This expectation did not bring about a gentle breeze, but became a "order-cutting storm": Industry news said that Apple, Nvidia and AMD's three core customers have cut TSMC's orders, and Apple's cuts reached 10%.

/// Author | Qingning

Preface

"The next few decades will be the golden age of the semiconductor industry."

In the writing of Fortune magazine, TSMC Chairman Liu Deyin is full of expectations for the semiconductor industry.

This expectation did not bring about a gentle breeze, but became a "order-cutting storm": Industry news said that the three core customers of Apple , Nvidia, and AMD have cut TSMC's orders, and Apple's cut rate reached 10%. Affected by rumors of order-cutting, TSMC's market value also fell below $400 billion last Friday, shrinking by $350 billion from January.

In July, the golden age has not yet begun, and a storm has arrived.

has no worries about performance, and suddenly encountered a storm

The order cut of TSMC can be described as "three disasters in one day". Among the several major order-cutting customers mentioned in

, the shipping target of new iPhone 3 models of has been reduced by 10%. AMD has cut orders for about 20,000 7nm and 6nm process from the end of this year to the beginning of next year. Nvidia's TSMC's 5nm process product has chosen to be postponed to be released by one quarter, and the expected order cuts are no less than 15%.

In addition to the rumors, TSMC's posture is still very strong. On the one hand, TSMC's revenue in the first quarter reached NT$491.1 billion NT$3 (approximately RMB 110.4 billion), setting a new record high in a single quarter. On the other hand, TSMC has built a total of 12 new wafer factories since last year, and plans to increase the price of most processes by 6% next year.

TSMC's strength is difficult to dispel the concerns of institutions. Data from market organization Canalys shows that due to the impact of economic situation and market demand, global smartphone shipments fell by 11% in the first quarter of this year. Research firm Gartner also made a prediction: global personal computer sales may drop by nearly 10% this year.

Before this, storage giant Micron said in July that adjusted revenue for the quarter was $7.2 billion, well below the Wall Street 's expected $9.05 billion. Samsung Electronics also suspended procurement due to "inventory inventory", including displays, memory chips, PCBs, power supplies, etc., and will last until the end of July. Data released by the South Korean Statistics Agency on June 30 pointed out that chip inventory surged by 53.4% ​​year-on-year in May, and chip inventory has continued to increase since October last year.

In response to the recession of the consumer market, TSMC Chairman Liu Deyin responded: The demand for chips for consumer electronic products such as smartphones and personal computers has weakened. However, under the strong demand for automotive chips and high-performance computing products (HPC) chips, production capacity will remain full this year.

However, in the view of investors, the proportion of smartphone business in TSMC's current revenue structure has reached 40%. The weakness in the consumer electronics market will lead to a decline in TSMC's capacity utilization rate. TSMC's stock price also fell 5.81% last Friday, and its market value fell below $400 billion.

TSMC's decline did not answer the most critical question: Where did the "order cut" of semiconductor come from?

Before the "Storm of Orders": The storm is coming

The orders of the semiconductor industry were harbing two months ago.

data from Qunzhi Consulting showed that in the first quarter of 2022, global smartphone panel shipments were about 436 million, a year-on-year decrease of about 12.5%. Industry analyst Omdia also pointed out that due to the cold market and the inflation of , global LCD TV shipments this year were about 212 million, the lowest level since 2010.

As a downstream semiconductor product that moves in volume, the display panel can digest huge amounts of driver chips. It is only a matter of time before panel manufacturers take the initiative to retreat, and the driver chip production capacity pulls back. Feng Ning (pseudonym), an engineer of a well-known domestic monitor foundry factory, also took a "roller coaster".

"According to past experience, we should update and change the production line in 2020 and adjust the production line in 21 years. Due to the impact of the epidemic, many manufacturers have expanded production while changing and expanding production. There are demands in both directions, so we ordered three more months of goods.About half a year later, the brand said that some of the previous orders would be removed. The goods have been digested for the past three months. "

Feng Ning's experience is not an isolated case. According to Korean media The Elec reported that Samsung Electronics plans to purchase about 54 million LCD panels for the smart TV department this year, but because TV sales were not as expected, Samsung reduced the purchase volume of panels to 40 million. The price of display panel driver chips (DDICs) also fell by 5-7%. Similar problems in

also appear on the consumer side MCU Now, industry rumors indicate that the MCUs in some dealers have been sold at half price. Taiwan media Economic Daily reported that Sheng Qun, a well-known MCU manufacturer, said that due to weak demand in the consumer market, customer orders have begun to slow down and inventory is being continuously adjusted. The MCU prices of manufacturers such as Infineon and Texas Instruments also showed a significant decline.

Theoretically, the main application of consumer-grade MCUs is smart home appliances, but under the influence of chip shortage, these MCUs have also "ripped" the price increase dividends of industrial-grade and automotive-grade MCUs. With the cooling of the consumer market, consumer-grade MCUs have seen a surge in production capacity and repeated orders. This MCU production cut is more like an active optimization. The market for underlying products of

is shrinking, and high-end products are not easy to pass. .

memory chip field, industry research agency TrendForce Consulting said: Although the consumer market has gradually weakened, the price of DRAM manufacturers was strong before and did not actively reduce the price. If suppliers choose to actively ship in the second half of the year, the decline may exceed 10%.

display chip field, digital media Toms Hardware statistics point out that the price of graphics cards in July fell by 17-20% month-on-month. Statistics said that the transaction volume of graphics cards for dealers in June has dropped by 4%. In line with the decline in Bitcoin and the delay of new products from manufacturers such as Nvidia, the price of graphics cards will further decline.

However, Feng Ning believes that the market is cold and it is not a bad thing:

"These are all thunders that were not handled last year. If it explodes at one time this year, it will be more stable in the future. "

"failed to meet expectations" TSMC's "thunder" in the semiconductor industry may be the market that was too booming before.

Take TSMC as an example. From 2017 to 2019, TSMC's growth rate range was 3-5.5%. However, affected by the epidemic in 2020, chip demand increased, and it cooperated with TSMC's several price adjustments. TSMC's performance growth rate reached 25 in 2020 and 2021 respectively .2% and 18.5%.

The rapid growth during the epidemic has made TSMC's goal from "controlling the market" to "meeting expectations".

If we analyze from the "controlling the market" model, TSMC's share of the global semiconductor market has not decreased. In 2019, TSMC's semiconductor production accounted for 21% of the world, and in 2021, this figure has become 26%. In the first quarter of this year, TSMC's foundry share reached 53.6%, and its competitor Samsung's market share is less than 20%. TSMC's appliances With the advantage of dominance, you don’t have to worry about business problems at all.

However, from the perspective of "meeting expectations", TSMC will face unimaginable pressure. As TSMC transforms into high-performance computing business, the company’s HPC business has increased from 30% to 37%. However, the main source of TSMC’s previous business growth and capacity expansion was the smartphone business, which accounted for 44%.

The rumor of this "order-cutting storm" is essentially destroying TSMC’s growth in smartphones and high-performance computing chip businesses. Expected. If TSMC wants to reach the 30% growth mentioned by executives, it needs to take over more smartphone and data chip projects. However, from the market feedback, the demand in the consumer electronics industry has dropped significantly. The market's confidence in TSMC's growth has failed, which has triggered a subsequent decline in stock prices.

This sentiment has also been projected into the entire semiconductor industry under the superposition of factors such as the conflict between Russia and Ukraine, inflation and the impact of the epidemic. It can be seen from TSMC's growth that from 2020 to 2021, the entire semiconductor industry has experienced abnormal growth under the influence of chip shortage and hot sales of electronic products.In the semiconductor industry in 2022, the market has been overdeveloped, customer purchasing power has declined, and the market has entered a period of contraction. The upstream also needs to follow the downstream to adjust production, and cutting orders has become the norm.

For TSMC, they have reduced the proportion of smartphone business and chose high-performance chips to tell investors a better story. But the high-performance chip itself seems to have become the exclusive story of TSMC. If other semiconductor companies want to tell stories, they need to find new growth points.

New energy, new story

What can drag the semiconductor industry out of the "single-cutting quagmire" is new energy vehicles.

is different from the hot and cold market in the consumer market. Automotive semiconductors have a demand for continuous production and require the continuous supply of high-quality semiconductor devices. In June this year, Chen Yudong, president of Bosch , said that the role of automotive-grade chips in automobiles will be amplified. The company's ESP ( body electronic stability system ) product, as long as there is a shortage of chip supply, it will cause the car to be discontinued.

"In the first half of this year, I estimate that the total production capacity of major enterprises (domestic) enterprises has been affected by 1 million vehicles. It is estimated that the output value of 100 billion will be gone." After

was stimulated by the "chip shortage", domestic car companies have also started their chip industry layout and prepared their own "chip rescue balls". Among the old car companies of

, SAIC Group cooperated with Infineon in 2018 to specifically prepare for the IGBTh business; Dongfeng Motor cooperated with CRRC Times to invest in IGBT projects last year, with an annual output of 300,000 in the first phase; GAC Capital chose to start from scratch and invest in wafer foundry company Guangdong-Xin Semiconductor, and develop analog chips on 12-inch wafers.

Among the independent brands and new forces, BYD has the first-mover advantage in the electronics industry and launched the first generation of 32-bit automotive-grade MCU chips in 2019. NIO plans to develop its own autonomous driving chip in 2020, and introduces Xilinx senior executive Hu Chengchen in 2021. Great Wall chose to invest in Horizon to develop automotive-grade AI chips and smart cockpit chips. Yang Ping (pseudonym), a distributor of

analog chips, said: "Last year, ST automotive chip delivery cycle was too long. Although there was no problem with sales, many of the manufacturers I contacted wanted to change their plans, even if they were industrial-grade. If I could withstand the sale in the second half of the year, I would consider doing domestic chip business."

's long product shipment period also proves Yang Ping's judgment.

Based on the current delivery market of MCU manufacturers, the delivery period given by ST, NXP and Microchip have reached more than 30 weeks, and some products have even exceeded one year. The latest report from TrendForce Data shows that as semiconductor equipment delivery time has been extended by more than triple, the growth rate of wafer foundry production capacity in 2023 will drop from 10% as originally predicted to 8%. This also means that the chip lead time may be extended from 6 to 9 months. This gap period is also a good opportunity for dealers to supplement domestic chips.

"It is so fierce to say that it is because you are used to eating big fish and meat. If you eat less, you will feel hungry." Yang Ping pointed out, "The demand for consumer electronics growth in the past two years, including smart home appliances and electronic products, has increased a bit too much. In the long run, the entire industry will be overdrawn. However, in the past six months, Kunshan has been suspended, and the foreign market has also calmed down a little. Let the profit aside now, and the important thing is to do it for a long time."

In his opinion, the "order cut storm" in the semiconductor industry is more like a shower: if the time is short and the area is small enough, it can indeed create an atmosphere of "strong winds everywhere and heavy rain". But what can fill this land is not rain, but hopeful sunshine.