Nowadays, the semiconductor industry seems to be in a vicious circle. On the one hand, companies are shouting about chip shortages, and foundries and international IDM manufacturers are working hard to expand production; on the other hand, there is a warning of "overcapacity of chips" that has gradually emerged recently, which makes the semiconductor industry even more confusing.
What is the current global chip shortage? Is there really going to be an oversupply of chip production capacity?
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What is the current situation of chip shortage in the industry? The current situation of the industry is still short of chips, but unlike the previous chip shortage in the entire industry, chip shortages are more structural shortages, automotive chips and industrial control chips are shortages, and consumer chips are oversupply.
The shortage of automotive-grade chips has always existed. During the epidemic, the "home economy" has pushed auto companies to significantly reduce automotive chip orders. In addition, chip suppliers have good expectations for the consumer electronics market and industrial fields, which has transferred more production capacity to non-automotive demand, resulting in a shortage of automotive chips.
Among them, the coupling degree with the core functions of the automobile is relatively high MCU and SoC are extremely short of . At the same time, the rapid development of new energy vehicles has increased the demand for power semiconductor chips rapidly, and has been unable to alleviate in the short term.
consumer chips are oversupply due to the sluggish consumer electronics market. Recently, media reported that many mobile chip manufacturers and mobile phone brand manufacturers have cut orders in recent days, including MediaTek cut by 35%, Qualcomm cut by 15%, Xiaomi , vivo, OPPO orders will be reduced by 20% in the next few quarters...
According to TrendForce, due to the addition and multiplication effect of the traditional off-season, the production performance of smartphones in the first quarter of 2022 is even weaker, with global output only reaching 310 million units, a quarterly decrease of 12.8%. The annual recession is also as high as 10.1%.
Looking forward to the second quarter, facing the intensified high inflation and the direct impact of the epidemic, the consumption momentum continues to weaken. According to TrendForce's current observation, it is estimated that global smartphone production will be approximately 309 million units in the second quarter, which is slightly the same as the first quarter, but it is not ruled out that there is still a possibility of a subsequent reduction in the season.
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3 major signs point to overcapacity?
Observe the implementation time of the production capacity of wafer factory, capital expenditure plan, and changes in the market price of some chips. The semiconductor industry may face the problem of overcapacity in the future.
Signs 1: manufacturers "crazy" expansion of production, a large number of new production capacity is about to be released
2021 to the present, the chip market has been hot, we can see the continuous announcement of production expansion plans by global foundries and international IDMs. As for the progress of production expansion, leading companies such as TSMC, UMC , Intel , Samsung , LIJI, SMIC , Micron , ST semiconductor , Huahong , GM , GM , Silan Micro , BYD Semiconductor and other leading companies are no exception.
The global production scale is huge. According to incomplete statistics from global semiconductor observations, 9 of the fabs have production capacity released in 2021, and most of them are concentrated in mainland manufacturers; 14 fabs have capacity released in 2022, and 8 will be added in 2023, with most of them being the leading manufacturers, and 9 will be added in 2024 and 2025.
Since the new production capacity takes a long time from investment to formal production, the current released capacity is not enough to alleviate the chip shortage problem. However, estimating from the global production capacity start time, the new production capacity of OEM and international IDM plants will continue to increase in volume in 2022 and 2023, and the production capacity may reach its peak by 2024 and 2025. Industry speculates that as demand slows down, large-scale production capacity may lead to the possibility of semiconductor overcapacity.
Signs 2: Capacity expenditure is huge, capital danger critical line warning
The significant expansion of production is bound to be the rapid growth of capital expenditures of large factories.
The industry believes that the semiconductor industry may be accompanied by a sharp decline in the semiconductor market one to two years after a sharp increase in capital expenditure. For example, in 1984, the global semiconductor industry capital expenditure rose by more than 100%, and the semiconductor market fell in the following year. The same pattern also occurred in the following four cycles.
After comparing the historical cycle laws in the industry, it comes up with a reference indicator, that is, the capital danger critical line. When capital expenditures grow by more than 40%, it is usually predicted that there will be overcapacity and a decline in semiconductor growth in the future.
Judging from the above-mentioned capital expenditure data of major wafer foundries and IDM, the overall expenditure ratio of major factories exceeds or is close to the capital danger critical line.
For example, TSMC's capital expenditure in 2021 increased by 74% year-on-year, and is expected to increase by 33.2%-46.5% year-on-year; UMC's capital expenditure growth rate in 2021 is as high as 80%, and is expected to increase by 100% this year. Intel, for example, it expects capital expenditure to grow by 43% year-on-year this year, just exceeding the capital danger critical line. GlobalFinance's capital expenditure has doubled in the past two years, with a growth rate far exceeding other manufacturers. Samsung's capital expenditure has not increased significantly this year, but its investment amount is second only to TSMC. SMIC has steadily expanded production this year, with a growth rate of 11.10%.
In addition, combined with the data in Table 1, the expansion targets of more wafer foundry and IDM manufacturers (including TSMC, UMC, and SMIC) are concentrated at 22/28nm, and most of the output will be used for mature node semiconductors. Currently, industry news shows that advanced nodes are generally short of shortages, while some mature nodes may have the possibility of oversupply.
According to recent foreign media reports, TSMC will need to reconsider whether it is necessary to invest in new production capacity (except for projects that have been invested). They believe that if the company further increases its capacity in the future, it will not only face increased risk of idle capacity, but also face huge construction and equipment cost pressures.
1 Signs 3: Some chip prices drop
Prices rise when supply exceeds demand, and price drop when supply exceeds demand is the market rule.
Since 2020, wafer foundry prices have risen wildly for 6 consecutive quarters. In late April this year, foreign media reported that major wafer foundry mature process manufacturers have announced that they will not increase the price of mature process foundry in the near future. What is more obvious is that some chips have begun to lower their prices recently.
Among them, GPU suffered an avalanche decline. GPU prices have been falling since December last year. According to foreign media reports, in early May this year, the prices of AMD's Radeon RX6000 and Nvidia's GeForce RTX30 (both of which are gaming graphics cards) have dropped from 80% higher at the beginning of this year to below 20% compared to the premium of the suggested retail price.
In addition, according to technology media Tom's hardware, the average price of graphics cards in May fell by another 15% month-on-month. Currently, more than half of AMD and Nvidia's graphics cards are priced at the suggested retail price or below. The report noted that this is much better than the MSRP seen last year or the MSRP, and in the next few months, or seeing all MSRP cards sold at lower than the MSRP.
In mainland China, according to CCTV Finance's Zhengdian Finance report on April 8, the price of graphics cards on the market has also plummeted. In Shenzhen Huaqiangbei, known as the " China Electronics First Street", some merchants said that the prices of graphics cards of various brands have fallen sharply, and the prices are at a low level in the past two years. In the past month, they have dropped by about 1,000 yuan.
According to an investigation report by CCTV Finance reporters, many speculators stocked up at high prices in the early stage, and planned to sell them to the market after raising prices. As a result, a large amount of inventory was thrown into their hands, and they were finally forced to lower the price, causing heavy losses. In the future, with the decrease in demand and supply of graphics cards on the market, there is still room for graphics cards to decline.
It is worth noting that Apple launched new M2 chips and MacBook equipped with M2 chips and other software and hardware products such as MacBook, which are equipped with M2 chips. In the second half of the year, Apple may launch the latest iPhone 14 series.In addition, Intel, AMD and Nvidia will launch new products in the second half of the year. Given the influence of the above manufacturers, this may become a new variable that affects consumer chips.
s
Equipment: New key to affecting production capacity?
In the near future, this link of semiconductor equipment may become a new key to affecting production capacity.
Industry news shows that the supply of industrial MCUs, FPGA, embedded processor and other key chips has led to an elongation of the equipment lead time. In April this year, according to foreign media reports, companies including Applied Materials, Kelei, Panlin Group, ASML and other companies have issued warnings to customers that they may have to wait for up to one and a half years to deliver orders.
If the equipment cannot be in place on time, the expansion speed of major OEM factories can only slow down.
It is worth noting that in terms of advanced processes, ASML directly affects the implementation of technologies such as 3nm and 2nm based on its monopoly position. At this year's Q1 financial report meeting, ASML said that as the market demand for chip manufacturing equipment exceeds the supply in the second quarter, it will raise its long-term revenue expectations, maintaining a 20% revenue growth this year and the expected production capacity of 55 extreme ultraviolet lithography machines. It also stated that more than 70 extreme ultraviolet lithography machines will be able to be produced in 2025.
However, relying solely on ASML to expand production is not enough. ASML has 700 product-related suppliers, of which 200 are key suppliers. Therefore, whether ASML can successfully and quickly increase its production capacity will largely depend on whether supply chain partners can continue to follow up.
Conclusion
The statement of semiconductor overcapacity is not to extinguish the raging flames of industry expansion, but to reflect more of the wisdom of preparing for the future. Semiconductors are a cyclical industry that always follows a cycle of increasing demand - expansion of production - increasing capacity - overcapacity - falling product prices - stopping expansion of production - increasing demand - expansion... At present, chip production expansion has lasted for nearly two years, and market demand has been gradually met, and the turning point of chip supply and demand will be unknown. Faced with the potential overcapacity crisis, enterprises can adjust their inventory and product lines in a timely manner to better respond to market demand.
Source: Global Semiconductor Observation Wang Kaiqi
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