While 2019 is in full swing, it’s important to take a look back at the events that impacted the global electronics supply chain. It’s equally important to consider how those events will shape the year ahead.
Image by mohamed_hassan on Pixabay
The explosive progression of Internet of Things (IoT) and the automotive industry has led to higher than anticipated demand for electronic components – creating unprecedented shortages and some whose end is still uncertain. However, we can be certain of a few trends that can aid us in our preparation for this year. These are: supply chain disruptions resulting from mergers and acquisitions (M&As); the continuous push for electric vehicles; and the impending resurgence of cryptocurrency.
Residual effects from M&As
The last few years have been abnormally busy with mergers and acquisitions. In fact, according to IC Insights, about 100 M&A agreements were reached between 2015 and 2018. This could cause residual effects in the industry such as line obsolesce and availability, operational issues, supplier reduction, and a reset in direction within semiconductor companies that could present supply chain risks.
We expect that M&As will continue in 2019 and catalyze supply chain disruptions, though the current political climate and global trade concerns will likely limit the amount of mega-deals we’ve seen in the last 10 years. Qualcomm’s terminated bid for NXP Semiconductors, for example, would have been the biggest semiconductor takeover globally but is now the latest high-profile casualty of the trade spat with China.
The future of the electric road
As evident by General Motors’ recent development and Ford’s announcement earlier this year to end sales of sedans in North America, U.S. automakers are starting to pave the way for a low carbon future by leveraging today’s popular SUVs to fund tomorrow’s electric vehicles. This supports the Worldwide Electronic Systems compound annual growth rate (CAGR) prediction, where automotive electronic system sales are expected to increase by 5.4% from 2016 through 2021. In fact, the automotive segment will be the strongest end market for semiconductor chips and account for 9.8% of the global electronic systems sales by 2021, according to IC Insights. As we move to a more eco-centric automotive market, we can anticipate that the high demand for automotive components we’ve witnessed over the past couple years will maintain throughout 2019 and beyond.
Shortly after the explosive growth of the crypto market in early 2018, the digital currency dipped in Q2 and again in Q3 after a slight resurgence. Consequently, the value of graphic cards (often utilized by crypto miners) has also risen and fallen in accordance with the market, causing fluctuating demand across the supply chain. However, with the rapid adoption of blockchain platforms across the world, used as the underlying technology behind cryptocurrencies and much more, cryptocurrency will need to meet this demand in an effort to stabilize it.
Perhaps the most significant indicator that cryptocurrency will surge in 2019 is the long-awaited institutional demand which will have a direct influence on Wall Street’s decision to back crypto. Therefore, it seems likely that we’ll witness another crypto miner gold rush where graphic cards will enjoy a significant rise in demand, especially if a digital currency exchange traded fund (ETF) is made available to U.S. investors. Electronic component distributors would be wise not to rule out another spike in graphics card demand in 2019.