Weak demand, not just COVID-19, will hurt analog chips in 2020

ON Semiconductor saw analog chip sales drop 13% in 2019, joining eight other chip producers in the top 10 analog makers to see declines. The prospects for 2020 are not good, with the overall analog IC industry expected to drop 7%, IC Insights says.

Analog integrated circuit (IC) sales faced a broad downturn in 2019 and will decline another 7% in 2020, according to a forecast from IC Insights analyst Brian Matas.

However, the downturn in analog chips won’t be entirely be the fault of COVID-19, which seems to be hurting industries left and right on a global scale. Instead, weak demand will be a bigger factor, Matis told FierceElectronics this week.  Analog chips are used in power applications for vehicles and industrial as well as wireless.

“Covid will have an impact [on analog IC sales] and it did force us to lower our initial forecast in January,” Matas said in an email. “However, even without the virus situation, we believe that ongoing economic softness [as in] weak demand in many geographic regions will continue to weigh on the total analog market this year.”

In 2019, there was a “broader economic malaise” that took its toll on analog ICs, Matas explained.  “We believe the global analog market decline in 2019 had more to do with soft economic system demand rather than oversupply across all applications and geographic regions.”

For 2019, the decline was “widespread across all analog products” with an 8% decline, he said, resulting in a market of nearly $55 billion, down from nearly $60 billion in 2018.  Should the market fall another 7% in 2020, that would yield total global sales of less than $52 billion.

The 7% decline will be made up of a 3% decline in analog unit shipments and a 4% decline in the average selling price of the chips, Matas said.

The downward outlook for analog chips in 2020 will inevitably have its biggest toll on companies like Texas Instruments, which relies on analog chips for 75% of its semiconductor revenues. TI had $10.2 billion in analog sales in 2019, comprising about a fifth of the overall market and making TI the top producer, based on a tabulation by IC Insights released last week. TI's $10.2 billion in analog integrated circuit sales in 2019 represented a decline of 5% from 2018 when it pegged $10.8 billion, IC Insights said in a report released May 28.

IC Insights found that nine of the top 10 analog IC suppliers including TI saw reduced sales in 2019.  The others in the top 10 to decline were Analog Devices (down 6%), Infineon (down 1%), ST Micro (down 3%), Skyworks (down 13%), NXP (down 3%), Maxim (down 13%), ON Semiconductor (down 13%) and Renesas (down 4%).

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Analog chips are heavily deployed in power systems used in vehicles and industrial applications as well as voice and music applications in audio systems.  In wireless, analog ICs function to change frequency and modulation.

Matas said the analog decline in 2019 was felt across every analog product segment, from general purpose analog (amplifiers, interface, power management, signal conversion) to application-specific consumer, computer and communications.  Because the downward impact affected all analog product segments, it was an indication of a “broader economic malaise,” he added.    He noted that GDP declined in both China and the U.S. in 2019 over 2018, creating soft economies.