Pivoting from 4G to 5G
Demand for semiconductors expected to heat up as countries upgrade their telecom networks
23 Jul 2021 | Darryl Yu

With the growing need for digital efficiency and an internet of things (IoT) lifestyle, many countries are looking to develop and upgrade their telecom networks towards 5G technology. Around 100 times faster than 4G, reaching speeds of 10 gigabits per second, 5G has the potential to support functions such as autonomous driving and augmented/virtual reality.     

Underpinning the development of 5G technology is the critical semiconductor industry which has experienced significantly increased demand over the past several years.

“The Asian semiconductor outlook for companies remains positive into results for the 2H21 outlook and at this stage favourable supply-demand carrying into 2021, driven by continued strong tech demand and tight semiconductor supply driving up pricing,” according to a recent research note from Credit Suisse.

Indeed, global semiconductor leaders such as Intel, Samsung Electronics and TSMC have seen steady business growth over the past few years as they look to help telecommunications companies improve their services. In India, for example, Intel is working with Indian telecoms company Reliance Jio to develop its 5G network.

According to a research note from credit rating agency Moody’s Investors Service, “TSMC expects that the global market for foundry chipmaking (contract chip manufacturing) will grow about 16% in 2021. The solid industry growth outlook will be a result of strong demand from the 5G wireless technology, especially 5G smartphones, and high-performance computing.” The Taipei-based company hopes to keep up with increased demand for semiconductors and plans to spend US$100 billion over the next three years to grow capacity.

Demand for semiconductors is not expected to slow down anytime soon with countries such as China aiming to continue driving their 5G and overall digitization efforts over the next few years. The country has so far deployed 916,000 5G base stations, accounting for around 70% of the world’s total, with 5G-connected devices exceeding 365 million, according to data from China’s Ministry of Industry and Information Technology. The goal is to hit more than 560 million 5G users by 2023. Information from China’s General Administration of Customs reveals that the country brought in more than 310 billion semiconductor devices in the first six months of 2021, up 29% compared to the same period last year. 

Despite increasing demand, China faces stiff challenges ahead as rising geopolitical tensions with the United States and Taiwan hamper the supply of semiconductors. The country now looks to achieving semiconductor self-sufficiency by using subsidiaries and education programmes to spur growth in its domestic semiconductor sector. 

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