The darkest moment in the semiconductor industry is coming, and this time is not much the same as before
Author: Huang Yefeng
TrendForce recently released a report, mentioning that foundry factories are currently facing a wave of order cuts, including large-size driver ICs (DDICs) and TDDI. As for chips like MCU and PMIC, which were still out of stock at the moment, we have been saying that foundry factories are in full production status for this; TrendForce said that the recent wave of order cuts has included PMICs, even CIS (CMOS image sensor), as well as certain MCU and SoC products. In the second half of this year, inventory adjustments have begun to be made in smartphones, PCs, and TV-related peripheral devices (such as SoCs, CIS, and PMICs); downstream demand has significantly reduced.
More specifically, foundry factory’s customer orders cover 8-inch and 12-inch wafers, and the main affected processes are 0.1xμm, 90/55nm, and 40/28nm. Among them, the 8-inch wafer is obviously more affected, including driving ICs, CISs, and power devices including PMICs that use 0.35μm-0.11μm processes. Driver ICs are mainly affected by the decline in the TV and PC markets.
may be surprising to the supply of PMIC - at least according to TrendForce news, after the capacity of different chips is redistributed, PMIC has quickly reached the supply and demand balance. As demand continues to weaken in the second half of the year, PMICs in consumer electronics products have begun inventory adjustments. However, PMIC and discrete devices still have strong support for data centers, automobiles and industrial applications on the demand side.
is at least 100% full load compared to the previous long period of time. It is expected that the overall capacity utilization rate of 8-inch wafer factories will be about 90-95% in the second half of the year. The capacity utilization rate of foundry factories, which account for a large proportion of consumer electronic applications, will decline to 90%. Information like
, as the basis for the semiconductor industry to enter a downward period, feels no longer new. After the chip shortage ended, it is inevitable that the industry will enter a new downward channel - the semiconductor industry has also come through this, and is generally affected by changes in supply and demand relations. However, judging from the expectations of some analysts, this industry downward channel may have quite special features.
Micron Q4 is expected, the sign of the arrival of the downward period
3 At the end of June, Micron released its Q3 quarterly report (as of May this year), and its results were still quite good, including US$8.6 billion in revenue, an increase of 11% month-on-month and 19% year-on-year. But many people in the industry have noticed that its Q4 (as of August) market outlook is quite pessimistic. As an important market participant in memory products, Micron gave sales guidance data for the fourth quarter of US$7.2 billion, a 17% decline from the previous month.
actually has not much reference value for the month-on-month increase and decrease data. But generally speaking, the third natural quarter of each year, , is the peak sales season in July and August. In Micron's view, sales performance in the fourth quarter, including these two months, will decline. The reason for the decline is that the supply level on the supply side has maintained a steady increase, while demand has declined sharply, which may be a warning to the entire market. In order to stabilize prices, Micron is currently conducting inventory regulation; it is foreseeable that production capacity will be reduced soon.
memory has a very special position in the semiconductor industry. In the semiconductor industry report, Gartner will also list memory separately - the memory industry has stronger cyclical attributes and is more like a necessity in the electronics industry. Garnter's figures a few months ago showed that memory product revenue grew by 28% in 2022; but in 2023, the growth rate is expected to drop sharply to 2.3%. Judging from the current situation, the analysis agency may also lower the expected value.
Analytical agencies including Semicondutor Advisors regard Micron's expectations as a landmark event in the industry's downward trend. Micron also clearly mentioned in its quarterly report that FY23 will reduce CapEx spending on fab equipment, which is not only a reduction compared with the planned one, but also a year-on-year decrease compared with FY22. Semicondutor Advisors said that it is not surprising that even if it is cut in half.
In addition, Semicondutor Advisors also expects that another Samsung , which occupies a large part of the memory field, will soon send a similar signal.It is expected that Samsung will adopt similar strategies to Micron to control product circulation to stabilize memory product prices; CapEx cost investment will also be reduced accordingly. After the foundry factory sensed that the demand side was shrinking, the fluctuations in the entire industrial chain were inevitable. The suppliers of semiconductor manufacturing equipment will soon be affected. In fact, there have been news that the semiconductor material market has faced a downward trend in the new year.
This time the situation may be different from the past
IC Insights has a data that gives the sales rankings of the top 10 semiconductor suppliers in Taiwan, as shown in the following table. This is the sales change of these companies in May and June this year. From this, it can be seen that most companies' monthly revenue has declined month-on-month, including TSMC; Novatek's quarter-on-month decline reached 26%; DRAM supplier South Asia Technology's revenue decline was 16%, which may indeed reflect the current situation of the storage market to some extent. We can pay attention to Micron's market performance in the new fiscal quarter to confirm this.
is still the same, the characteristics of annual seasonal changes have made the reference value of month-on-month data not that great. But historical data are still available for reference: March, June, September and December are common month-on-month growth seasons. Obviously, the situation in the past two months this year is no longer optimistic. There are many companies with rapid performance in the past two years in the table above.
For example, TSMC's sales in May-June increased by an average of 14% month-on-month, but this year it has fallen by 5%. Even if TSMC claims that it has so much confidence in the market, it still has such signs in sales data. In fact, it is not just in the past two months, TSMC's expected Q3 fiscal quarter is completely inconsistent with the historical month-on-month changes.
If the market downturn was just caused by the imbalance in supply and demand, it was actually nothing special - because the semiconductor industry was originally a cyclical industry that was up and down: memory is a representative category; practitioners who have been in the industry for a long time should have been used to it. Generally, during the downward period of the market, mature industries and enterprises will experience production shrinkage (may be accompanied by corporate staff reductions and significant reductions in revenues, etc.), distribute other products, and wait for a new round of seller market opportunities.
But Semicondutor Advisors' views on the current market are even more pessimistic. Analysts of this institution believe that this round of market is quite special, mainly reflected in several aspects. First of all, the chip shortage wave before the downward period, and its impact scope was that no wave of market trends in the semiconductor industry had been achieved before. The concern caused by the chip shortage problem in the previous two years has been completely "out of the circle"; while the previous supply and demand imbalance has never reached this level.
From this perspective, the buyer's market will be unprecedented during the downward period caused by the demand side to increase production.
Secondly, the outbreak of new crown worldwide, as well as global regional conflicts, including Sino-US trade frictions, and the long-lasting and wide-ranging chip shortage trend have made the semiconductor industry more regionalized.
In the past, a chip may have participated in more than 10 countries and regions: the materials come from Germany, the United States design tools are needed, the British IP is required, chip design is done in mainland China, manufacturing is made in Taiwan, and packaging and testing is possible upstream of the manufacturing equipment. This is the so-called "globalization".
But the COVID-19 pandemic has made more people realize that the supply chain is so fragile and can be interrupted at any time. The lack of any link will lead to chips being unable to be made; TSMC, as the most preferred semiconductor manufacturing process, has become unprecedentedly high in pricing and market voice, which has also made more upstream and downstream companies realize the seriousness of the problem; the Russian-Ukrainian conflict has interpreted from another level, and it is important to reduce the dependence of raw materials on a certain country and region; the United States' suppression of China's semiconductor market has made China and even more countries see the importance of "independent development"; the trade conflict between Japan and South Korea has made South Korea realize the importance of grasping the upstream of the semiconductor industry...
All parts drive more companies and more countries to seek localization or anti-globalization of the development of the semiconductor industry.
plus the global economic environment is now very unsatisfactory, making this wave of market trends look unique. Semicondutor Advisors commented that the current market is not just a matter of supply and demand tilt. On the one hand, on the demand side, although the application markets such as consumer electronics are indeed showing signs of fatigue, there are still many new demand highlights emerging.
But even so, macroeconomic performance is poor, and political problems have an impact on technological development. For example, the current technology ban strategy of the United States on China is actually suppressing the development of the overall market, and some of the demand has been artificially cut off. Semicondutor Advisors said this in his comments: "Is it a weak demand side, or overcapacity on the supply side, or both? It doesn't matter anymore." In short, this is a supply and demand imbalance, and as for why it is imbalanced, this may be another topic.
Different countries and regions may have their own development problems, which will further deteriorate the situation of overcapacity in the future: for example, the post-order of the US "CHIPs Act" Act may also have an impact on the industry. Fortunately, there are still many hot spots in the electronics industry, and there are still many future variables in the industry. There is probably room for observation whether it is the darkest moment. 2023 will be a crucial year for the industry.
Editor: Elaine
