Semiconductor spend increases despite lower smartphone demand

Apple and Samsung both increased spending on semiconductors in 2020 despite weakened demand for smartphones due to coronavirus.

Gartner said the pandemic strengthened sales of other consumer electronics, PCs for work and accessories, while the widespread adoption of cloud computing services for work and education meant there was a greater need for data centre technology.

Overall, the top ten semiconductor consumers increased their spend by ten per cent during the year and increased their share from 40.9% of the market to 42%.

Semiconductor spending

This growth came despite challenges faced by some Chinese companies – most notably Huawei – in sourcing components due to US sanctions.

Apple remains the world’s biggest purchaser thanks to demand for AirPods, Macs and iPads, while Samsung is still number two.

The Korean electronics giant’s portfolio benefited from a weakened Huawei in the mobile market and the shift to cloud services and home working. Huawei is still number three despite a spending decrease of 23.% year-on-year.

“Two major factors impacted the top OEMs’ semiconductor spending in 2020, the COVID-19 pandemic and the political conflict between the US and China,” said Masatsune Yamaji, research director at Gartner.

“The pandemic weakened the demand for 5G smartphones and disrupted vehicle production, but drove the demand for mobile PCs and video games, as well as the investment in cloud data centres through 2020. Furthermore, a rise in memory prices in 2020 resulted in increased OEM chip spending through the year.

“The US government increased trade restrictions on Huawei in 2020, limiting its ability to purchase semiconductors, which, in turn, limited its smartphone supply and reduced its market share. However, the Chinese market remains important for semiconductor vendors, as other Chinese smartphone OEMs stepped in to fill the vacuum created by Huawei in the second half of 2020.”

Xiaomi would appear to have been the chief beneficiary of this vacuum given it increased semiconductor spending by 26%, a figure also driven by sales of other connected devices. However it too could be subject to sanctions in the not too distant future after the US added it to a list of firms suspected of having links to the Chinese military.

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