Global chip sales continue to decline as US-China trade war escalates

08-Aug-2019 Intellasia | South China Morning Post | 6:02 AM Print This Post

Global sales of semiconductors the tiny chips that drive nearly every modern technology, from flat-screen televisions and smartphones to electric cars and the internet itself declined for the second consecutive quarter as trade tensions between the United States and China created industry uncertainty.

Worldwide chip sales reached $98.2 billion in the three months ended June 30, down 16.8 per cent from $117.9 billion a year earlier, according to data from the Semiconductor Industry Association (SIA), the trade body that represents US interests in chip manufacturing, design and research.

“At the midpoint of 2019, the global semiconductor market remains in a period of decreased sales, with revenues through June lagging the midyear totals from last year by nearly 15 per cent,” said John Neuffer, SIA president and chief executive, in a statement released on Monday. “Year-to-year sales were down across all major regional markets and semiconductor product categories.”

Chip sales in the first quarter dropped 13 per cent to $96.8 billion from $111.1 billion a year ago, according to the SIA.

The association’s latest quarterly industry data came days after US president Donald Trump vowed to unleash a new 10 per cent tariff on $300 billion of Chinese goods as of September 1. Trump said in a series of tweets last Thursday that the levy would be imposed because the latest round of trade talks had not yielded sufficient concessions from Beijing.

China’s foreign ministry said that announcement violated the agreement reached between the two nations, following a summit between Trump and his Chinese counterpart Xi Jinping in late June when the US promised not to impose further tariffs. This week, China has allowed the yuan to fall further against the US dollar, prompting the US to label it a currency manipulator, further roiling markets and clouding the economic outlook.

A new round of tariffs on $300 billion in trade with China will have potentially crippling consequences for the US economy, according to the SIA when it testified before the International Trade Commission in June on the Trump administration’s proposed fourth tranche of tariffs.

If implemented, the US government’s proposed new round of tariffs will encompass virtually all information technology (IT) products, including laptops, smartphones, solid state drives, video game consoles, printers, televisions and displays.

“IT firms make up a significant sector of the US economy, and any slowdown in this sector will have a ripple effect through a broad range of other industries, greatly impacting US economic growth,” the SIA said in June. “There is no scenario in which tariffs on IT products is positive for the US economy.”

Worries over such a slowdown intensified in mid-May when Huawei Technologies, the world’s largest telecommunications equipment vendor, was put on a trade blacklist by the US government over security concerns. That effectively barred the Shenzhen-based company from buying hardware, software and services from American hi-tech suppliers.

Micron Technology, the largest US maker of computer memory chips, said in June that it resumed some shipments to Huawei after determining that a subset of the products it sells to the Chinese firm was not subject to the rules covering the trade blacklist. China makes more than 90 per cent of the world’s smartphones, 65 per cent of personal computers and 67 per cent of smart televisions, according to estimates from Bernstein Research. But the country has had to buy much of the chips that go into these devices from abroad, especially the US. The value of China’s annual chip imports has surpassed oil in recent years, surging to $312 billion in 2018.


Category: China

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