By Nathalie Voit

A new report released Jan. 3 by trade credit insurer Euler Hermes predicts that the semiconductor market will continue to grow in 2022.

According to analysts at Euler Hermes, global semiconductor sales are poised to increase by 9% in 2022. The strong predicted sales growth comes after the 26% surge in semiconductor sales in 2021. The report forecasts chip sales will cross the $600 billion threshold for the first time this year.

“The current semiconductor cycle has been firing on all cylinders since the industry emerged from its worst recession in 2019,” the analysts said.

According to Euler Hermes, three major factors have driven sales in the semiconductor space.

First and foremost, unprecedented demand for consumer electronics during the pandemic led to a boom in sales. Demand for personal computers, smartphones, and audio and video equipment accounted for 80% of final sales in the industry, the report noted.

Additionally, larger-than-anticipated demand coupled with a series of supply-chain-related shortages pushed prices up. Prices for semiconductors in 2021 increased as chipmakers struggled to meet “unusually strong” consumer demand while dealing with a labor shortfall due to the COVID-19 pandemic.

Finally, the credit insurance company said that an improved product mix of semiconductors also drove sales up last year as higher-priced and new-generation chips were introduced into the market.

However, the report warned that the industry is expected to face some risks in 2022 as demand growth normalizes and an “increasing frequency of unusually adverse climatic events” leads to a dent in sales.

Moreover, a “standstill” between the U.S. and China could ease growth as business on both sides may be disrupted due to prolonged restrictions on Chinese companies specializing in microchip manufacturing.

Meanwhile, ongoing supply chain disruptions from the pandemic continue to threaten the industry and limit manufacturing capacity.

“Unpredictable and random” events affecting major semiconductor markets like Taiwan and South Korea should also be considered, said Aurelien Duthoit, senior sector advisor for technology and retail at Euler Hermes.

“Further ahead, the industry will enter 2023 in the fourth year of its current growth cycle and is likely to experience a plateau in sales. History shows a semiconductor cycle lasts four to five years and is followed by a period of adjustment lasting 12 months on average,” the report concluded.