The Trump administration is deciding how to help save the airline, cruise line and hospitality industries crippled by the coronavirus outbreak in the U.S., but what about the semiconductor and electronics industries?
President Trump on Monday afternoon said the crisis could last into August, making his remarks as the Dow closed the day by dropping nearly 3,000 points, marking its largest ever single-day points decline and worst single-day percentage loss since 1987.
Arguably, airlines are in the worst spot of any major industrial sector, yet there are a few market sectors that are buoyed by the crisis such as grocery chains like Costco, food producers and makers of chemicals that can be used to kill the virus, like Clorox, which finished up 4% on Monday.
What about the electronics industry and technology more broadly? Apple shares slid 12.86% on Monday after the company announced Friday it would close its stores outside China for the next two weeks. Also, the French antitrust authority announced Apple created cartels in its distribution network and fined the company $1.2 billion.
Intel and Nvidia shares were separately down 18% on Monday, while AMD was down nearly 12%. Broadcom shares got trounced, down nearly 20% to $187.58 after the company announced earnings last Thursday and said it wouldn’t give annual guidance for now because demand uncertainty is intensifying with COVID-10 outbreaks on the rise.
Intel closed the day at $44.61, not quite as low as its $43.46 close on June 3, 2019, the low point of the last 12 months.
The recent declines for semi makers are almost uniform, with the Philadelphia Semiconductor Sector index of 30 semiconductor companies down by nearly 16% on Monday, reaching $1,298.78, almost at the 12-month low of $1.296.89 hit on June 10, 2019.
Against such declines in shares, the industry had already seen a 12% decline in semi industry sales globally in 2019, compared to 2018, according to the Semiconductor Industry Association (SIA). Total sales for 2019 were $412 billion. January sales were $35.4 billion, down slightly, just 0.3%, from January 2019.
The SIA has been active in monitoring public policymakers like the White House that have an impact on the long-term health of the semi industry. In a recent blog, SIA CEO John Nueffer argued that America’s leadership in semis around the globe is “put at risk by broad restrictions on U.S. exports of commercial chip technologies to China.” Boston Consulting Group prepared the report, which was commissioned by the SIA.
In February, SIA blogged about the formation of a new White House Office of Science and Technology Policy interagency working group focused on advancing semiconductor R&D. SIA has called for tripling federal investment in semi research over five years to about $5 billion annually. The new working group will be a “significant boost to innovation in semiconductors and the many technologies they enable,” said David Isaacs, vice president of government affairs for SIA.
While SIA’s efforts appear to focus on long-term R&D funds and trade, the ITIF (Information Technology & Innovation Foundation) recently argued broadly that “technology should be part of any stimulus plan” envisioned by Congress. ITIF argued for an expansion of unemployment insurance to assist workers hardest hit in all industries. It also called for more generous Small Business Administration loans.
Coronavirus relief provisions are part of legislation now before the U.S. Senate. A multibillion dollar House measure includes access to free testing, $1 billion in food aid and sick leave benefits for Americans, but Senate Minority Leader Chuck Schumer, D-New York, said he will unveil a plan Tuesday of more than $750 billion that calls for more money for hospitals, expanded unemployment insurance and funds for small business, among other measures.
ITIF also called for immediate government help to expand access to low-cost broadband connectivity and devices and telemedicine tools. One step ITIF urged is for Congress to provide stimulus funds to expand the Lifeline program, which subsidizes connectivity for eligible low-income Americans. More broadband at home would make it easier to provide remote schooling. ITIF also called for Congress to allocate $10 billion for technology modernization in government and at least $1 billion for states to improve election technology.
Arguing that cities need data analytics and IoT to better manage public services and become more resilient in a crisis like the pandemic, ITIF argued Congress should allocate $2 billion for smart city funding.
“The coronavirus has shown how important widespread and advance information and communications technology are to society,” ITIF argued. “But with serious lags and gaps, America is not prepared for national crises like the one that is now unfolding. Congress can change this now and for the future with the right action.”
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