The future growth in semiconductors or processing chips will not be driven by smartphones, but by big data and the Internet of Things (IoT), Toshiki Kawai, the chief executive officer of the Tokyo, Japan-based leading electronics and semiconductor company Tokyo Electron Ltd., told CNBC in an interivew. Additionally, the demand will be supported by new technologies such as artificial intelligence (AI), virtual reality, augmented reality and the fifth-generation (5G) of mobile networks.

New Age Technologies to Drive Growth

Over the past few years, smartphones, computers and data centers have been the primary drivers for growth in the semiconductor industry. Those mainstream drivers are set to change. While talking to CNBC during a Japanese language interview, Kawai said "As we look to the future, we believe IoT will be at the core of everything. The big data that comes out of that would determine the semiconductor demand."

The IoT is a network comprised of physical objects capable of gathering and exchanging electronic information in real time, like internet-connected smart televisions, home appliances and cars, which are fitted with modern chips capable of generating, sharing and processing data. Big data refers to the growth in the volume of structured and unstructured data that is gathered in multiple formats from a variety of sources, the speed at which it is created and collected, and the scope of how many data points are covered. Processing, parsing and drawing useful inferences from such large troves of data often becomes a gigantically complex task and required high end computing devices.

Talking about the future course that the semiconductor industry will take, Kawai said, "It's no longer like the past when the so-called silicon cycle began and ended with the number of smartphones sold. We're looking at a different phase of growth."

Despite the 21.6 percent year-on-year rise in the global sales of semiconductors which topped $420.4 billion during 2017, there are concerns of a decline in the near future. The projection is attributed to the falling prices of memory chips, a huge inventory piling, and a slowdown in demand from high-growth industries. With the demand from traditional growth drivers – smartphones and computers – taking a hit, future appears to be challenging for semiconductors, adds CNBC. (See also, What are the main types of chips produced by semiconductor Companies?.)

Kawai opines that the ongoing trade war between the U.S. and China may make things difficult, though its specific impact on the semiconductor industry is still not apparent. Leading technology giants, like Alphabet Inc.’s (GOOGL) Google, Apple Inc. (AAPL), Facebook Inc. (FB) and Alibaba Inc. (BABA) exploring in-house chip designing will also hit the global industry. (See also, Facebook Wants to Build Its Own Chips.)

Kawai’s company is a world renowned manufacturer of equipment required to produce semiconductors and integrated circuits, and additionally supplies equipment to fabricate flat panel displays and photovoltaic cells. (See also, Apple Building Health-Focused Custom Processor.)

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