Currency fluctuation, whether policy-driven or market-driven, is a sizable issue for the import and export industries, as it impacts the price and the profitability. A single digit change may seem very inadequate, but the impact is severe in the semiconductor industry, whose worldwide sales are estimated to reach $354 billion in 2015.
On August 11th, the People’s Bank of China (PBOC) set the midpoint rate of the Chinese Yuan (also referred as RMB) to USD to be 6.2298, the lowest since April 25, 2013. On the 12th, PBOC lowered the midpoint rate again to 6.3306. Within the 2 days, RMB devalued by 3%, which is the most immense fall in 20 years.
Due to the significant position China has in the global economy, a chain reaction has begun where we are seeing fluctuation in values within the global currency, global stock market, and global gold value. Many analysts viewed the RMB fluctuation as China’s reaction to the decrease of 8.3% in its export in July and the concern for the economy outlook.
What and how could the RMB fluctuation impact the semiconductor industry?
Component Prices: Since semiconductors are often traded in USD, the price is estimated to increase for Chinese component buyers who buy from overseas.
End products: Being known as the “world’s factory”, the RMB fluctuation allows for end products made in China to be cheaper in the global markets, opening more opportunities for Chinese manufactures.
Opportunities: The opportunities for domestic chip makers in China are countless, since they have the advantage to trade in RMB.
However, there are other factors in the electronic industry that may smooth out the impact:
Long lead-time: The long lead-times of semiconductors make the influence of currency fluctuation not as obvious as other industries.
Stable market: The global semiconductor market is relatively mature and stable, as big players in each segment are fixed. In such markets, mostly supply and demand will be the essential influencing factor.
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