A part of the upstream semiconductor industry, global Aluminum Electrolytic Capacitors market is expected to slump by -4.3% in the year 2020 in response to the challenges facing the downstream electronics industry. The market thereafter will recover and grow to reach US$7.3 billion by the year 2027, trailing a post COVID-19 CAGR of 2.5% over the analysis period 2020 through 2027. A key part of the electronics value chain, aluminum electrolytic capacitors are facing the risk of disruptions in a modular value chain. The electronics industry is a complex assembly sector and over the decades, the push for cost reduction, performance optimization, faster time-to-market, speed of innovation, do more with less principle and an increasingly narrower window of opportunity have encouraged modularity of the value chain. A modular value chain is characterized by high levels of outsourcing to competent, independently operating suppliers. The assembly process in electronics is complex and involves hundreds or perhaps thousands of individual parts that must be developed, produced and procured together for sub- and final-assembly. Value chain modularity helps standardize the technology and make the procurement process easy and cost effective.

Over the last 20 years, Greater China defined as mainland China, Hong Kong, and Taiwan have come to accounts for a large percentage of world imports of intermediate electronics goods or electronic intermediaries. Electronics industry in virtually every country today has massive contract manufacturers from China. The current pandemic has exposed the risk of heavy reliance on China for electronic intermediaries. Outbreak of the virus in the country, lockdowns & travel restrictions imposed, closure of non-essential manufacturing plants, trade bans, restrictions on movement of goods, have together disrupted the global supply chain leaving electronics manufacturing struggling to cope with raw material shortages. Manufacturers of electronic products are facing dual challenges of production bottlenecks as a result of supply chain disruptions and inability to deliver on backlogged orders and weak new orders as a result of soft consumer demand. Electronics supply chain already in state of flux in the pre-pandemic period by the U.S. and China trade and tariff war has been pushed into crisis with little preparation at the start of the pandemic in January 2020. With most electronic raw material supply dependent on Southeast Asian countries and China, over 75% of companies witnessed shipment delays which in the month of April rose to 3 to 5 weeks. The overall velocity of the value chain to perform and fulfil orders has reduced significantly. In addition, the pandemic has disrupted supply chains causing massive damage for manufacturing companies reliant on China for supplies.

These supply chain disruptions will step up the pressure to decouple from China. Rethinking supply chains will spur the movement of production out of China, including for electronics. Consumer electronics manufacturing, followed closely by automotive and industrial electronics remain the worst impacted. With companies cancelling and delaying modernization plans and with IT budgets slashed, industrial electronics is also feeling the pain of the general slowdown. With most electronic companies expected to witness decline in sales and profitability, the semiconductor industry also remains impacted and likely to face short-term financial hardships. The shutdown has disrupted economic activities in a manner hitherto unimagined and the human cost of the pandemic is continuing to grow and is expected to deal an unprecedented blow to people, businesses and economies worldwide. As businesses struggle to keep afloat, job cuts and bankruptcies are expected to rise sending millions into unemployment. The loss in consumer confidence and erosion of household wealth and discretionary spending will impact virtually every industry and business worldwide. The COVID-19 pandemic has therefore pushed consumers to conserve cash. With unemployment rates rising amid the virus induced economic crisis, consumers are cutting spending budgets. Unemployment rates have hit never-before highs with the US topping the charts with 12.5% unemployed as a % of total labor force. Social outlook against this background remains grim with households expected witness erosion in wealth. Personal financial outlook, community, economy, job security confidence, purchasing and investment confidence are all tumbling as the human and economic cost of the global pandemic rises. For the electronics industry this brings grim news of falling sales and revenues as consumers hold back on discretionary spending. As discretionary funds are used to purchase consumer electronics, demand highly correlates with GDP. Excluding electronic and networking hardware required for work-from-home (WFM), demand for all other consumer electronics are declining sharply. Smartphones, TVs, smart speakers, automobiles, cameras, smartwatches, smart home appliances, among others have all recorded declines in retail sales.