US-China trade war has had limited impact on semiconductors, says industry expert

This photo taken on November 19, 2018 shows workers checking laptop parts in a factory in the Hangyong Auto Industrial Park, in Lu'an City, in China's Anhui Province.

STR | AFP | Getty Images

The U.S.-China trade dispute has had limited impact on the semiconductor sector, according to Ajit Manocha, CEO at chip industry association, Semi.

The tariff war between the two economic powerhouses has actually been a "very small" reason behind the slowdown seen in the semiconductor industry, Manocha told CNBC's Arjun Kharpal and Geoff Cutmore at the World Economic Forum in Dalian, China on Monday.

The U.S. and China have been embroiled in a trade dispute for more than a year, with both sides levying duties on each other's goods valued at hundreds of billions of dollars. Their months-long trade fight has shifted supply chains, rocked global equities and threatened the world economic outlook.

However, Manocha said the outlook for semiconductors appears "very upbeat."

"Tariff has not really slowed down the industry," he said, even though he acknowledging that 2019 was "not a very good year" for the sector, in part due to an excess in capacity.

"Most of the softening you see today is dominated by the memory pricing. I think as ... the correction and capacity question takes place, probably the pick-up will start again early part of 2020," Manocha said.

He added that artificial intelligence becomes more commonplace in areas such as the next generation 5G wireless standard, smart medical technology and quantum computing.

"All these things will require a lot more silicon chips," he said, describing AI as the "next oxygen" for the industry.

Rising importance of China

Recent developments in the trade fight between Beijing and Washington surrounding firms such as Chinese telecommunications giant Huawei have cast the spotlight on the interdependence of tech companies in both countries.

Don't underestimate China here. I think they are definitely in the lead.

Ajit Manocha

CEO of Semi

U.S. firms supply the components and software used in Huawei's products, while the Chinese tech giant holds patents critical for mobile networks such as 3G, 4G and the next generation wireless network with super fast speeds, 5G.

Manocha said that if Washington continues to target China unilaterally, the Asian giant can still continue to do business with other countries.

Looking ahead, he said the world could become "more dependent" on China as it has become a competitive "global leader."

"If you look at 5G and the (Internet of Things), China and Asia Pacific have about 50% of the market share and by 2025, they will actually exceed the rest of the world," Manocha said. "Do they have all the bells and whistles in place? No. But definitely they are already ahead on many areas."

"Don't underestimate China here," Manocha added. "I think they are definitely in the lead."

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