On the whole, chip demand looks stronger right now than what many feared it would be back in March. But there are also more pockets of weakness than what one might expect in light of how the Philadelphia Semiconductor Index has rallied to new highs.
Here's a quick overview of how chip demand currently looks within some notable end-markets, based on what chip developers have been sharing lately.
Areas of Strength
Cloud Capital Spending - Many chip suppliers reported on their April earnings calls that they're seeing strong demand from Internet/cloud giants, and commentary hasn't changed much since then. Nvidia (NVDA) and Broadcom (AVGO) both indicated via more recent earnings reports/calls that they're still benefiting from strong cloud orders, and companies such as Intel (INTC) , AMD (AMD) and Western Digital (WDC) have largely said the same during recent investment conference talks.
Telecom Capital Spending - This is an end-market where demand was generally soft in Q1, but has been picking up in Q2, thanks to both improved 5G capex and fiber/broadband network investments made to support the traffic spikes that have been seen in recent months. Equipment suppliers such as Cisco Systems (CSCO) and Nokia (NOK) have reported seeing stronger orders from telcos, and chip/component suppliers such as II-VI (IIVI) and Inphi (IPHI) have in turn reported seeing stronger demand from OEMs.
Medical Devices/Equipment - Not too surprisingly, chipmakers such as Microchip Technology (MCHP) and Analog Devices (ADI) have reported seeing very strong demand for chips going into medical products. Microchip asserted that its ventilator-related sales are (for now, anyway) up by 100x or more, while also noting demand has risen for chips going into products such as ultrasound machines and hands-free dispensers.
PCs - It's hardly a secret that notebook demand picked up in March and April, as consumers and organizations made purchases to support remote work and learning activities. And during recent conference talks, chip suppliers such as Intel, AMD, Western Digital and Micron have indicated PC-related demand remains healthy. However, Intel and AMD continue to caution that macro pressures could weigh on demand later this year, with Intel also suggesting on-premise enterprise server demand could soften.
Not-So-Strong Areas
Cars - With consumer spending currently under pressure and many auto plants having been temporarily shuttered, 2020 is shaping up to be a rough year for automotive chip sales. And recent commentary from companies such as ADI and Microchip suggests automotive demand is still weak, although Microchip did indicate (while hiking its quarterly guidance) that factory reopenings have boosted demand a bit.
Industrial Equipment - Factory closings and cautious capital spending are headwinds here for companies such as Texas Instruments, ADI and NXP Semiconductors. However, ADI did recently note that it's seeing some "green shoots" related to factory automation investments, and suggested efforts to regionalize supply chains will also be a growth driver going forward.
Smartphones - Between store closings and its impact on consumer spending and supply chain activity, COVID-19 has taken a toll on smartphone chip sales. Qualcomm said in late April that it expects phone volumes to be down about 30% annually in Q2, and Broadcom indicated more recently that this year's iPhone production ramp will start relatively late. However, for companies such as Qualcomm, Broadcom, Skyworks and Qorvo, such pressures are partly offset by the high chip content needs of 5G phones, which are quickly growing as a percentage of smartphone sales.
