Semiconductor macroeconomic trends 2020

China remains the primary industry shaper in semiconductors. China’s current economic and technology war with the US shows every sign of being protracted, confusing, and disruptive.

Listed below are the top semiconductor macroeconomic trends, as identified by GlobalData.


China buys more than 40% of global semiconductor production, but only 20% of its demand is met by domestic suppliers. China accounts for at least 30% of the revenues of the top seven US chip companies and, in turn, provides them with supply chain services such as testing and packaging (although some services are moving to Vietnam, Malaysia and Thailand).

With the US ban on chip exports to Huawei, the blacklisting of major Chinese companies supplying equipment used to monitor Uighurs, and continuing US blocks on Chinese corporate acquisitions, Beijing is pushing to become as self-sufficient as possible in chips. However, it is currently up to a decade behind the US and Korea in chip technology.

The volatility between the US and China will continue for the next two years at least. China will not reach parity with the US, Korea, or Taiwan by 2025. However, domestic production by native Chinese companies is probably on track to cater for 25% of its semiconductor needs by 2025.

The Chinese government relies heavily on Baidu, Alibaba and Tencent’s captive operations and investment in start-ups to develop its home industry. Alibaba’s Pingtouge chip subsidiary could become one of the worlds most advanced and aggressive chip operations within five years. Of China’s plethora of start-ups, AI chip specialist Cambricon and AV chipset provider Horizon Robotics are world-class. We expect many startups to be acquired by giants like Baidu, Alibaba, Tencent, Huawei,, or Ping An.

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By GlobalData

The Trump factor

President Trump’s mercurial policy decisions will continue until at least the November 2020 presidential election. Trump’s tariffs have had negative consequences for US business and consumers. There were signs of the administration dialling back on tariffs against China by late 2019. So far, the US semiconductor industry has watered down the impact of tariffs through supply chain manoeuvers.

By mid-2019, Beijing had decided that Trump was weak. China is gearing up to fight a protracted technology war with the US. Beijing’s belief that it has the upper hand will determine the intensity of future tariff and technology wars. This will shape the scene in 2020 and beyond. If things get hot, China will threaten the US with a block on exports of industrial-grade rare earth minerals, critical to the US defense and electronics industries.

The stance on China of the Democratic Party’s presidential candidate will be an important issue during the election campaign. It is likely the party’s 2020 platform will call for multilateral cooperation with Europe, Japan, and others to counter China. This could be more worrying to Beijing than a Trump continuation.

Mergers and acquisitions (M&A)

M&A has calmed down compared to the $200bn spree of 2015-2016, which led to a 40% contraction in the number of independent chip companies. An additional drag on M&A activity is US’s ban on Chinese acquisitions of US-based semiconductor companies.

We do not expect the average annual M&A run rate of $30bn a year to increase over the next two to three years. M&A will be driven in part by the leading chip companies using M&A to cut costs, round out R&D resources, and acquire skilled design, AI, and data management personnel. The big players will continue to fund or acquire AI start-ups from the large populations in the US, Israel, and China. Alibaba will be especially active.

This is an edited extract from the Tech, Media, & Telecom Trends 2020 – Thematic Research report produced by GlobalData Thematic Research.