The coronavirus pandemic hit the electronic components industry like a freight train, knocking supply and demand for six. Now that 2021 is upon us, economies are starting to open up with pinned hopes on vaccines. This could be a banana skin, but 2021 should be a calmer year overall. The world should get back to business.
2021 in a nutshell
The avenues shut down for raw materials and shipments of electronic components will begin to open back up in 2021. This will create a healthier supply and demand market than 2020. Some issues will remain. Component shortages are likely, and this is especially true of newer parts that are found in connected devices.
Semiconductors will lead demand
The semiconductor industry saw a significant increase in global chip demand in 2020 and this will only continue in 2021. Cyclicity driven by 5G and Wi-Fi 6 upgrades and tailwinds like edge computing, AI and AR / VR will fuel demand.
Who will benefit most? Our money is on Broadcom, Arm, Qualcomm, Intel, AMD, Nvidia and Skyworks with TSMC winning on the foundry side.
DRAM will follow the path of semis
Dynamic random access memory (DRAM) is as essential to connected technologies as semiconductors. 2020 saw a sharp increase in recovery from the first quarter, and 2021 will exhibit a similarly healthy supply and demand situation.
Who will benefit most? Samsung, Micron and SK Hynix, who are the first, second and third largest manufacturers of DRAM respectively.
Shutdowns will continue
The risk of shutdowns of component production because of the coronavirus will remain in 2021. This will create extended lead times and supply issues. Governments may be forced to shutdown factories in localised areas.
The good news is this will become less common as the year goes on. The pandemic’s impact on production will reduce over time.
Tailwinds will fuel more demand than cyclicity
When evaluating electronic component demand, cyclicity and tailwinds are often pitched against each other. In 2021, we expect tailwinds like AI, edge computing, robotics and VR / AR to fuel greater growth than cyclical upgrades.
This is a sign of the times. The world is getting more connected and smarter. Innovation will fuel tailwinds and create booming tech sectors.
Counterfeiters will grow more prolific
One of the sad realities of electronic components is counterfeit components. They are becoming more sophisticated. As manufacturers clamber to get stock in this year, they are at a high risk of being targeted by counterfeiters.
Companies should rigorously control purchase sources, conduct quality inspections and use a trusted distribution partner to combat these risks.
Looking to the future
In 2020, the electronic components industry handled the coronavirus pandemic in an efficient and calculated manner. Supply and demand issues hit the industry, but they were solved for the most part in good time.
2021 will be calmer for several reasons: 1) We now have a lived experience of the coronavirus and know how to manage shutdowns efficiently, and 2) There is an increased need for us to get back to work and get on with our lives.
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