How well will the world adapt to more remote work?
“I think that remote work does work well in places like the U.S. and Europe,” Morales said. Asian commercial cultures, by contrast, tend to require more in-person interactions, he added, so the adjustment might be more difficult.
Adjusting to pandemic realities extends to education in particular.
“There's over 30 million children that attend just the public schools in the U.S.,” Morales said. “Now, if they're all not going to school right now, they're all going to start using different types of applications like Zoom to stay somewhat connected to their classrooms and their teachers.”
“Where I see a big change is when you start thinking about shelter-in-place and work-at-home scenarios. You're going to need a lot more internet infrastructure,” he added. “So, that means more servers and larger data centers to support the streaming services.”
Thus, demand for computing infrastructure should support the semiconductor market in the months ahead. Even so, pandemic-induced disruptions fog the view.
What’s Next for the Semiconductor Industry
Morales and his fellow IDC analysts took a hard look at the chip industry in a report titled “Impact of COVID-19 on the Worldwide Semiconductor Market Forecast.” Among the report’s projections for 2020:
Almost 80% chance of a notable decline in the global semiconductor market
Over 50% likelihood of the industry declining at least 6%
One-in-five chance of a rapid rebound after an initial sharp contraction
Morales said that before the pandemic erupted, IDG expected the introduction of 5G smartphones in 2020 to fuel demand for semiconductors. Moreover, tech titans like Google, Facebook, Amazon, Microsoft and others were expected to resume investing heavily in cloud infrastructure. And enterprises were likely to invest more in their own private clouds.
The pandemic is putting the brakes on those plans.
“In some cases, it could be one or two quarters of delay,” Morales said.
The path forward in the next few months has so many variables that it’s all but impossible to anticipate the most likely outcome. Each nation will vary in its ability to contain the pandemic. Weeks or months of shelter-in-place take their toll on demand for everything — including the components at the core of computing.
“You look at energy prices now, and you've seen where the price of oil is going,” Morales said. “It tells you a lot about where demand potentially goes. That means that people are not driving as much. You've got airlines now basically hunkered down and not flying. That has an immediate impact on energy prices.”
That kind of economic fallout will proliferate throughout the economy in response to the pandemic. If people spend less on technology in the first half of the year, then the semiconductor industry could pay the price in the second half, Morales noted.
Ultimately, semiconductor spending should rebound, particularly in areas like technology infrastructure that are integral to long-term technology transformations.
“You're seeing investments in infrastructure for smart cities, for smart buildings,” Morales said. Once those projects get going, it’s difficult to stop them — though they may face short-term delays.
“I think inevitably they do come back,” he concluded. “And they are going to be very important and foundational to the semiconductor market returning back to growth.”