After increasing 9.9 percent in 2014 to a record $335.8 billion, global semiconductor sales fell slightly in 2015 to $335.2 billion.4 Much of the dip in the value of sales was due to exchange rate factors. According to IC Insights, sales by the top 20 semiconductor companies for 2015 would have risen 4 percent instead of remaining flat if exchange rates had remained constant. 5 World Semiconductor Trade Statistics (WSTS) predicts growth for 2016 at 1.4 percent and 2017 at 3.1 percent.
Five of the top ten and eight of the top 20 semiconductor companies (including foundries) are U.S. firms.7 The U.S. is the leader in the semiconductor manufacturing equipment industry, with 47 percent of the world market. Along with Japan and the Netherlands, these top three countries control over 90 percent of the $37 billion global markets.
Although there was a slight downturn in the industry in 2015 when the market is calculated in dollars if exchange rates had remained constant, sales would have risen, and sales did rise on a unit basis. In 2016, the market is expected to enter a cyclical upturn that will continue into 2017. The U.S. market is only approximately 15 percent of semiconductor manufacturing equipment sales; thus U.S. companies need to export. Over 90 percent of global semiconductor manufacturing equipment sales outside the United States take place in five markets: China, Taiwan, Japan, Korea (South) and the EU, creating a very concentrated market.
Over the past decade, China consistently ranks as one of the largest and fastest growing country markets for U.S. semiconductors and semiconductor manufacturing equipment and will continue to do so in the near-term. Global headwinds brought on by slowing global demand for ICT products, slowing transitions to smaller IC manufacturing nodes and a strong dollar, however, will be exacerbated by China’s opaque policies and unprecedented, state-led investment to develop an indigenous semiconductor industry. China’s policies create medium and long-term uncertainties for U.S. industry prospects in the Chinese market.
European Union (EU)
The case study for Germany in the 2015 report is replaced this year with an EU case study, as it makes sense to look at multiple countries when selling into Europe. The EU is the second largest market for U.S. semiconductor exports, and the EU is expected to be the fastest growing market for semiconductor manufacturing equipment in 2016. Due to the EU’s participation in the WTO Information Technology Agreement (WTO ITA), most types of semiconductors and Semiconductors Manufacturing Equipment enter EU member states duty-free, and further coverage came with the WTO ITA Agreement expansion that was agreed upon in December 2015.
Japan is an important market and competitor for U.S. semiconductor and semiconductor manufacturing equipment companies. Japan has the third largest electronics manufacturing industry in the world and is home to two of the top 10 semiconductor buying companies, Sony and Toshiba, which also are also top semiconductor producers and customers for semiconductor manufacturing equipment. In 2015, Japan switched places with China to regain its position as the third largest country export market for semiconductor manufacturing equipment but is expected to return to fourth in 2016. Japan is a participant in the WTO Information Technology Agreement (WTO ITA), and will eliminate tariffs on all products under the WTO ITA expansion on the implementation date – July 1, 2016.
Korea is the fourth largest export market for semiconductors and the second largest export market for semiconductor manufacturing equipment. Korea is a participant in the WTO Information Technology Agreement, so most types of semiconductors and semiconductor manufacturing equipment enter the country duty-free, and any remaining types are covered under the U.S.-Korea Free Trade Agreement and the WTO Information Technology Agreement expansion.
Taiwan is the top market for semiconductor manufacturing equipment and the sixth largest U.S. export market for semiconductors. Taiwanese companies are major manufacturers of electronics equipment. Final product assembly often takes place in China, and semiconductor export sales are mainly attributed to that market. Both design and buying decisions for the semiconductors in the electronic equipment, however, often take place in Taiwan. Taiwan, a participant in the WTO Information Technology Agreement (ITA) and the WTO ITA expansion (with implementation beginning July 1, 2016), presents no significant tariff or non-tariff barriers to U.S. exports. Taiwan’s leadership in semiconductor foundry necessitates purchase of state-of-the-art semiconductor manufacturing equipment.