There is a bit of a dark cloud over the industry at the moment. It may not be too surprising since we are in one of the longest periods of sustained growth since the last downturn in 2008, meaning a market correction is probably relatively close. There have been a lot of indicators, including from market analyst IHS Markit who revised its forecast for 2019 from 2.9% growth to a 7.4% drop. The reason given for the downturn is increasingly soft demand, combined with a rapid rise in inventory levels in the first quarter. The IHS Markit report doesn’t mention power electronics specifically, but Infineon’s CEO, Dr. Reinhard Ploss, gave us a little more insight at the company’s recent second quarter financial announcement. He said that, “the boom is over for the time being, the momentum in demand has weakened. Revenue was up for automotive and digital security, slightly down for industrial power control and more significantly down for the power management and multimarket segment”. Infineon’s results were quite reasonable for the market, but other companies focussed on power alone could have more problems.
The troubles for the industry don’t end there though. There are also several other significant events regionally and globally that could prolong or worsen any downturn. In Europe, there is still no sign of a solution to Brexit, which has paralysed decision making and hurt investment in both the UK and continental Europe. The recent European elections haven't helped either, with parties from both the left and right extremes of the political spectrum making inroads at the expense of stable centrist parties. The long-standing centrist alliance may not continue to hold the power in the forthcoming parliamentary session for the first time, but there should be enough moderate candidates to form a new centrist alliance.
Globally, things are no more stable. President Trump is continuing to try force the EU and China to the negotiating table by implementing tariffs. The US relationship with China, especially, has reached a new low point. Not content with tariffs, Trump has also placed sanctions on Chinese multinational telecoms company Huawei, supposedly on national security grounds. The sanctions stop US companies selling technology to Huawei. Huawei is the world’s third biggest manufacturer of mobile handsets with 14.7% of the market and 260 million phones sold this year already. The sanctions will hit the company’s power component suppliers hard, as it will to those suppliers focussed on the 5G infrastructure market, where Huawei is the market-leader.
However, all may not be quite as bad as it seems, and if we can overcome the challenges, then there is the prospect of a swift bounce back. IHS Markit Technology sees that too and forecasts a recovery in semiconductor sales in the third quarter.
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