Other Applications. Whilst High Added Value still was going strong in 2019 (based in Aerospace, which was compensating the decay on IGT) with an annual growth of 4.2% the other Market segments were already showing a decay, somehow significant in Automotive (-5.8%) and Other Applications (-1.5%).
This overall trend of market reduction except for aerospace was present in the first quarter of 2020 when the pandemic broke out in Europe. Subsequent to lockdowns and mobility restriction the whole profile of demand and supply changed and adjustments on orderbooks and capacities followed within the industry with a dominant effect on Commercial Aerospace and Automotive.
the
As a consequence of the above forecast
studies estimate an
overall European IC Market reduction of -26.8% at year-end, providing a figure dimension of 2.6 BUSD which represents a regression back to figures of 2012. As per the Market segments the estimates indicate -30.7% (High Added Value), -21.8% (Automotive) and -2.7% (Other Commercial
Applications). Aerospace is driving
the decay with an estimate of -38%. Notwithstanding the above some Market subsegments have manifested growth such is the case of the food industry or defence firearm applications.
This situation has affected as a whole to the European IC industry and measures have been adopted in terms of adjusting capacity with shifts reduction and temporary layoff of professionals. In addition, investments have been put into halt and priority attention is given to cash management.
Assuming that the pandemic is bound to be overcome via the health measures and vaccine application the arising question is how is expected the recovery to be. If we look to the GDP estimates figures of EU(27) + UK what we found is that versus an overall drop in 2020 in the order of magnitude of -7.4% ÷ -8.4%, the expected growth (recovery) for 2021 is in the order of magnitude of 6%, that is that this estimate do not foresee a full recovery by 2021. Translating the analysis to the IC sector and in consideration than the estimated drop for 2020 is deeper than GDP the
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conclusion is that it will take minimum 3 years to be in similar levels than 2019. Of course, this would manifest in a different manner depending on the market segments and product applications a company is operating. Another factor that happens also with any given crisis is that washes away all underlying existing problems that any given company might be carrying over and as a consequence the crisis effect are amplified vs the original root cause. Having established the above, recovery for each company would not be equal as per the demand recovery and this represents an opportunity to reposition the companies and their line of products to gain in competitiveness. This is why it is so important not only to apply the reactive measures to withstand the crisis effects but to plan ahead reviewing the strategy, technological solutions and competitive factors that will reposition the company on the recovered scenario.
October 2020 ❘ 13
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