On October 11, the semiconductor sector continued to fall. Anji Technology fell by more than 10%, Northern Huachuang approached the limit, and Zhichun Technology, Yak Technology , Ruixin Micro , Zhongwei Company , Xinyuan Shares, etc. followed suit. TSMC's stock price fell by more than 7%, the biggest drop since May 2021.
The semiconductor sector has always been very resistant to declines. Why did the sector not rise against the trend as expected and instead turned to a sharp drop? After the panic, what investment opportunities will domestic emerging demand bring? This article will be analyzed in detail.
in the downward phase of the economy, the semiconductor sector faces the pressure of mean return
Recently, from the demand side, the US SIA website released statistics of its WSTS. After the continuous decline in the previous two months, the global semiconductor device sales in August were still falling rapidly. The monthly sales in August were US$47.36 billion, almost the same as the same period last year, and the month-on-month decline of 3.37% compared with US$49.01 billion in July.
From the supply side, in recent days, Micron announced that in order to cope with the decline in demand, it will slow down production and reduce capital expenditure. Capital expenditure will decrease by about US$8 billion in 2023, that is, a year-on-year decrease of 30%, and equipment expenditure will also decrease by 50%. Micron predicts that global memory chip market demand will recover in the second half of fiscal year 2023 starting in May next year. Since then, Kioxia also disclosed that the production of Japanese factories will be reduced by about 30% from October.
From the perspective of micro-enterprises, Micron's expected fourth-quarter performance is under pressure and is reducing capital expenditures. Affected by the rapid weakening of consumer demand and the sharp adjustment of inventory of all end market customers, the company achieved revenue of US$6.64 billion in FY22 Q4, yoy-13%; at FY22, the company achieved a record revenue of US$30.76 billion, yoy-11%, achieving positive free cash flow for the sixth consecutive year. The company is taking measures to reduce supply growth, and the capital expenditure of the wafer factory has been cut by nearly 50% year-on-year; at the same time, it continues to enrich its product portfolio and add industry-leading 1-alpha DRAM and 176-layer NAND nodes and other products, striving to stand out in the downward cycle.
Asus is expected to reduce inventory by about 20 billion to 30 billion NT$ in the third and fourth quarters. From the end of the second quarter to the end of the fourth quarter of this year, Asus sets a target of reducing the overall inventory amount by NT$50 billion. Asus now believes that inventory will not be cleared until mid-2023.
Overall, the semiconductor industry is facing the problem of accelerating economic downturn, which has brought some challenges to some companies in my country's semiconductor industry chain. However, in the context of anti-globalization, my country's semiconductor industry chain still has structural investment opportunities.
Domestic low penetration rate may have historic investment opportunities
Although European and American countries have been strengthening their technological blockade on my country, this will strengthen my country's determination to develop independent advanced process semiconductor equipment and promote the accelerated introduction of domestic equipment in mature processes and more advanced processes. It is expected that under the active expansion of leading wafer fabs and the localization of equipment procurement, domestic semiconductor equipment companies' sales will still achieve good growth.
my country's wafer factories are rapidly promoting the expansion of wafer production capacity of 28nm and above. On September 24, the SMIC Tianjin Xiqing 12-inch chip project officially started construction. The project starts construction time only one month longer than the previous project cooperation framework agreement , reflecting that SMIC is rapidly promoting capacity expansion.
The demand for domestic substitution in the semiconductor industry chain is becoming increasingly urgent.
device: The localized supply in mainland China accounts for a low proportion, the capabilities of leading enterprises in various key areas are gradually breaking through, and the trend of domestic substitution continues to strengthen.
Materials: At present, various domestic material manufacturers have entered mass production and supply. Domestic material manufacturers have gradually achieved breakthroughs in all aspects of wafer manufacturing and ushered in rapid revenue growth.
Equipment Parts: Semiconductor precision parts are the cornerstone of the semiconductor equipment industry. Overseas manufacturers are dominated by them, and are generally scattered and concentrated. Domestic parts manufacturers continue to make breakthroughs and accelerate replacement.
As a technology chaser, the computing power gap among domestic companies is rapidly narrowing. If the energy is produced and software compatibility is optimized, it is entirely possible to achieve domestic production.At the same time, domestic companies are gradually establishing a safe and controllable software ecosystem and intellectual property patent system to deal with potential risks. Although the road is long and arduous, in the process of actively catching up, the domestic semiconductor industry is expected to usher in the improvement of competitiveness of the entire industrial chain.
Ping An Securities believes that although the semiconductor industry cycle is downward, the U.S. sanctions on China's semiconductor industry will promote the acceleration of the domestic substitution process in upstream semiconductor equipment, manufacturing, materials, EDA and other links. The development of leading enterprises in various sub-tracks is more certain. In terms of upstream equipment, we recommend Northern Huachuang and China Micro. In addition, downstream automobiles, new energy-related application fields, power, third-generation semiconductors and other sub-tracks are still improving. It is recommended to pay attention to power semiconductors, simulation and other targets, and recommend Times Electric, Star Semiconductor , Xinjie Energy, and Siruipu.
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