In the chip industry known as the "roller coaster cycle", chip manufacturers will face a severe situation in the next few months. At that time, the record sales may turn into the worst decline in a decade or more.
During the epidemic, orders in the semiconductor market increased sharply, pushing sales and share prices to new highs, and triggering a global scramble to buy chips. Chipmakers hope that this boom can last for several more years without a painful correction. However, they are now facing a familiar problem: increased inventory and shrinking demand.
This is a long-standing dilemma. It takes several years to build a chip factory, but they are not always put into production when they are most needed. In the past few years, there has been a shortage of supply in this industry. Just this quarter, auto manufacturers and some other customers are still complaining that they can‘t get enough electronic components.
Demand decline or heavy impact on chip industry
For large chip manufacturers, the fate has changed rapidly. NVIDIA and other companies said that the core business would decline by more than 40% every year. Micron Technology warned that the demand in many fields was rapidly disappearing.
When Biden signed a $52 billion chip bill to subsidize domestic production, Micron Technology, the largest storage chip manufacturer in the United States, told investors that demand was fading.
Sanford C. Bernstein analyst Stacy Rasgon said: "This is a bit of black humor. Politicians will find that when the industry turns, the chip shortage problem will be solved automatically soon."
PC manufacturers are big buyers of chips, and they can see the first signs of the chip industry turning. According to the data of Mercury Research, the shipment of desktop processors in the second quarter fell to the lowest level in nearly three decades. Since 1984, the total processor shipments have experienced the largest year-on-year decline.
This is a legacy of the epidemic blockade. During the epidemic, the trend of working at home stimulated the demand for personal computers and other equipment. As a result, chip manufacturers are busy fulfilling a large number of orders, while supply chain obstacles make customers feel desperate. Electronic equipment manufacturers are willing to pay a high price to buy chips.
Now, consumers are reducing large expenditures, and chip buyers are following suit, creating what the industry calls "inventory correction". The last similar downturn occurred in 2019 and did not last long.
However, due to the weak global economy, it is expected that this time the situation will be particularly serious. If inventory adjustment occurs while the economy is in recession, the chip industry will not rebound as quickly as last time.
Since this year, although the problem of chip shortage has improved from last year, the supply of chips in some fields is still tight. In view of the new changes in the chip market, some enterprises have continuously expanded their capacity, and some enterprises have transformed to new tracks. With the increasing popularity of the new energy vehicle market in recent years, it has become the choice of many enterprises to transform the research and development of chips urgently needed for the production of new energy vehicles. In a chip enterprise in Xuzhou High-tech Zone, Jiangsu Province, several production lines are running at high speed to produce a high-power organic passivation chip for vehicles, which is mainly used in the power controller of new energy vehicles.
In a chip packaging and testing production factory in Shenzhen, the production director said that their production capacity has been increasing in recent years. Orders from auto manufacturers have poured in, and the capacity utilization rate of this factory has been close to 100%. In order to ensure delivery, the enterprise imported a lot of manufacturing equipment to expand the production line and improve the production capacity. According to the data, due to the shortage of chips, it is expected that by the end of this year, the cumulative production reduction of global auto companies will climb to 3.8294 million vehicles.
Industry insiders said that the mismatch between supply and demand made chip supply tight in the fields of automobile, industrial automation and AI big data. In recent years, Chinese enterprises have increased their investment in the chip industry year by year. The data shows that up to now, there are more than 416000 chip-related enterprises in China; Among them, 68000 new registered enterprises were added from January to July 2022, with an average monthly growth rate of 41.6%; From the time of establishment, 26.8% of chip-related enterprises were established within one year.
Some chip prices "avalanche"
In the past two years, affected by the epidemic, the supply chain of the chip industry was disrupted, and the price of chips rose sharply. Now there is a situation of price reduction in the chip market. What is the matter?
As the core component of the electronic control system, this Italian semiconductor chip was one of the most popular chip products in 2021. The market price once rose to about 3500 yuan, and dropped from a high level to about 600 yuan in 2022, with a price reduction of more than 80%. The price of another model of chip will remain at about 200 yuan in 2021. At present, the price is only about 20 yuan per chip, only one tenth of the highest price. In LED lighting products, light-emitting chips and driver chips will be used, and the prices of these two types of chips also began to fall this year.
Xiao Yansong, secretary of the board of directors of an LED enterprise, said that the price of LED chips fell by 20% - 30% year on year, and the price of driver chips may fall by more, about 40%. Since this year, the market price of consumer electronics control chips has also continued to fall, from a high of 100 yuan to double digits.
Taking mobile phones as an example, the global sales of mobile phones will decline in 2022, which will lead to the oversupply of electronic chips for mobile phones. The major mobile phone manufacturers have lowered their delivery targets and cut orders from upstream chip manufacturers. Ma Xuerong, the general manager of an electronic technology limited company in Shanghai, said that there must be a cut in the order, because there is no demand from everyone, the order will be delayed, the delivery will be delayed, or the order will be cancelled. Now that the supply exceeds the demand, the orders will naturally decrease.
Liu Xingliang, a member of the Information and Communication Economy Expert Committee of the Ministry of Industry and Information Technology, said that the public data showed that the price decline was not small in the field of consumer electronics, especially in many large categories of chips such as panel chips, communication chips and analog chips. Among them, the price of most chips fell by more than 20% in the past two months, and the price of some chips fell by more than 80%.
The shortage of chips has plagued many core industries in the world and China, such as new energy vehicles, for two years. However, the price of some chips has plunged by 90% recently, the inventory of chips has increased, and the delivery period has shortened. Some core enterprises just want to take a breather, but the chips needed by automobile manufacturers and industrial equipment manufacturers are still tense.
The global chip industry has experienced a rare situation of "rain in the sun" where product shortage and price collapse coexist.
Which chips "plummeted"?
It is understood that as the core component of the electronic control system, the Italian French semiconductor L9369-TR chip is one of the most popular chip products in 2021. In the third and fourth quarters of last year, the price of this chip rose 100 times, and the market price was as high as 3500 yuan. In 2022, the price fell from a high level to 671 yuan, with a reduction of more than 80%.
The price of STM32F103C8T6 chip under ST STF Semiconductor will remain at about 200 yuan in 2021. At present, the price is only about 20 yuan per chip, only one tenth of the highest price.
LED lighting products often use light-emitting chips and driver chips, and the prices of these two types of chips also began to fall this year. The market price of consumer electronics control chips continued to fall this year, from a high of 100 yuan to double digits.
Liu Xingliang, a member of the Information and Communication Economy Expert Committee of the Ministry of Industry and Information Technology of the People‘s Republic of China, quoted public data and said that the price decline was not small in the field of consumer electronics, especially in many large categories of chips such as panel chips, communication chips and analog chips. Among them, the price of most chips fell by more than 20% in the past two months, and the price of some chips fell by more than 80%.
According to public data, among the eight major types of chips, such as driver IC, passive component, GPU and analog chip, the price jump has almost become a trend.
The price of drive IC has been gradually reduced since the beginning of this year, with a decrease of about 10% to 15% in the second quarter. According to Xie Qinyi, director of display research at Omdia, an international research institute, the wafer capacity is not so short, and the panel factory has reduced production, resulting in a sharp reduction in demand. It is expected that the price of drive IC will be reduced by more than 20% in the third quarter.
Previously, the supply of power management chips, which account for the largest proportion of general analog ICs, was seriously in short supply. However, this year, with the rapid opening of new capacity and the postponement of downstream demand, the price rise of analog IC is coming to an end, and some chip prices have fallen by 80% in the last two months. Take the general consumer power management chip TPS61021 as an example. The price of the chip has dropped from the highest point of 45 yuan last year to about 3 yuan at present.
In 2022, the global sales of mobile phones fell, resulting in the oversupply of electronic chips for mobile phones. The major mobile phone manufacturers have lowered their delivery targets and "cut orders" to the upstream chip manufacturers.
Qualcomm is also experiencing chip demanders‘ "order cutting". At present, it has cut the order of Snapdragon 8 series by about 15%, and will reduce the price of two flagship mobile chips by about 40% by the end of the year. Samsung Electronics said that the inventory of mobile phone memory chips is high, and the future sales may weaken further, and the company is trying to reduce the inventory.
The truth behind the "crash"
Zhang Yang, a senior analyst of Beijing Boruheng Consulting Co., Ltd., said in an interview with China News Service that the technology iteration and upgrading of high-end chip products is very fast, usually in a few months. Chip manufacturers will face huge losses due to product backwardness if they fail to de-stock in time, so the current price reduction "promotion" is also reasonable.
At the same time, the demand for consumer electronic terminal products has declined, especially the mobile phone is the largest chip market, which has a great impact on the entire industry; On the supply side, in order to cope with the previous "core shortage" phenomenon, many chip manufacturers increased production. The increase in supply and the decrease in demand have led to the current chip price reduction.
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