The news of Brexit sent shockwaves through the stock markets worldwide. The US NASDAQ and Dow Jones, London’s FTSE 100, Germany’s DAX, France’s CAC 40 index, and Japan’s Nikkei all fell steeply on June 24, 2016. Moreover, the British pound fell by -8.5% against the US dollar to a 30-year low of -$1.37.
While it’s difficult to state what impact Brexit will have on the EU and the world economy. So far, things look stable for the semiconductor industry until Brexit affects the EU economy and in turn consumer demand.
The majority of semiconductors are manufactured in Taiwan, South Korea, and Singapore, and the majority of semiconductors are consumed by China. The United States accounts for 50% of semiconductor sales worldwide, according to the International Trade Administration.
In Europe, Germany is a key end market for automotive and industrial semiconductors. Companies such as NVIDIA (NVDA), Texas Instruments (TXN), and NXP Semiconductors (NXPI), for whom the automotive industry is a key growth driver, are unlikely to be affected significantly by Brexit, as they have offices worldwide.
Europe accounted for only 10% of global semiconductor sales in April 2016, according to World Semiconductor Trade Statistics. According to the International Trade Administration (or ITA), the United States accounted for 50% of global semiconductor sales in 2015, of which more than 82% came from overseas. Among the United States’ top ten semiconductor export countries, Germany (EWG) is the only country located in Europe.
Only 6% of SME (semiconductor manufacturing equipment) was sold to Europe and the Middle East in 2015, according to the ITA. Of this amount, most sales came from Germany, the Netherlands, and Ireland. The world’s largest SME supplier Applied Materials (AMAT) earned 6% of its revenue from Europe in fiscal 2015.
The global semiconductor industry is unlikely to be significantly impacted by Britain’s exit from the EU (European Union) due to the industry’s lower exposure to Europe (VGK). In all, Brexit’s short-term impact could be felt due to currency devaluation, and its long-term impact could be felt if a favourable trade agreement isn’t reached between Britain and the EU. It’s difficult to say how the economy will react, as such event has never been seen before.
(photo - esilicon.com)