Chip demand could roar back this year, experts say

Demand for chips, displays and home electronics are likely to see a boost in demand once the new coronavirus is contained, several experts said during a Korea Chamber of Commerce and Industry meeting Tuesday.

The chamber’s meeting in central Seoul brought together analysts and academics to discuss business strategies to respond to the coronavirus pandemic.

Participants generally agreed that Covid-19 was driving transformation across multiple industries, including the expansion of remote services and an increase in online content. Combined with an anticipated recovery in the global economy after the pandemic, the overall adoption of new technologies will likely boost demand for IT parts and devices.

Semiconductors in particular - which account for a large portion of Korea’s overall trade - may see demand suddenly skyrocket during the second half of 2020 if the coronavirus is contained in the near future.

“The pandemic has not dealt a substantial blow to the semiconductor industry yet. If the spread in the United States and Europe is slowed down by June, the overall effect will be minimal,” said Song Myung-seob, an analyst with Hi Investment & Securities. “There were past instances where the industry experienced rapid recovery after an epidemic. Likewise, if the pent-up demand for IT devices explodes in the year’s second half, the recovery speed for semiconductors will also gain strength.”

The demand slump for consumer electronics has also been relatively small, and the respiratory disease is expected to eventually boost consumers’ focus on health, hygiene and machines including air purifiers, drying machines and stand-alone apparel cleaners. Sales of products related to indoor air quality have increased 46 percent in the past three years.

The short-term outlook for the electric vehicle market is mixed. Some point out that carmakers in Europe and the United States are urging governments to ease emissions regulations, citing the cratered demand since the coronavirus began its global spread. If those efforts are successful, those regulatory changes could also slow electric vehicles’ expansion in the market.

Kiwoon Securities’ research center head Kim Ji-san, however, said the effect will be short-lived and that local producers will continue to benefit from a growing market in Europe. Electric vehicle battery contracts usually span a period of several years, making them less vulnerable to short-term demand fluctuations.

The immediate outlook for displays in the short term is negative, said Jung Won-seok, a researcher with Hi Investment & Securities. The pandemic had shut down factories and caused a halt in production, he noted, and demand will likely be affected, although a strong recovery in IT devices may prompt a quick rebound. Korean display makers have also been struggling as Chinese competitors flooded the market for LCD displays with low-cost alternatives.

“Currently, China has surpassed Korea in the LCD panel market,” Korea Display Industry Association Vice Chairman Seo Kwang-hyun said. “Our task now is to maintain Korea’s technology leadership in the OLED market. For that, we need support from the government like wider tax cuts on research and development costs.”

Industry officials also raised the issue of Korean employees still being unable to enter foreign production sites to upgrade or expand facilities.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]