According to Taiwan's Economic Daily on September 11, benefiting from Huawei's recent large-scale stockpiling, more than 20 local semiconductor manufacturers such as TSMC and MediaTek set a record high in August.

(Text/Lu Dong, Editor/Zhuang Yi) "Huawei's urgent orders have become the main reason for Taiwan's exports to hit a new high", "Huawei is Sony's main money tree", "Stopping supply Huawei will inevitably cause a blow to the South Korean semiconductor industry." As the US sanctions ban is about to take effect, media and industry insiders in Japan, South Korea and Taiwan have begun to feel more and more recent.

The most obvious affected one comes from Taiwan. According to Taiwan's Economic Daily on September 11, benefiting from Huawei's recent large-scale stockpiling, more than 20 local semiconductor manufacturers such as TSMC and MediaTek set a record high in August. People on the island bluntly stated that Huawei's orders have had an "immediate" impact on Taiwan's economy.

. The Korean semiconductor industry represented by manufacturers such as Samsung and Hynix also stood out in August under the influence of Huawei's "urgent orders", with exports increasing by more than 40% year-on-year. The East Asia Ilbo pointed out that Huawei has become the core export target of South Korea's memory chips, and the impact of "short supply" cannot be underestimated.

Of course, Japan will not be "survived". In the report, the Nikkei Shimbun "cryed" that for Japanese companies that account for about 30% of Huawei's parts supply, the US ban has a huge impact. If the ban really takes effect, nearly 3 trillion yen (about 200 billion yuan) of supply will be stopped in companies in Japan, South Korea and Taiwan alone.

In fact, its own enterprises are also "harmed" by the US ban. In March this year, a report released by Boston Consulting Corporation in the United States warned that restricting trade with China or even directly "decoupling" in the semiconductor field will permanently damage the US semiconductor industry and ultimately lead to its loss of global competitive advantage and leading position, with a significant negative impact on the United States.

TSMC (data photo)

"Taiwan's export performance is thanks to Huawei's pulling goods"

In the context of the continuous heavy-handed suppression of the US government, trying every means to hoard more key chips in a short period of time has become the top priority for Huawei to continue its business, which has benefited greatly from the recent performance of semiconductor companies in Japan, South Korea and Taiwan.

According to Taiwan's Economic Daily, benefiting from Huawei's pull-up and traditional peak season effects, the revenue of semiconductor manufacturers listed in Taiwan increased by more than 10% month-on-month in August, an increase of 13.21% year-on-year, and more than 20 semiconductor manufacturers achieved record revenues in the month.

report screenshot

Caixin Media Chairman Xie Jinhe issued a statement pointing out that Huawei's orders have had an immediate impact on Taiwan's economy. In August, Taiwan's total exports were US$31.176 billion, a month-on-month increase of 10.6% and a year-on-year increase of 8.3%, which is the first time in history that a monthly export exceeds US$30 billion.

"In this epidemic, Taiwan's export performance was remarkable, and it was also the impact effect brought by Huawei. Taiwan's electronic parts exports in August were US$12.48 billion, an increase of 19.1% over the same period last year. This is all thanks to Huawei's goods. In August, Huawei's urgent orders accounted for about US$1 billion to US$1.5 billion, which is the main reason for the high exports hitting a record high in a single month." He said bluntly.

Among specific companies, TSMC, which mainly manufactures Soc chips for Huawei HiSilicon, achieved revenue of NT$122.9 billion (approximately RMB 28.7 billion), a month-on-month increase of 16% and a year-on-year increase of 15.8%, setting a record high in historical revenue, with revenue in the first eight months increasing by 31% year-on-year.

Industry insiders on the island analyzed that TSMC's revenue hit a new high in August, indicating that HiSilicon's urgent orders were intensively shipped at the "last moment", and the production capacity of special processes was full, playing an important driving force for driving revenue to create new highs.

TSMC's 2019 financial report shows that Huawei contributed nearly 40 billion yuan in revenue, accounting for 14% of the company's second largest customer. Although TSMC Chairman Liu Deyin once admitted that she "don't want to lose Huawei", the company did not plan to continue supplying Huawei under the ban of the United States.

Another Taiwanese chip design company, MediaTek, increased its revenue in August by 42% year-on-year, also hitting a record high, with consolidated revenue reaching NT$32.716 billion (approximately RMB 7.6 billion).

Image source: Taiwan Business Times

In fact, MediaTek was not originally within the scope of Huawei's ban announced by the U.S. Department of Commerce in May, but in August the United States expanded the scope of the ban to further restrict Huawei from obtaining chips produced using US software, technology and equipment. Subsequently, it was reported on the island that Huawei began to expand its demand for goods to MediaTek, hoping to pull the products shipped in the second half of the year in one go.

Officials on the island pointed out that Huawei's efforts to pull goods in August were almost the situation of pulling goods as much as possible, which led to the full sprint for MediaTek's 4G/5G mobile phone chip shipments. In addition, 5G mobile phone chips have entered the traditional peak season, which has become an important reason for MediaTek's revenue high.

In addition to well-known manufacturers such as TSMC and MediaTek, Huawei's chip suppliers on the island, Lianyong, Duntai, Shengjia, Realtek and Yilong Electric, also hit record highs in August, and semiconductor packaging and testing manufacturers and substrate manufacturers also benefited from the operations, including Sun and Moonlight, Jingmai, Jingcai, Yongzhi and other companies also hit record highs in August.

However, Taiwan media Juheng.com reported with the title "Huawei emergency order effect is candy and poison" that although Huawei suppliers on the island have benefited from urgent orders for customers in the short term and performed well, after the lack of Huawei orders after September 15, whether other customers can fill the Huawei order gap will be a major variable affecting the future performance of these companies.

Juheng.com report screenshot

In this regard, Xie Jinhe mentioned above also stated in the article that once the shipment of Huawei is stopped, island manufacturers such as MediaTek and TSMC will be the first to be affected, and may even seriously impact Taiwan's export performance.

He also pointed out that compared with TSMC, MediaTek's proportion of shipments to Huawei is higher. Once shipments are stopped, future operations will face severe challenges, and the impact will be much greater than TSMC. On August 28, MediaTek confirmed to the outside world that it had applied to the US to continue supplying Huawei in accordance with regulations, and reiterated that it would comply with relevant global trade laws and regulations.

Xie Jinhe believes that with Huawei's urgent order coming to an end, how to fill the vacancy has become the top priority for Taiwanese companies in mid-September and next month.

Both Japan and South Korea believe that "a huge impact"

As we all know, semiconductors have now become a highly globalized, divided and cooperative international industry. Therefore, the impact of the US ban on Huawei is not only Taiwan, but also semiconductor companies in Japan, South Korea and other countries cannot be spared.

The Nikkei Shimbun reported on September 10 that under the US sanctions ban, companies in Japan, South Korea and Taiwan alone have 2.8 trillion yen (about 180 billion yuan) of parts facing the risk of supply cessation.

As the Huawei ban approaches, South Korea, like Taiwan, semiconductor exports have begun to rise sharply.

From the perspective of different countries, South Korea's exports to China increased by 9.7% year-on-year, ranking first in all countries. Analysts pointed out that South Korea's growth in semiconductor sales to China is mainly due to Huawei's hope to stockpile large quantities of chips before the US ban takes effect, which significantly increases orders from two major memory chip manufacturers, Samsung Electronics and SK Hynix.

According to data released by the Ministry of Commerce of China on September 10, from January to August this year, my country's cumulative imports of integrated circuits reached 1.5 trillion yuan, an increase of 15.3% year-on-year, 17.6 percentage points higher than my country's foreign trade imports. Ministry of Commerce spokesman Gao Feng pointed out that as a global electronic product manufacturer, China's semiconductor demand has steadily increased, becoming the main driving force for the growth of the global semiconductor market.

According to data released by Huawei, in 2019, it purchased 11.85 trillion won (about 68.3 billion yuan) of products from Korean companies, mainly composed of chips, semiconductor products and displays, and this amount accounts for nearly 6% of the total electronic equipment exported by South Korea to China that year.

Under pressure from the US ban, the Korean National Daily reported on the 9th that Samsung Electronics and SK Hynix have actually stopped supplying memory chips (DRAM) to Huawei.The report also quoted analysis from the Korean securities industry that Huawei accounted for 3.2% of Samsung Electronics' sales last year, and SK Hynix's sales accounted for 11.4%.

In the second quarter of 2020, Samsung and SK Hynix accounted for more than 70% of the global DRAM market share. Image source: China Flash Memory Market

South Korea's "East Asia Ilbo" reported that Huawei, as the core export target of South Korea's memory chip industry, will inevitably cause a blow to the South Korean semiconductor industry, and the decline in memory chip prices will also increase.

Against this background, Samsung Electronics and SK Hynix have applied for export licenses to Huawei from the United States. At the same time, relevant personnel from the South Korean semiconductor industry revealed that due to the suspension of supply to existing major customers, Korean companies are currently planning to strive for diversified supply chains and increase supply to Chinese companies such as OPPO, Vivo, and Xiaomi to make up for the losses of "short supply" Huawei.

In the second quarter of this year, Huawei's global mobile phone shipments surpassed Samsung for the first time to top the list. This is undoubtedly the huge demand for semiconductor components. The Nikkei Shimbun admitted that the US ban has a huge impact on Japanese companies that account for about 30% of Huawei's parts supply.

According to Huawei's 92 core supplier list disclosed in 2018, Japanese companies were selected 11 behind the United States and mainland China, including Fujitsu, Hirose, Murata, Sony, Sumitomo Electric, Toshiba Storage and other manufacturers.

The Nihon Keizai Shimbun reported that in Japan, Sony may have hundreds of billions of yen trading on Huawei every year in terms of smartphone image sensors. The report bluntly stated that for Sony, the image sensors provided to Huawei and others are the main money tree. Therefore, Sony is discussing applying to the US government for the export of sensors to Huawei.

What is worrying is that according to the Korean National Daily, relevant people in the South Korean industry have negative opinions on the application for approval, saying that "due to the case of the United States actively sanctioning Huawei, there is no way to know whether the transaction will be approved, and the application itself needs to be cautious."

South Korea's export control and economic sanctions expert and lawyer Li Xiumei (transliteration), also said that the basic policy of the US government is not to issue licenses to semiconductor products related to Huawei. After the new ban comes into effect, it will become more difficult to obtain a license.

In this case, Japanese companies began to do the same thing as Korean companies, seeking customer diversification. For example, liquid crystal panel company Japan Display (JDI), is discussing expanding supply to other Chinese smartphone manufacturers such as OPPO, Xiaomi and Vivo.

Faced with the ban on the United States, Huawei's rotating chairman Guo Ping recently said at a symposium that the current suppression of Kirin chips will cause certain difficulties for Huawei's terminals, especially high-end mobile phone business, but I believe Huawei can solve it. He also mentioned that Huawei will continue to maintain investment in HiSilicon, and at the same time will help front-end partners improve and build their own capabilities. He believes that there will be a stronger HiSilicon in a few years.

In March this year, a report released by Boston Consulting (BCG) pointed out that the U.S.-China technology trade restrictions could end its leadership in the semiconductor field.

In the report, Boston Consulting Company gave an assessment in two situations. The first hypothesis is that "the United States maintains existing export restrictions and technical controls to China", and the second hypothesis is that "completely terminate bilateral technology trade and decoupling with China in the technology field." The results of

calculation show that under the premise of the former assumption, the impact will appear in 2-3 years. In 3-5 years, the revenue obtained by US semiconductor companies from the Chinese market will decrease by 55%, the global market share will decrease by 8%, global revenue will decrease by 16%, and R&D investment will decrease by 13%-25%.

If the second situation occurs and China and the United States experience "decoupling", the impact will occur immediately after the ban decision is made. After 3-5 years, US semiconductor companies completely withdrew from the Chinese market, their global market share fell by 18%, global revenue decreased by 17%, and R&D investment decreased by 30-60%. The report

pointed out that whether it is maintaining existing export restrictions to China or completely "decoupling" with China in the technology field will lead to a significant decline in the global market share and revenue of US semiconductor companies in the next few years.The sharp decline in corporate revenue will inevitably lead to insufficient investment in innovation and R&D, and the loss of 15,000-40,000 high-tech talents in the US semiconductor industry.

Restricting semiconductor trade with China may cause the United States to lose its leadership in the semiconductor field. Image from: Boston Consulting

This article is an exclusive article of Observer.com and may not be reproduced without authorization.