Semiconductor sales by market region
The semiconductor industry has been at the center of the US-China (FXI) trade war, as the two countries together account for the majority of worldwide semiconductor sales. According to the SIA (Semiconductor Industry Association), semiconductor sales rose 20.5% YoY (year-over-year) in June 2018 with the largest growth coming from China at 30.7%, followed by the Americas at 26.7%, Europe at 15.9%, Japan at 14.0%, and Asia-Pacific/All Other at 8.6%.
According to the World Semiconductor Trade Statistics (or WSTS), over 60% of the worldwide semiconductor sales come from the Asia-Pacific region. China is the largest consumer of semiconductor chips, as most of the PCs, smartphones, and consumer electronics are manufactured here. Skyworks, Qualcomm (QCOM), and Qorvo earn around 80%, 63%, and 60% of their revenue from China.
As China is the largest market for chip companies, the country’s regulatory approval is required in major M&A (mergers and acquisitions) deals. The Qualcomm-NXP Semiconductors (NXPI) deal got stuck in the US-China trade war, which resulted in Qualcomm walking away from the deal on July 25. However, Qualcomm, in its fiscal Q3 2018 earnings, stated that the trade war would not impact its sales from China.
China is investing in the semiconductor manufacturing space, especially memory chips. This move has alarmed South Korea (EWY), which houses two of the biggest memory chipmakers, Samsung (SSNLF) and SK Hynix. The memory market could grow rapidly as the world moves towards the data economy.
In light of the above developments, the South Korean Ministry of Trade, Industry, and Energy announced plans to invest $1.34 billion over the next ten years on the development of next-generation semiconductors. The investment would be focused on memory chips, foster logic, and the foundry business. Like China, South Korea would aim to get global semiconductor companies to set up their factories in the country. The Ministry hopes to make South Korea a global semiconductor hub. Next, we will look at semiconductor sales by product.
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