In the first half of this year, the import, export and production of domestic chips declined in an all-round way, and the downward trend of the chip industry continued. In addition to storage, the demand for consumer electronics continues to decline, and automobile chips are no longer "lack of cores", and the industry is in a turbulent adjustment.
Under the background of the current global economic weakness, chip competition between China and the United States and the downward cycle of the global semiconductor industry, the domestic chip industry is facing great pressure.
On July 20th, Yu Xiekang, vice chairman of China Semiconductor Industry Association, revealed at the 2023 World Semiconductor Conference that according to preliminary statistics, the sales of integrated circuit industry in China in the first quarter of 2023 was about 205.36 billion yuan, which was basically the same as that in the first quarter of 2022.Among them, the total revenue of memory chips and non-processor chips decreased by 19% year-on-year, and the decline of memory chips was as high as 44%, and the decline in consumer electronics demand was very obvious.
It is worth noting that last year’s chip sales were reached during the epidemic. Therefore, with the liberalization of the epidemic this year, the recession perception of the entire chip industry is more obvious.
“Western sanctions have suppressed our advanced chip technology, and this impact is really great.But I think the new technologies, new materials, new prices, etc. in the latter enterprises should inspire us. Yu Xiekang believes that US-led export control will not only disrupt the chip industry chain and supply chain, but also have a significant impact on the industrial development model. He called for "strengthening cooperation", that is, the industry should join hands to safeguard the globalization of the semiconductor industry and promote its global development.
At a sub-forum in the Yangtze River Delta on July 19, a person in charge of a semiconductor industry association responded to a foreign media article and pointed out that "China and the United States have indeed had a war in the field of chips and integrated circuits."
At this year’s World Semiconductor Conference, many chip experts generally believed that the current export restrictions of the US government on China’s advanced chip technology and the global support for chip manufacturing have made China’s chip industry bear the brunt of the geo-economic and "chip fragmentation" and face severe challenges. Some investors believe that the status quo of the chip industry has affected the investment path and long-term development.
Import and export manufacturing declined completely, and the chip industry continued to decline.
In mid-July, the General Administration of Customs and the National Bureau of Statistics successively released the statistical data on the import, export and manufacturing of integrated circuits in the first half of 2023.
Among them, on the import side, in June 2023, China imported 41.3 billion integrated circuits (ICs), down 19.0% year-on-year, while in the first six months of this year, Chinese mainland’s IC imports fell 18.5% year-on-year to 227.7 billion, while the total import volume fell 22.4% year-on-year to US$ 162.6 billion. On the export side, China exported 24.1 billion IC products in June, down 2.2% year-on-year. In the first six months of this year, China’s IC export volume dropped 10% year-on-year to 127.6 billion, and the total export volume dropped by 12%. On the manufacturing side, from January to June this year, the output of integrated circuits in China was 165.7 billion, down 3% year-on-year.
On the whole, in the first half of 2023, the import and production of domestic integrated circuits declined in an all-round way, but the export side did not increase, and the downward trend of the chip semiconductor industry continued, and even bottomed out.
Not just Chinese mainland. According to the latest data released by the American Semiconductor Industry Association (SIA), the global semiconductor sales in the first quarter of 2023 was US$ 119.5 billion, down 8.7% month-on-month and 21.3% year-on-year, indicating that the global semiconductor industry is still in a downturn.
On July 20th, TSMC, a foundry giant, announced its financial report for the second quarter of 2023. Its consolidated revenue was about 111.1 billion yuan, down about 10% year-on-year. The net profit was 42 billion yuan, down 23.3% year-on-year, becoming the first decline since 2019. It is not only impacted by the decline in demand for smart phones and personal computers, but also the destocking of the chip industry and the weak economy.
Wei Zhejia, president of TSMC, said that customers are more cautious in placing orders this year and focus on controlling inventory. Moreover, the general trend is weaker than TSMC’s previous expectation, including slower economic recovery in Chinese mainland and poor terminal demand. Although AI is very strong, the trend of the big environment still can’t fully make up for the reduced part. How to see the end of inventory adjustment depends on economic factors. Therefore, TSMC expects that the revenue of wafer foundry market will decline by about 15%-17% this year, and the annual capital expenditure will be adjusted to the bottom range of 32 billion-36 billion US dollars.
According to the data of China Semiconductor Industry Association, 44% of the revenue of memory chips declined in the first quarter, which is one of the phenomena that the chip industry is in a recession cycle.
Earlier, memory chip leader Zhaoyi Innovation (603986.SH) disclosed the announcement of pre-reduction of performance. The company estimated that the net profit for the first half of 2023 was about 340 million yuan, down 77.73% year-on-year, and the estimated net profit after deduction was about 80.99% year-on-year.
Guosen Securities pointed out that the current storage price continues to decline, and the weak demand has led to the extension of the bottom of the cycle to the third quarter of this year. The original factory successively cut production and capital expenditure. It is expected that the price decline will narrow in the second half of this year, and the industry will pick up at a low growth rate after bottoming out. TrendForce Jibang Consulting believes that it is expected that the average price of NAND Flash will continue to fall by about 3%-8% in the third quarter of this year, and it is expected to stop falling and rebound in the fourth quarter, and the average price decline of DRAM will converge to 0-5% in the third quarter.
Ni Guangnan, an academician of China Academy of Engineering and a researcher at the Institute of Computing Technology of Chinese Academy of Sciences, said that China should use the scale of its domestic market to stimulate the growth of local enterprises, such as Changjiang Storage.He emphasized that even without extreme ultraviolet mask aligner, China can produce advanced DRAM and SSD master control chips.
"In the upstream of the industrial chain, the NAND Flash of Changjiang Storage and the DRAM chip of Changxin Storage have reached the global mainstream level and production capacity; In terms of SSD master control chips, products from more than a dozen domestic manufacturers have been commercialized, and their product capabilities are equal to those of mainstream foreign manufacturers. It should be pointed out that the core equipment for producing NAND Flash memory chips is the etching machine, and the etching machine of Zhongwei Company has broken through the 5nm process and reached the international leading level. The mask aligner process for producing SSD master chips and DRAM is 12~28nm, and EUV mask aligner is not needed, so its chip production and equipment will basically not be’ stuck’. " Ni Guangnan said.
Besides storage, nowadays, the demand for consumer electronics continues to decline, and automobile chips are no longer "core-deficient". The manufacturing end is affected by the semiconductor policy of the United States. The whole industry is in a turbulent adjustment, and it is changing from "shortage" in previous years to "flood". The global semiconductor inventory water level is high, and there has been some chaos.
At the SEMICON China event at the end of June, Chen Nanxiang, chairman and acting CEO of Changjiang Storage, said that the globalization system of the chip semiconductor industry chain has been destroyed, and now the industry is facing great uncertainty, and the industry chain will enter a "turbulent and disorderly" moment. It not only impacts the existing global supply chain industrial division of labor, but also has a significant impact on the industrial development model.
According to wind statistics, in the first quarter of this year, the average inventory turnover of major semiconductor manufacturers in the world was about 7 months, reaching the historical peak in two years, far exceeding the conventional inventory water level of about 3 months.
In the past 20 years, the global semiconductor industry’s sales always go back and forth between peaks and valleys, and it will go through a cycle every 4-5 years. Looking back on the recent three cycles of global semiconductors, it generally takes 3-6 quarters for the industry to bottom out. The first round peaked in the third quarter of 2010 and bottomed out in the first quarter of 2012, which lasted for six quarters. The second round peaked in the fourth quarter of 2014 and bottomed out in the second quarter of 2016, which lasted for six quarters. The third round peaked in the third quarter of 2018 and bottomed out in the second quarter of 2019, which lasted for three quarters.
Pei Yun, a partner of Yuanyi Investment Technology, mentioned that at present, the industry is in overcapacity and the semiconductor industry is in a downturn. He believes that there are three signals for the industry to bottom out: first, the inventory has bottomed out; second, the enterprise has suffered substantial losses; and third, there has been a reduction in production. He predicted that the expected orders and gross profit margin of the storage market will improve in the second half of this year, and once it reaches the bottom and inflection point, the market investment confidence will be more sufficient.
At the World Semiconductor Conference in 2023, Wang Lin, a partner of Walden International, said that the number of newly-added semiconductor companies in China reached its peak in 2017, and the future will mainly be elimination. We should reject low-level homogenization competition and get out of the involution through "endogenous+epitaxial" and other means. As far as semiconductor equipment is concerned, it is one of the popular racetracks at present. The internationally famous equipment companies are basically platform companies, and domestic enterprises are also evolving to platform companies.
Wei Shaojun, a professor in Tsinghua University, bluntly said that the manufacturing technology of advanced chips (7nm, 5nm) in China is still far behind that of foreign companies, while China’s emphasis on mature chips is "fragile".
"In the long run, there is no doubt that there is still a big gap between the manufacturing level of our current technology and the international level. Although many of us believe that we should pay more attention to our mature technology, it is undeniable that advanced technology has strong guidance." Wei Shaojun said.
At this World Semiconductor Conference, many domestic chip experts argued about the future under the background of Sino-US chip war.
Wei Shaojun believes that the process of globalization of semiconductor industry has been interrupted. Facing the current internal and external environment, China should also promote the "re-globalization" of semiconductor industry. China is now under pressure, and it is necessary to break the blockade and containment as the goal to achieve self-reliance, but this does not mean self-isolation, but to foster strengths and avoid weaknesses and persist in opening wider to the outside world. Compared with the "division of labor" of globalization in the past, globalization is now recreated with "cooperation" and openness as its main feature.
"The semiconductor industry we have built on the basis of globalization still faces many challenges, and we need to deal with them one by one. How should we deal with them? I think an important idea here is that although we rely on globalization to build China’s own semiconductor industry, in the previous development, we mostly passively followed and undertook the successful development of chip internationalization. So now that it has stagnated or even been reversed, then we believe that’ globalization’ is still a direction that must be adhered to. We must stand on our own feet, play a more important role, and take the initiative to make a difference. " Wei Shaojun emphasized that the development of China’s chip industry must foster strengths and avoid weaknesses, and take the initiative in development.
Shen Fenghua, a professor at Kyung Hee University and CEO of Hikemeisi, believes that China is the world’s largest semiconductor manufacturing base and the largest semiconductor market, and China is an indispensable link in the global semiconductor industry chain. De-sinochem and anti-globalization have led to the destruction of the global semiconductor industry chain. Under the new situation of anti-globalization, not only China needs re-globalization, but also the United States needs a global system.
"China needs high-performance chips, advanced semiconductor equipment and EDA from American companies such as NVIDIA. The world also needs rare earths in China market and China. Under the new situation, the re-globalization of the semiconductor industry is unstoppable. " Shen Fenghua said.
VC seeks new track, domestic substitution continues to accelerate.
On July 20th, at the opening ceremony and summit forum of the 2023 World Semiconductor Conference, Wei Min, director and chief supply officer of Huawei, said that the competition between China and the United States has worsened the supply environment of the whole chip, and semiconductors that were originally easily available have now become as valuable strategic resources as "oil".
After several rounds of sanctions and export restrictions by the US government, after five years, Huawei reopened the layout of its self-developed chip track this year.
At this conference, Huawei demonstrated its layout in semiconductor digitalization, including chip EDA engineering simulation and OPC (Optical Proximity Correction) engineering simulation, and achieved some technological breakthroughs in chip design, manufacturing, production and supply. Earlier, Huawei announced that it had made a breakthrough in 14nm EDA software with partners such as Huada Jiutian.
For the people, it should be emphasized that if there were no chip competition between China and the United States, it would have been the fastest development period for China’s semiconductors. Now that there is Sino-US competition, it doesn’t seem to be a bad thing at all, with better investment and higher enterprise enthusiasm.
In fact, with the acceleration of "domestic substitution" by domestic enterprises such as Huawei, investors in the chip industry have made certain investment adjustments as a whole.
At a forum of the World Semiconductor Conference on July 19th, Shen Wenjie, executive director of Yunjiu Capital, mentioned that at present, its capital institutions pay more attention to the investment with income exceeding 100 million yuan and about to enter the Pre-IPO, because these enterprises grow well, which can digest the overvaluation and are close to the listing in the capital market. At the same time, Yunjiu paid attention to some companies in chip design and chip equipment materials in the early days.
On the whole, Yunjiu Capital belongs to the "dumbbell" investment logic in the semiconductor track, and the risk of investing in both ends is low. "From the perspective of the founding team, I mainly look at two points. First, his direct front-line work experience has been done in design, materials and equipment, and production lines; Second, the founder should have some experience in capital market, and clearly understand and adapt to the whole capital environment and the pace of change. Because we will also see that some companies are still starting businesses under the idea of 2021, which may not match the market and is actually very difficult. "
Pei Yun said that the investment stage of Far Wing is mainly in the early to middle stage of growth, and the single amount is about 50-80 million yuan. Therefore, he mentioned that at this stage, if you don’t go back to invest in Angel or Round A, you still need to contact the project for commercialization or commercial progress. "To put it bluntly, we may discuss it more from the perspective of performance."
In addition, there are still some "domestic substitution" markets and opportunities in the markets of advanced packaging, automotive electronics and high computing power chips, especially the chip market in China is developing on the path of "self-production and self-marketing".
TSMC executives said that despite the short-term fluctuations in the industry, the semiconductor prospect is very positive and worth looking forward to, and the global semiconductor market is still growing strongly. Technological innovation will be the engine to promote the substantial growth of the semiconductor industry. It is estimated that the global semiconductor output value will tend to 1 trillion US dollars in 2030, of which 40% is expected to contribute to high-computing products, 30% is supported by mobile computing such as mobile phones, 15% is a high-growth market such as electric vehicles, and 10% is an IoT equipment market.
It is reported that TSMC will launch a 3nm powerful N3E process chip this year, and it is also the direction of the follow-up efforts. According to the road map published earlier, it is estimated that by 2026, TSMC will launch a 2nm follow-up technology N2P/N2X chip and strengthen the N3A process.
Chen Jiashu, CEO of Gartland Microelectronics, who is headquartered in Shanghai, said that the automotive chip products developed by him include MIMO transceiver architecture, transmission network design and optimization of power supply layout network, thus reducing the power consumption of the transceiver, which can be reduced by 20-30% compared with the products of American friends. At the same time, it also has great technical advantages in security and network capability. At present, more than 120 models have been equipped with Gartland CMOS millimeter-wave radar chips.
"In fact, China’s accumulation in the development of vehicle-level chips is very limited. We started from the earliest enterprise engaged in the development of vehicle-level chips nationwide, hoping that our input and output can contribute to the future electrification and intelligent development of China." Chen Jiayu said.
At present, advanced packaging technology has also aroused great concern in the market. Zhao Xiaoma, a partner of CIC Consulting, told Titanium Media App and others that under the background of Sino-US competition, it is forbidden to export high-end mask aligner, and restrictions such as high-performance chips below 10nm technology hinder the improvement of domestic chip manufacturing process. In this case, advanced packaging, as another way to improve performance, does not get stuck in the neck. Therefore, it has become the key point for the domestic semiconductor industry to make up for the scarcity of advanced processes.
However, some investors and industry experts are worried that the "small but scattered" environment of China’s chip industry has affected the long-term development of the industry.
"Because recently, indeed, there have been some chaos in the semiconductor industry in China, and it is indeed necessary to conduct self-examination. There are 1% enterprises with more than 1000 people in China, and over 80% enterprises are small chip companies. Small, chaotic and scattered is the current situation of the semiconductor industry in China, which is actually closely related to capital. " Wang Lin said that in recent years, due to geopolitics, industry, shortage and other reasons, it has played a key role in the development of China’s semiconductor industry.
Walden International, where Wang Lin is located, was established in Silicon Valley in 1987. The company manages both US dollar funds and RMB funds, with a management scale of over US$ 3 billion. The company focuses on investment in high-tech fields such as semiconductor and electronic industry chain, automotive intelligence, artificial intelligence, big data, cloud computing and new economic model innovation, and has invested in more than 500 high-tech companies in 12 countries around the world, including SMIC, Microsemiconductor (688012) and Lanqi Technology (688008).
Wang Lin noticed that some company founders "stepped on each other" in the industry, and even four or five or even seven or eight similar products appeared in the "stuck neck" track, and everyone unanimously said that the first (listed company) did not do well, which became the vicious status quo of entrepreneurship in the chip field.
"Now this atmosphere is not very recommended to start a business, because it is out of our original intention of supporting science and technology entrepreneurship. Therefore, everyone would rather support investing in innovative companies than investing in companies that are technically repetitive. I feel that I need to invest more in industries that are truly supported by the state and companies that really make me proud. " Wang Lin said frankly that the market space among companies in the semiconductor industry is very small, and they are also squeezing and competing with each other, which has affected the development of the chip industry in China.
Guo Yiwu, Secretary-General of Shanghai IC Industry Association, mentioned that at present, China’s chip manufacturing is weak, and TSMC’s foundry accounts for 62% of the whole market, but the sum of the two domestic chip manufacturers is less than 10%, which is a big gap, and enterprises need to work harder. He stressed that the domestic industry should build consensus, give full play to their respective advantages, and develop in coordination, and the future can be expected.
Yu Xiekang mentioned that there are three opportunities for upgrading and optimizing the semiconductor industry in China in the future:First, seize the opportunity of digital economy development, and the industrial chain fills the shortcomings; Second, grasp the opportunities in the post-Moore era and meet the challenges of advanced technology development; The third is to seize the opportunity of high-level opening to the outside world and meet the development of chip re-globalization.
Integrated circuit industry is a highly internationalized industry. Only by eliminating market barriers and strengthening industrial cooperation can the long-term, sustained and stable development of semiconductor industry in China be realized.
According to enterprise investigation information, by the end of May, there were 5,770 chip-related enterprises cancelled and revoked in China in 2023, but 51,000 chip-related enterprises were newly registered in the same period. In terms of investment and financing, 424 financing events were completed in the chip track, which was 16.2% lower than that in the same period in 2022, but 14.6% higher than that in the same period in 2021.
Nanjing, the venue of the 2023 World Semiconductor Conference, currently has more than 500 semiconductor companies. Together with Wuxi and Suzhou, it has become a gathering place of chip industry in eastern Jiangsu, covering EDA, chip manufacturing, packaging and testing.
On July 20th, TSMC announced that it would expand the 28nm production capacity of its Nanjing plant. At present, TSMC Nanjing plant has the manufacturing capacity of 12nm, 16nm, 22nm and 28nm, with a monthly production capacity of about 350,000 pieces.(This article is the first titanium media App, author | Lin Zhijia)
