopted lockdowns and border control measures to suspend economic activities. Production activities in major countries have slowed down, supply chain procurement has been delayed, and public consumption has also been affected. Oil prices have fallen sharply from 2019, which is detrimental to Taiwan's manufacturing production and sales. Fortunately, Taiwan’s epidemic is well controlled. Although domestic economic activities are affected, it can still be maintained. The profitability of international transfers and the advance deployment of government economic relief measures will help alleviate the impact of international factors on the domestic economy. It is estimated that the output value of Taiwan's manufacturing industry in 2020 will decrease by 5.05% from last year.
Besides, benefiting from the rise of the housing economy and the continuous introduction of new technology applications such as artificial intelligence (AI) and 5G, it is expected to bring new business opportunities to Taiwan's manufacturing industry. However, the Wuhan pneumonia vaccine has not yet been successfully developed. Whether the epidemic will return after work in various countries or winter, it is still necessary to continue to track the follow-up impact on the industry. Recently, the US-China Economic and trade disputes have heated up again, which may affect the supply chain layout and production and sales prospects of Taiwan's information and electronics industry. The future development of the situation also requires continuous attention.
The four major manufacturing industries forecast sluggish international demand, impacting Taiwan's manufacturing output performance
Metal electrical machinery: The international construction, automobile market, and mechanical equipment demand are weak. The world crude steel output and raw material prices are expected to continue to decline. This is unfavorable for the sales of steel products, auto parts, and machinery and equipment, and limits the output performance of Taiwan metal electrical, and mechanical industries. Therefore, the metal electrical and mechanical industry is expected to be NT$5.24 trillion in 2020, a decrease of 4.62% from 2019.
Information electronics: Taiwan’s epidemic prevention is adequate, and production activities can still be maintained. With the housing economy, AI, and 5G infrastructure fermentation, it is expected that new consumption models and demand are expected to bring business opportunities, making the semiconductor industry support for Taiwan’s information and electronics industry production and sales growth in 2020 Main force. However, follow-up needs to continue to pay attention to the development of the epidemic, as well as the impact of the US-China trade war and changes in the economic situation of various countries on the global information and electronics industry demand and supply chain procurement. It is predicted that the output value of the information and electronics industry in 2020 will be NT$7.1 trillion, a slight increase of 1.1% over the same period in 2019.
Chemical industry: Due to the restricted global economic activities, supply and demand in the crude oil market are severely imbalanced, and oil prices are hovering at low levels. The U.S. Energy Information Administration (EIA) significantly lowered the average annual price of Brent crude oil to US$33 per barrel. The decline in oil prices has led to a continual decline in the quotations of petroleum-related refined products, and the difference between crude oil purchase costs and refined product prices has converged. Under the influence of the same drop in price and volume, the output value of Taiwan's chemical industry is unfavorable. It is predicted that the output value of the chemical industry in 2020 will be NT$3.81 trillion, and the annual growth rate will be -16.36%.
People's livelihood industry: Affected by the epidemic, people have reduced their consumption frequency when they go out, and Taiwan has implemented border control measures, resulting in a sharp drop in the number of foreign tourists visiting Taiwan, which has an impact on the revenue of domestic retail, catering and other service industries. Also, recent domestic consumer confidence tends to be conservative, which will also limit the production and sales of people's livelihood industries. It is predicted that the industrial output value of people's livelihood in 2020 will be NT$2.44 trillion, and the growth rate will be -2.69%.
Taiwan's semiconductor industry is expected to continue to grow positively in 2020, outperforming global performance
Looking back in 2019, although the US-China trade dispute slowed down the global economy and trade, Taiwan's semiconductor industry output value can still maintain a positive growth of 1.7%. According to statistics, Taiwan's semiconductor output value in 2019 reached NT$2.665 billion. Among them, the expansion of demand for smart homes and ASICs has driven the growth of IC design services. Although the IC manufacturing business is dragged down by memory demand and price declines, the foundry business is still driven by the demand for high-end chips such as smartphones, high-speed computing, Internet of Things, AI, etc. The IC manufacturing output value remains flat in 2019. IC packaging and testing benefited from the growth of downstream customers' demand for heterogeneously integrated packaging and maintained a small growth throughout the year. In total, in terms of the added value rate of each industry in 2019, the semiconductor industry (excluding IC design) remained at 62.1%, which was significantly higher than the manufacturing average of 29.1%.
Looking forward to 2020, under the impact of the COVID-19 epidemic on the global economy, it is predicted that Taiwan's semiconductor industry can maintain a positive growth of 4.0%~5.7%, and the output value can reach NT$2.8 trillion. Among the favorable factors, including AI artificial intelligence, 5G, automotive and Internet of Things, smart applications, and other diversified developments, support the development of ICs globally and in Taiwan. Second, the epidemic has driven demand for homework, remote teaching, servers, etc., while also stimulating the shipments of epidemic prevention-related ICs, including microcontrollers, temperature sensors, and chips for respirators. Leading manufacturers have advanced technology and advanced process capacity. It also stimulated a substantial growth in Taiwan’s semiconductor exports.
IC manufacturing has the highest added value rate in the semiconductor industry
Taiwan’s semiconductor industry includes IC design, IC manufacturing, and IC packaging and testing, which organizes Taiwan’s semiconductor industry. In terms of unfavorable factors, first, due to the impact of the epidemic, except for a few products such as servers, base stations, and high-end laptops, international market research agencies have all lowered their estimates of global terminal electronic products and semiconductor sales month by month, which will impact Taiwan the growth momentum of the semiconductor industry. The U.S. government continues to strengthen its control over China, requiring chip suppliers to prohibit supply to Huawei when using U.S. software, equipment, and related technologies without the prior approval of the U.S. government. There may be demand for urgent orders in the short term, but there are also concerns about reducing orders for 2020. China also intends to strengthen the local semiconductor supply chain and accelerate the establishment of a non-American industrial ecosystem, adding uncertain factors to the development of Taiwan's semiconductor industry.
2020 semiconductor strategy should use global headquarters value, expand epidemic prevention and new application services, the ITRI IEKCQM forecasting team pointed out that the key successful experience of Taiwan's semiconductor industry is taking the science park as the core driving role, and then forming a complete cluster of upstream, middle, and downstream technology corridors. In the post-epidemic era, Taiwan’s semiconductor industry cluster advantages should still be used to focus on the next generation of innovative products and application services. And with Taiwan as the value of global headquarters, it drives the diversified development of the semiconductor industry.
Secondly, under the impact of the epidemic, the demand for epidemic prevention-related medical products such as temperature sensors, medical respirator chips, and epidemic prevention medical material microcontrollers has increased significantly. The epidemic has also driven notebooks and game console-related processors, computing chips, and DRAM. Also, after the epidemic, attention should be paid to the development of 5G infrastructure and emerging technology applications, which will drive demand for communication chips and smart chips. In the long run, after the epidemic, the importance of de-globalization and resilient manufacturing will rise sharply. Both companies and customers will require more detailed product information and inventory preparation, review real-time production, and shift to stable supply. The semiconductor industry will become more Pay attention to production flexibility and customer contact density. The development of emerging technology applications will accelerate the digital transformation of enterprises, such as the introduction of technology solutions such as remote operation, unmanned, virtual, and real integration, which will generate a large amount of chip demand. As for the unmet needs of remote work, teaching, medical information security issues, and people-oriented "temperature", they are also potential business opportunities for the semiconductor industry in the future.
Among the many semiconductor industries, the foundry is Taiwan most important industry, with its output value accounting for 49.2% of the overall semiconductor industry. Taiwan’s foundry and IC packaging and testing industries rank first in the world in terms of market share, especially TSMC is the most representative and ranked first among the world's foundry industry. In 2017, the global market share reached 55.9%. TSMC has invested a lot of money in technology research and development. Its 10nm process has good technical capabilities, yield and Power consumption control is superior to competitors such as SAMSUNG, monopolizes Apple mobile phone chip orders, and the more advanced 7nm process is also put into mass production. It has won important orders from international manufacturers such as Apple and Qualcomm Semiconductor Corporation. Can it continue to lead in technology in the future? Competitors will be the key to maintaining global market share.
Among the many semiconductor industries, the foundry is Taiwan most important industry, with its output value accounting for 49.2% of the overall semiconductor industry. Taiwan’s foundry and IC packaging and testing industries rank first in the world in terms of market share, especially TSMC is the most representative and ranked first among the world's foundry industry. In 2017, the global market share reached 55.9%. TSMC has invested a lot of money in technology research and development. Its 10nm process has good technical capabilities, yield and Power consumption control is superior to competitors such as SAMSUNG, monopolizes Apple mobile phone chip orders, and the more advanced 7nm process is also put into mass production. It has won important orders from international manufacturers such as Apple and Qualcomm Semiconductor Corporation. Can it continue to lead in technology in the future? Competitors will be the key to maintaining global market share. The semiconductor industry has the characteristics of technology and capital intensive.
