In recent years, the semiconductor field has developed rapidly. In order to gain a competitive advantage, traditional mobile phone manufacturers such as OPPO and vivo have also begun to develop their own chips. At the same time, the COVID-19 pandemic has led to the shutdown of some factories around the world, and the war between Russia and Ukraine has led to an increase in the price of some semiconductor materials, resulting in a “chip shortage” in the market. As a result, many capable countries have begun to invest in the chip industry in an attempt to expand production capacity.
According to statistics, in the past three years, the number of registrations of global semiconductor companies has increased sharply. At the peak, the number of registrations in a single month can reach 50,000. During this period, my country also set off a wave of registration of chip companies. In the past two years alone, the number of newly established chip companies in China has reached 100,000. It involves IC design, manufacturing, packaging and testing, as well as semiconductor equipment, materials, applications and other fields.
With the ever-changing global situation, the macro-trend of US dollar interest rate hike and inflation has affected market demand, and the loss of consumer electronics has made companies that blindly expand after the semiconductor core shortage wave face high inventory risks, and prices are no longer firm. The overall demand for chips in the market has declined, and the semiconductor industry has entered a down cycle.
one
After 20 years of dominating the semiconductor market, mobile phones and PCs are no longer the biggest growth engines for the semiconductor industry. The downturn in the consumer electronics market has affected chip shipments. Due to the decline in the terminal consumer electronics market, the orders for upstream semiconductors have also decreased. The markets such as mobile phones and PCs are currently declining. It is expected that the downstream market will hardly rebound in the second quarter.
Market research firm IDC predicts that global shipments of smartphones will drop by 9.1% in 2022 to about 1.2 billion units, half of which will be 5G models. As the world’s largest mobile phone market, data from the China Academy of Information and Communications Technology shows that in 2022, the total domestic mobile phone shipments totaled 272 million units, a year-on-year decrease of 22.6%, of which 5G mobile phone shipments were 214 million units, a year-on-year decrease of 19.6% , accounting for 78.8% of mobile phone shipments during the same period.
The saturation of the PC market has hit Intel hard, which largely limits the growth of Intel’s business demand. Intel’s annual revenue in 2022 will be US$63.1 billion, a 20% drop from US$79 billion in 2021, and its net profit will be US$8.014 billion, a 60% drop from US$19.87 billion in 2021. bad moment. Intel CEO Kissinger also said that economic uncertainty will continue until 2023.
In this regard, Intel has made a series of capital expenditure adjustments, including reducing capital expenditures by US$3 billion in 2023 through layoffs, delaying factory construction plans, and suspending RISC-V plans and network switch business, and by the end of 2025 A reduction of $8 billion to $10 billion.
South Korea, where the semiconductor industry is very developed, has also suffered heavy losses. According to data from the South Korean economic department in January, South Korea’s semiconductor exports to China plummeted by 31% year-on-year, showing a downward trend for eight consecutive months. Overall exports of semiconductors plummeted 44.5 percent, marking the fifth consecutive month of year-on-year declines.
two
The decline in demand for consumer electronics has also made memory chips start to struggle. According to the latest data from the market research company TrendForce, the average price of DRAM (Dynamic Random Access Memory) plummeted by 34.4% in the fourth quarter of last year, compared with a drop of 31.4% in the third quarter; the performance of NAND flash memory was also unsatisfactory. Price declines were 32% and 27.7% in the quarter and fourth quarter, respectively.
Samsung, which mainly produces memory chips, saw a staggering 96.9% year-on-year drop in the operating profit of its DS (Device Solutions) division in the fourth quarter of last year. The fourth-quarter consolidated revenue of the semiconductor business was 20.07 trillion won, down 24% year-on-year.
Plunging prices due to high inventories and a weak global economy led memory chipmakers to cut capacity and delay expansion plans in the second half of last year. Micron Technology, SK Hynix and Kioxia have all announced corresponding measures in an attempt to stabilize the market by controlling oversupply.
three
Under the trend of continuous upgrading of automotive electronics, intelligence, and networking, the development of the MCU market has begun to accelerate. During the low tide of chips, the development of domestic MCUs is also under tremendous pressure.
China Merchants Securities pointed out that the downstream of domestic MCU manufacturers is concentrated in consumer products, small home appliances and other fields, and most of the MCU product models are concentrated in 8-bit MCUs and 32-bit low-end consumer applications below 100MHz. Since 2022, downstream demand has been relatively weak. Therefore, from the perspective of shipments, many domestic MCU manufacturers are facing greater shipment pressure.
According to CITIC Securities, domestic manufacturers in the MCU sector are in the catching-up stage, and the vehicle market has initially begun to penetrate. However, the concentration of the MCU industry is relatively high, and most of the mid-to-high-end market is monopolized by foreign manufacturers.
Four
On the other side of the ocean, venture capital investment in Silicon Valley semiconductor start-ups was still quite hot three years ago. Last year, venture capital investment was only US$7.8 billion, a 46% drop from 14.5 billion in 2021 and a 24% drop from 10.3 billion in 2020 . In China, there are also many enterprises that have to be “overwhelmed” by the tide of bankruptcy due to difficulties in financing and product development.
According to the data obtained by Titanium Media from Enterprise Check, in 2022, China will revoke or cancel 5,746 chip-related companies, far exceeding previous years, and an increase of 68% from 3,420 in 2021. At present, there are more than 170,000 existing chip-related companies in China (only statistics of company names, brand names, and related companies whose business scope includes chips) exceed 170,000.
You know, in the first 8 months of last year, China revoked and canceled 3,470 chip-related companies. In the four months from September to December, more than 2,300 canceled chip companies have been added in China. This means that on average, more than 15 chip companies cancel their industrial and commercial information every day.
Daniel Kim, an analyst at Macquarie Securities, pointed out that from the perspective of chip price declines and related losses, the current market downturn may be worse than in 2008.
five
The chip industry has a large demand for funds, a high degree of talent enrichment, and a long development cycle. Generally, it takes 5 to 10 years for many chip companies to go from establishment to profitability. In the face of widespread chip anxiety in China, Ren Zhengfei once said frankly: “Chips cannot be rushed, not only related to processes, equipment, and consumables, but also to be down-to-earth and not to catch up in a bubble.”
On the whole, the domestic semiconductor industry started late, and there is a big gap with the advanced level of foreign countries. However, with the unstoppable trend of electrification of automobiles, the amount of chips used in automobiles will increase significantly, and the amount of chips used in cars is expected to reach about 1,000-1,200. The products cover various types of products such as storage, simulation, computing, and sensing.
According to Techsugar, the total value of semiconductor devices for electric vehicles is expected to reach between US$1,500 and US$2,000, which is three to four times that of traditional cars and mobile phones (about US$400-500). If the market can continue to grow, it is expected to surpass the demand for chips in the mobile phone market. China can take advantage of the scale advantages of the electric vehicle industry to catch up in automotive semiconductors.
