The semiconductor market is expected to contract in 2020 as the ongoing COVID-19 outbreak continues to cause disruptions to supply chains, according to an IDC report filed this week.

"The emergence of COVID-19 has brought with it travel bans and quarantines; massive slowing of the supply chain; uncertainty in the stock market; falling business confidence, and growing panic among the population," said Mario Morales, program VP of semiconductors and enabling technologies at IDC, in the report.

The report lays out four potential scenarios for the market and predicts an 80% chance of a significant contraction in annual revenues. The analyst firm predicts a 20% chance the markets will rebound in the second half of the year.

However, IDC notes that because the pandemic is still developing, it is difficult to forecast the long-term effects it could have on the industry. IDC says the most likely scenario will see the semiconductor industry fall by 6%, with the supply chain beginning to recover as quarantines and travel bans begin to ease this summer.

Several chipmakers have issued warnings either during quarterly earnings reports or in separate Securities and Exchange Commission (SEC) filings since the onset of the pandemic.

Boise, Idaho-based memory and storage manufacturer Micron Technology warned investors that COVID-19 could have an unpredictable effect on supply chain and production resulting in supply shortages in the third quarter. "The emergence of the COVID-19 pandemic has created both operational challenges and macroeconomic concerns," Micron CEO Sanja Mehrotra said, according to a transcript of the company's latest investor call.

Micron, which employs more than 37,000 people in 18 countries, has since the start of the outbreak taken steps to prevent the spread of the virus through its workforce. This including work-from-home orders, suspending international travel, health screenings, and social distancing rules. And so far those efforts appear to be working with just two employees having tested positive for the virus to date.

Thanks to these preventative measures, Mehrotra says the company's operations have yet to be interrupted.

However, the company has already had some close calls as global governments have implemented quarantine orders and begun closing businesses. On March 16, the Malaysian government implemented such an order, which would have closed Micron's operations, however the country later added semiconductor manufacturing to the list of essential services.

Looking to the third quarter, Mehrotra warns high demand and limited supply, especially for laptop chips needed to support commercial and educational work-from-home efforts, will likely result in shortages.

However, as China-based manufacturers begin to recover and return to full production, this will likely change, Mehrotra said.

"Once the U.S. and other major economies have demonstrated containment of the virus' spread, we expect a rebound in economic activity," he said. "Much depends on potential government stimulus and the rate, pace, and effectiveness of containment efforts."

Intel in a SEC filing warned the rapidly deteriorating economic situation caused by COVID-19 had the potential to erode the company’s financial standing and announced a halt to planned stock buybacks.

In an email to SDxCentral, an Intel spokesperson denied any connection between the decision to halt buybacks and plans to seek government assistance.

The timing of the SEC filing, however, came just days before the Senate was expected to vote on a $2 trillion stimulus package intended to right the economy. Under the stimulus, enterprises seeking assistance would not be allowed to participate in stock buybacks. The bill passed a vote in the House of Representatives Friday.

To date, Intel has repurchased approximately $7.6 billion in shares of the planned $20 billion announced in October 2019, leaving nearly $13 billion in stock repurchases on hold indefinitely.

Broadcom earlier this month pulled its 2020 guidance due to poor visibility but assured investors that the company hadn't experienced any supply chain shortages yet.

“There is no doubt COVID-19 has created a high level of uncertainty, which we can’t help but think is going to have an impact on our semiconductor business, in particular in the second half the year,” Broadcom CEO Hock Tan said during the chipmaker’s first-quarter earnings call. “We believe it is only prudent that we withdraw our annual financial guidance until such time that visibility returns to pre-COVID-19 levels.”

According to analyst Jim Handy in a blog post on The Memory Guy, there is a strong relationship between memory revenue and the overall semiconductor market. In an attempt to temper concerns over how the economic crisis could negatively affect the semiconductor market, he argued that neither the dot-com bubble nor the 2008 economic crisis had lasting impacts.

"Throughout this history [1991-2019], growth has resumed as soon as the calamity was brought under control," he wrote, citing data from Objective Analysts.

Handy anticipates 2020 will be a down year for semiconductor makers, but the situation isn't likely to last.

"Since demand is likely to rise back to the trend line, then the future shortage that we have already been predicting is likely to happen on time, driven by insufficient capital," he wrote. "The net impact of COVID-19 will be to cause an earlier downturn in 2020 than would have otherwise occurred, but the impact is unlikely to go beyond that."