On October 8, a topic about "American chip giants plummeted by nearly 14% overnight" hit the hot search on Weibo , with 130 million views.
The American chip company AMD (NASDAQ: AMD), with a market value of nearly US$100 billion, released an extremely bad preliminary financial report on October 6, which scared the US stock market.
AMD expects revenue in the third quarter to be approximately US$5.6 billion, which is 1.1 billion lower than the previously given revenue outlook median value (6.7 billion), which has tended to be sluggish. The gross profit margin has also dropped sharply, mainly because the PC market has weakened significantly and processor shipments have decreased. After the news was announced, chip stocks in the US stock market (October 7) suffered a heavy blow. AMD's stock price fell 13.9% overnight, and its market value evaporated by US$15.18 billion (approximately RMB 96.613 billion), with a cumulative decline of nearly 60% this year.
is unique. Samsung Electronics 's third-quarter results released in early October showed that operating profit decreased by 31.7% year-on-year, the first time in the past three years that profit fell by year-on-year. In addition, Micron , Kioxia, and SK Hynix have announced a significant reduction in capital expenditure next year.
As the global economic recession spreads to the technology and chip industry, from AMD to Samsung , from Micron to SK Hynix, overseas chip giants have ushered in a cold "winter". The semiconductor industry may say goodbye to the economic cycle.
consumer demand declines, and upstream chip manufacturers are facing a decline in volume and price of
Overall, PC and mobile phone shipments have both declined significantly since this year.
market research agency Gartner showed that global PC market shipments in the second quarter were about 72 million units, a year-on-year decline of 12.6%, recording the largest drop in the past nine years. Data from market research firm Canalys shows that global smartphone shipments decreased to 287 million units in the second quarter, the lowest point in the quarter since the outbreak of the epidemic.
demand side has spread to the upstream storage field, and high inventory and price declines have occurred. According to TrendForce data, the price of DRAM (dynamic random storage) products used for personal computers fell by 13%-20% year-on-year in the third quarter, and the price of DRAM products used for servers, mobile phones, and graphics cards fell by 10%-15% year-on-year; the price of NAND (flash memory) products fell by 13%-18% year-on-year in the third quarter. The agency expects the decline in memory product prices to expand in the fourth quarter.
The industry is in poor prosperity, the memory chip giant Samsung Electronics (KRX: 005930) first felt the "coolness".
On October 7th local time, Samsung announced its third-quarter performance guidance, with revenue expected to be 76 trillion won, an increase of only 2.7% year-on-year; operating profit reached 10.8 trillion won, a decrease of 31.7% year-on-year. This is the first time that Samsung has seen a year-on-year decline in profits in the past three years, mainly due to weakening communication demand and falling memory chip prices during the global recession.
Earlier, Micron Technology (NASDAQ:MU) financial report showed that revenue in the latest quarter fell 19.71% year-on-year to US$6.643 billion, the lowest revenue since the second quarter of fiscal 2021; net profit fell 45.15% year-on-year to US$1.492 billion. Micron CEO Sanjay Mehrotra expects global PC market shipments to fall by about 15% year-on-year in 2022, and smartphone shipments will fall by 7-9%.
Samsung Electronics' performance and South Korea's chip inventory
In fact, South Korea's chip inventory hit a record high, surged by 67.3% in August, while semiconductor production fell by 1.7% year-on-year. At present, Micron and Kioxia have announced that they will cut nearly 30% of their capital expenditure next year, and SK Hynix will also significantly reduce capital expenditure next year by 70%-80%.
AMD company is the same as it is cool and hot.
At the financial report meeting in early August this year, AMD CEO Su Zifeng (Lisa Su) said that the PC market is expected to decline this year to 13%-16%, which will affect AMD's overall performance.
Based on the initial revenue of US$5.6 billion in the third quarter, AMD increased by about 29% year-on-year, while AMD's guidance on revenue growth of more than 55% in early August. In addition, AMD's gross profit margin will reach 50% in the third quarter, while the previous guidance gross profit margin was 54%.
Specifically, according to institutional estimates, AMD's PC business revenue in the third quarter was approximately US$1 billion, accounting for 18% of revenue, a year-on-year decrease of 40%.But at the same time, AMD data center is expected to maintain positive growth in the third quarter, with revenue growing 45% to US$1.6 billion, accounting for 29% of total revenue.
Tidium Media App mentioned in the article "Ren Zhengfei's Cold approaches the "Three Chip Pioneers" in the United States" that from the horizontal comparison of Nvidia, Intel and AMD, AMD's stock price is slightly undervalued - especially the EPYC series products, which received 14% of the server chip market where Intel Xeon is located, while its share in 2018 was slightly higher than 1%.
In comparison, Intel (NASDAQ:INTC) performed poorly, with PC business revenue in the third quarter decreased by 25% year-on-year. It is expected that Intel's revenue will fall by 9-13% year-on-year, gross profit margin will fall by 9.1 percentage points, and earnings per share will fall by 57%.
In fact, judging from the expectations of the entire third-quarter report of the US stock market, due to the rapid hike of interest rates by Federal Reserve Fed and the initial signal of deterioration of the US economy, coupled with the strong appreciation of the US dollar, investment institutions have made highly cautious view of the performance outlook of listed companies and believe that corporate profits are about to slow down. According to
FactSet data, analysts predict that S&P 500 earnings per share (EPS) in the third quarter increased by only 2.4% compared with the same period last year, the smallest in two years. The surplus of US companies, excluding the energy industry, will fall by 4%, shrinking for the second consecutive quarter and falling into a "surplus recession." The market estimates that the performance of listed companies in the United States may review high growth next year, with surplus in the first quarter of 2023 increasing by 6.5% year-on-year and 5.5% in the second quarter.
Fita Group's quantitative strategy director Ches Holme said that although "the estimate for next year is irrational", the decline in stocks in areas such as consumer electronics has fully reflected the negative news and the stock price may have bottomed out. Bloomberg said that the current profit situation of US stocks is similar to the previous wave of economic recessions, and both indicate that the profit growth of S&P 500 companies will be weak in the next few months.
While squeezing bubbles, building factories at high prices
So, how can the "cold winter" of chip giants survive?
Take "old chip wizard" Intel as an example. In the case of a poor macro environment, Intel CEO Pat Kissinger (Pat Gelsinger) implemented the "three-step" after taking office, which is worth learning from by many companies.
is the first step to learn from Internet companies to "reduce costs and increase efficiency". In May this year, Intel announced a freeze on recruitment of its client computing business unit, and also cut it, including canceling some of the group's travel plans and restricting participation in industry meetings. "Our more emphasis on spending priorities and priorities will help us resist the global macroeconomic uncertainty," Intel said.
The second step is to shift the resource focus from Intel CPU to wafer foundry with mature processes and special processes, increase local factory construction, and seek subsidies for chip bills.
In February this year, Intel acquired Israeli semiconductor solution foundry company Gaota Semiconductor. It is expected that after the acquisition is completed, it can obtain mature process technology and customer base to expand the diversity of its foundry business and production capacity . Kissinger recently said that Intel Foundry Services (IFS) will implement "system-level foundry" to cover wafer manufacturing, packaging, software, and an open chip (Chiplet) ecosystem. This means that Intel wants to "eat" the entire chip industry chain.
htmlOn August 23, Intel signed an agreement with Canadian asset management company Brookfield, to jointly provide investments up to US$30 billion for Intel’s two new wafer factories in Arizona, USA. Among them, Intel will invest 51%, Brookfield will invest 49%, Intel will hold to and operate two wafer fabs. The transaction is expected to be completed before the end of 2022.
US President Biden Holding wafers at the chip summit (Source: CNBC)
Fitch Ratings North American Enterprise Rating Senior Director Jason Pompeii pointed out that Intel will be the biggest winner in the US chip bill subsidy program. Among the companies that may receive subsidies, only Intel has huge capital expenditures in the medium term, and the operating cash is not enough to pay, which requires large subsidies from the US government.
Of course, it’s not just Intel. With the gradual implementation of a US$280 billion Chip and Science Act, which includes a US$52.7 billion chip subsidy program, many chip giants are ready to move. Despite poor performance and the overall environment is getting colder, IBM, Micron Technology (Micron), Wolfspeed, Samsung and TSMC have responded, announcing high investment or new semiconductor factories in the United States to seek certain financial preferential and subsidies from the US government, and are expected to be distributed in the spring of 2023.
Intel's third step is to look at the future. Kissinger admitted in interviews many times that the company's performance is not good at the moment, but on the other hand, the company invests heavily in R&D and invests in the ecosystem. In 2021 alone, global semiconductor research and development investment reached US$71.4 billion, and Intel contributed 19% of it, reaching a record high of US$15.2 billion. With so much money being spent, new technological products such as quantum and neuromimicry chips appeared at this year's Innovation Conference.
In any case, increasing capital investment, basic scientific research investment, business sales approaching the demand side, reducing costs and increasing efficiency are all effective ways for chip companies to survive this "cold winter".
The founder of a domestic semiconductor company told Titanium Media App that he does not think the semiconductor cycle will always be in a downward trend, and the industry currently needs more basic scientific research. Due to the fields of 5G, AI, HPC (high performance computing), autonomous driving, and other fields, as well as the digital development of enterprises, the growth of the chip industry is greatly promoted, especially the wafer foundry production capacity has always been in a state of supply and demand. Although consumer demand in mobile phones and PCs is weak and the pressure to destock in the industrial chain is relatively strong, the demand for segments such as automobiles, servers, and photovoltaics is relatively stable.
returns to China. Looking ahead to October, as the US Department of Commerce further strengthens restrictions on China's development of semiconductor manufacturing on October 8 and includes Yangtze River Storage , North Huachuang , and magnetoelectric technology on the UVL entity list, many institutions believe that this will help domestic substitution.
On October 9, the China Merchants Bank electronic team released a research report stating that this action in the United States will strengthen the logic of domestic substitution, especially the domestic companies' production expansion plans for 2023 are clear, and it is expected that domestic equipment manufacturers will perform significantly better than overseas manufacturers in 2023.
Looking ahead to the next October, the CITIC Securities team stated in the research report that overall, affected by factors such as the recurrence of local epidemics and economic pressure, it is expected that the performance of the electronics industry's third-quarter report in 2022 will continue to differentiate. At the same time, benefiting from the support of downstream subdivided demand such as smart cars and photovoltaics, coupled with the continued realization of domestic substitution logic, the subdivided tracks such as semiconductor equipment and components, IGBTh are expected to remain in a high prosperity state, and the mobile phone field focuses on the Apple supply chain. It is recommended to pay attention to the leaders in the segment with sustained prosperity and bottom-up company growth logic.
