THOUGHTS

The Sudden Impact of COVID-19 and Urgent Need for M&A in the Semiconductor Industry

Aug 21, 2020

The semiconductor industry is widespread, crucial, and required in various industries across the globe. Over recent years, industry experts forecasted immense growth for this industry in the coming years. However, the current COVID-19 pandemic serves as a significant roadblock to this growth trajectory. While semiconductor companies shifted their focus to ensuring employee safety and securing supply chains, the economic impact of the pandemic worsened. Since the start, the COVID-19 pandemic has caused a substantial amount of business shutdowns and a continually increasing rate of unemployment.

Currently, semiconductor industry leaders are aiming to prepare themselves for the post-COVID era and strategizing to succeed in the new normal. For this purpose, there has been a recent increase in mergers and acquisitions within the industry (M&A). To better explain this fact, Infiniti’s industry experts have discussed the impact of COVID-19, the future of the industry, and the importance of M&A support for semiconductor industries.

As the pandemic continues, semiconductor companies are strategizing for the post-COVID era. To find out the next ideal strategy for the semiconductor industry, request a free proposal.

The Impact of COVID-19 on the Semiconductor Industry

After witnessing years of steady growth, the semiconductor industry suffered the impact of the COVID-19 pandemic. A sudden decrease in sales of various end-use segments, accompanied by restraints on manufacturing and business operations, led to significant losses for semiconductor companies. Infiniti’s experts identified four major end-use segments that have influenced the losses of the semiconductor industry during COVID-19.

  • PCs: Although consumer demand for tablets and laptops has increased due to the shift to working from home, companies are not investing in hardware upgrades currently. Additionally, consumer demand is temporary, and frequent updates are improbable. This has led to reduced demand for PCs and servers, a significant end application segment in the semiconductor industry.
  • Wireless Communication: With a drop in smartphone sales, due to the reduction in GDP, the semiconductor sector is witnessing a substantial decline in demand. Consumers are shifting to inexpensive alternatives, which also impacts the semiconductor industry negatively.
  • Automotive: Due to the decline in GDPs across countries, investment in automotive has reduced significantly. The application of government incentives may moderately improve demand in this end application segment; however, if government incentives are not strong enough, decreasing demand in this segment will continue to impact the semiconductor industry negatively.
  • Consumer electronics: With lower amounts of discretionary funds due to unemployment, reduced salaries, and low GDPs, the demand for consumer electronics has seen a sharp drop. Inessential items such as gaming consoles, televisions, and watches will continue to witness low demand. Therefore, this end application segment will continue to impact semiconductor companies negatively.
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Semiconductor industry players have faced significant challenges in the market recently. To efficiently overcome the challenges posed by the pandemic, speak to our experts.

What is the future of the semiconductor industry?

Preparing for the post-COVID era is a challenging prospect for the semiconductor sector. While discretionary expenses and the demand for various end application segments may increase, it is not advisable for semiconductor companies to rely on a possibility. Therefore, top semiconductor companies have shifted focus towards M&A. With changing consumer expectations, new innovative technologies, while opportunities may be available in certain circumstances, semiconductor companies require the appropriate resources to take advantage of them.

Additionally, with the rise in smart manufacturing through COVID-19 and other major technological trends, the semiconductor industry should invest in creating smart factories and preparing for the post-COVID era. M&A could help semiconductor companies prepare for a recovering economy and higher demand, by supporting the creation and development of newer technologies, and capturing growth.

M&A Support in the Semiconductor Industry

M&A requires a strategic and well-informed approach to be effective. After the financial crisis of 2008, the semiconductor industry players that recovered and reformed fastest were those that had made strategic M&A decisions in the duration of the crisis. Semiconductor industry leaders and companies require a similar approach to recovering and reforming after the COVID-19 crisis.

However, developing a strategic approach to M&A is challenging, and significant industry players have started leveraging M&A support from firms such as Infiniti Research. M&A provides companies with the opportunities to grow efficiently, expand to adjacent businesses or pivot to new opportunities. M&A support enables companies to capitalize on these opportunities successfully. Infiniti’s M&A support experts guide investors through every step of investment while considering changing dynamics of the industry, and the current competitive scenario. Additionally, M&A support enables semiconductor companies to identify and capitalize on the ideal opportunities and surpass growth targets.

To gain comprehensive insights into Infiniti’s M&A support and learn how to champion the new normal of the semiconductor industry, get more information.

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