At present, the supply and demand of the chip industry has undergone structural adjustment, but the profits of the semiconductor manufacturing sector are still growing strongly. The performance of Semiconductor Manufacturing International Corporation(688981) , the two giants of domestic wafer foundry, and Huahong semiconductor reached a new high in the first quarter of this year. At the same time, a number of international wafer foundry giants have also heard price increases again recently, which is regarded as a signal that the prosperity of the industry is still high.
However, some industry analysts pointed out that considering the downstream market adjustment and other factors, the market is worried that the semiconductor industry with rapid growth in recent years will face an adjustment inflection point, and it is even expected to enter a recession in 2024.
first quarter wafer foundry
profit improving
Since the outbreak of covid-19 epidemic, the semiconductor industry has become an industry with strong growth against the trend, but the overall profit of the sector slowed down in the first quarter of this year. According to statistics, the net profit of Listed Companies in the A-share semiconductor industry returned to their parent company in 2021 hit a record high of about 55.6 billion yuan, a year-on-year increase of 1.5 times; In the first quarter of 2022, the net profit of Listed Companies in the industry was about 14.1 billion yuan, but the growth rate slowed down over the same period last year.
The semiconductor manufacturing sector has become the only semiconductor segment with doubled profits. According to the latest performance disclosed by Semiconductor Manufacturing International Corporation(688981) the leader of wafer foundry, the company achieved a net profit of about 2.8 billion yuan in the first quarter, a year-on-year increase of 1.76 times, and the growth rate even exceeded that in the fourth quarter of last year. Another domestic wafer foundry giant, Huahong semiconductor, made a net profit of about US $100 million in the first quarter, a year-on-year increase of 2 times.
In addition, Semiconductor Manufacturing International Corporation(688981) sales gross profit increased significantly to 41%, reaching the highest level in history. However, the company expects the sales revenue in the second quarter to increase by 1% to 3% month on month, and the gross profit margin will fall to between 37% and 39%.
Semiconductor Manufacturing International Corporation(688981) co executive president Zhao Haijun said that in the first quarter, the company optimized its product portfolio and price adjustment, and overall promoted the average sales unit price to rise by 13% month on month and the shipment volume to rise by 7% month on month. The company’s gross profit margin exceeded the previous guidelines. On the one hand, it was due to the epidemic. The company postponed the annual maintenance originally scheduled for the first quarter to other quarters. The impact of the epidemic on the plants in Tianjin and Shenzhen was lower than expected.
However, in the second quarter, Semiconductor Manufacturing International Corporation(688981) some factories will carry out annual maintenance. In addition to the short-term impact of the epidemic on the capacity utilization of factories in Shanghai, the gross profit margin is predicted to decline month on month. In addition, it is gradually affected by the increase of depreciation of new production capacity and the rise of raw materials, manpower and other costs.
Huahong semiconductor’s gross profit margin also remained high in the first quarter of this year, close to 27%, and is expected to reach 28% ~ 29% in the second quarter. Tang Junjun, President and executive director of the company, said that under the background of continuous “core shortage” in the fields of automobile and new energy this year, the market demand for characteristic processes remained high, boosting the average sales price of products, and the characteristic process platforms such as nonvolatile memory, power devices, analog and power management, logic and RF, and image sensors were stable.
From the perspective of market performance, the overall decline of the electronics industry sector since this year, Semiconductor Manufacturing International Corporation(688981) once the largest decline in the year reached 27%, and the company’s share price rebounded from the end of April, rising by nearly 13%. The latest share price closed at 42.59 yuan / share. Hong Kong stock Huahong semiconductor rebounded from last week and closed up 6.81%.
expansion capacity
reduce the impact of the epidemic
The current round of Shanghai epidemic has disturbed the electronics industry, and leading companies are not immune, but the capacity expansion has not been interrupted.
At this round of performance briefing, Zhao Haijun said that the epidemic in the second quarter did have an impact on logistics, supply chain and upstream and downstream enterprises; It also has an impact on the progress of the company’s capacity delivery. Now the company tries to minimize the impact, and the relevant factors are also considered in the guidelines for the second quarter; In the future, the company will make up for the impact of relevant production capacity by accelerating production and output growth of other plants.
Overall, Semiconductor Manufacturing International Corporation(688981) maintained capacity expansion, adding 28000 pieces of capacity equivalent to inches / month in the first quarter, and it is expected that the capacity will continue to grow in the second quarter. This year, the company expects capital expenditure to be $5 billion, a further increase year-on-year.
At the same time, Huahong semiconductor once had a capital expenditure of US $124 million, mainly invested in Huahong Wuxi. Recently, the board of directors of the company passed the A-share listing proposal, which plans to issue 400 million shares, with a total of 18 billion yuan of projects to be invested, of which 70% will be used for Huahong manufacturing (Wuxi) project. According to the data, Huahong Wuxi factory is a 12 inch wafer factory with a monthly production capacity of 65000 chips. It is a leading 12 inch characteristic process production line in Chinese Mainland.
According to the prediction of several market institutions, the global semiconductor market will continue to be hot in 2022. According to IC insights, the capital expenditure of the global semiconductor industry will increase by 24% in 2022, reaching a record high of US $190.4 billion; Semi predicts that the global front-end wafer plant equipment expenditure will be US $107 billion in 2022, an increase of 18% for the third consecutive year.
However, the views of analysis institutions are divided as to whether the high-profile outlook of semiconductors can be sustained. According to Gartner’s latest statistics, the semiconductor market increased by 26.3% in 2021. Automotive electronics and data centers became important driving forces, and the lack of core further pushed up the price of chips; The industry is expected to grow by 13.6% this year, and the main driving force still comes from the price rise. Considering the weak growth of the consumer mobile phone market and the decline in demand caused by the overall inflation caused by the epidemic, the growth of semiconductors is expected to decline in 2023 and may enter a recession in 2024. If unstable factors such as energy prices and covid-19 epidemic continue, Gartner expects that the recession of the semiconductor industry may come in advance.
price rise coincides with
customer inventory increase
In recent years, the rising price of core shortage has become the main line of the wafer foundry industry, and the leading companies in the industry have also sent the news of price increase, which is regarded as a signal that the semiconductor industry will continue to have a high outlook.
It is reported that not only will TSMC, the world’s largest wafer foundry, comprehensively raise the OEM price of advanced and mature processes again from January 2023, with an increase of about 5% ~ 8% according to the scale of customers, products and orders, so as to cope with the pressure of inflation concerns and rising costs and support its production expansion plan. Samsung also reported that it is negotiating with customers. It is expected that the price of wafer foundry costs will increase by 15% ~ 20% in 2022, and the increase of traditional process chips will be greater; Liandian plans to carry out a new round of price increase in the second quarter of this year, with a price increase of about 4%.
Semiconductor Manufacturing International Corporation(688981) executives said that in principle, the company will negotiate with customers in a friendly manner. Considering the long-term strategic cooperation, the company will cooperate with customers with development potential to achieve win-win results for both sides.
However, the background and starting point of this round of wafer OEM price increase are different from those in the past.
Some electronics industry analysts pointed out that in the early stage of the epidemic, the supply and demand of the semiconductor industry chain was seriously unbalanced, and downstream customers placed orders intensively, resulting in the mature wafer foundry and generally full load of manufacturing processes. At present, the shortage of foundry capacity has been alleviated to a certain extent.
In addition, the price increase of TSMC, the leader of wafer foundry, is relatively restrained. This price increase is mainly aimed at mature processes, especially the price adjustment lower than that of other peers, which is not a comprehensive large price increase. The starting point of TSMC’s price increase is mainly to ensure the level of gross profit margin, but also has the significance of indirectly “Persuading” customers who repeat orders. The price increase from Samsung is higher than that from TSMC, and the actual implementation of the price increase may not be guaranteed.
On the other hand, the inventory level of the chip industry has become a potential concern, and the inventory level of the industry has reached an all-time high. Statistics show that it increased to 86 billion yuan in the first quarter of this year, almost twice the scale before the outbreak in 2019. Among them, the inventory of semiconductor design listed companies in the first quarter doubled compared with the end of last year.
Some insiders said that under the core shortage market in the previous two years, the downstream terminal application manufacturers in the electronics industry actively hoard inventory. With the gradual easing of the core shortage in the consumer electronics market of the largest application category, the inventory is gradually concentrated in the hands of the original upstream chip manufacturers. The future inventory removal cycle needs to see the recovery of the downstream market; Some institutional analysts pointed out that the current high inventory of the chip industry is concentrated on some products, and the whole industry has not reached the early warning line.
Regarding the risk of customer destocking, Semiconductor Manufacturing International Corporation(688981) executives said that the company’s mobile phone revenue accounted for less than 30% and adjusted the relevant production capacity. It is reported that there is an oversupply in smart phones, consumer goods and other fields, and some customers have about five months of inventory. However, there is still a capacity shortage in application markets such as power management, AMOLED driver and simulation, and there is a huge capacity supply gap in industries, new energy and other fields.
According to the latest situation, the agency expects the price of highly sensitive NAND flash wafer to begin to fall.
According to the latest research of Jibang consulting, due to the weak performance of retail demand since March and the increasingly conservative shipment of other terminal products, suppliers tend to reduce prices for sale. It is expected that the price of NAND flash wafer may begin to fall from May and gradually turn to oversupply in the second half of the year. The price decline of NAND flash wafer may reach 5% ~ 10% in the third quarter.
