Chip prices are reduced, chips are unsold. In the first half of 2022, because of the sluggish demand in the consumer electronics market, the chip industry once ushered in a price reduction tide, and in the second half of the year, the plot repeated itself.
Recently, CCTV news reported that as the core component of the electronic control system, STMicroelectronics chips were once one of the most sought-after chip products in 2021, and the market quotation once rose to about 3,500 yuan, but in 2022, the same chip fell from a high to about 600 yuan, a drop of up to 80%.
Coincidentally, the price of another chip last year was ten times different from this year. Chip prices are comparable to pork, up and down, the highest price and the previous normal price difference is extremely exaggerated, it is reported that the media reported 600 yuan of STMicroelectronics chips, the normal price in 2020 is only a few tens of yuan.
The chip craze seems to have passed, is the dark cloud that shrouded the entire tech circle last year about to lift? According to Bloomberg, the vast majority of chip companies believe that this hot market will have a major turning point for a long time in the future, and even some people are pessimistic that the semiconductor industry will usher in the worst decline in a decade.
A few joys, a few sorrows, chip prices avalanche, in addition to the industry silent, I am afraid that there are countless markets in the carnival.
01 The chip went down, but not completely?
The avalanche of chip prices is inseparable from the global sluggish electronics consumption.
From TSMC’s latest financial report, it can be seen that the smartphone business, which once supported half of the country, is no longer the largest source of revenue, and it is expected that the proportion of this business will continue to decline. According to CINNO Research, China’s smartphone SoC terminal shipments in the first half of 2022 were about 134 million, down about 16.9% year-on-year.
As for the PC side, according to market research company Mercury Research, in the second quarter of this year, desktop computer processor shipments fell to the lowest level in nearly 30 years, total processor shipments experienced the largest year-on-year decline since 1984, South Korea’s smartphone sales fell 29.2% year-on-year in July, computer and auxiliary equipment exports fell 21.9%, and memory chip shipments led the decline with a 13.5% decline.
Upstream demand decreases, downstream orders continue to cut, and prices naturally cool.
However, it should be noted that these chips that have reduced prices do not play any role in generalizing the entire semiconductor industry. Have chips really dropped in price? Under the news of the “plummeting”, there are still manufacturers who announced price increases against the trend, such as Intel, Qualcomm, Meiman Electronics, Broadcom, etc. plan to raise the price of some of their chip products.
Taking Intel as an example, according to Nikkei, Intel has informed customers that it will increase the price of semiconductor products in the second half of 2022, and is expected to increase the price of a wide range of products such as core servers and computer CPU processors and peripheral chips, and the increase varies depending on the type of chip, the lowest in single digits, and the maximum increase may reach 10% to 20%.
Has the price of chips gone up? It can be said that the price of consumer electronics chips has suddenly dropped due to the decline in demand, but the demand for MCUs in other application fields continues to be strong, such as automotive and industrial control, which has led to the high price of related chips. From the beginning of the abnormal mobile phone shipments, the future of the chip industry has been interestingly labeled as slow-selling, but in fact, the chip shortage in some industries has not ended.
Especially automotive chips, 2022 China Nansha International Integrated Circuit Industry Forum data shows that the current chip products can only meet the average of 31% of the needs of automobile manufacturers, Xpeng Motors’ He Xiaopeng also said that the automotive industry chip shortage is not over, GAC in June gave data that GAC faced a chip shortage of up to 33,000 pieces in the second quarter.
The new energy industry has been going smoothly, and the demand for chips in the future cannot be underestimated. It is reported that the average car needs to use 500 chips, new energy vehicles are equipped with more chips, last year global car sales of about 81.05 million units, that is, the entire automotive industry chain needs 40.5 billion chips.
In addition, high-end chips are still high on the market altar, on the one hand, the upstream industry chain for chips with advanced process technology has never faded. It was previously reported that TSMC’s 3nm chip will achieve mass production in September, and Apple will be the first customer to use TSMC’s 3nm chip.
It is reported that Apple will include the new A17 processor next year, as well as the M3 series processor, which will use TSMC’s 3 nanometers. On the other hand, there is a shortage of high-process semiconductor equipment, and the output of 3nm and 2nm advanced processes is not destined to be high, and there may be a supply gap of 10% to 20% in 2024~2025.
That makes it even less likely that prices will fall. All indications tell us that chips are falling and the industry is far from as simple as it seems.
02 Are consumer chips out of favor?
One side is quiet, the other side is not prosperous.
Consumer electronics chips have gone through the most glorious period of the first two years, and with the decline of electronic consumption, they have finally stepped down the altar. At present, many chip companies have begun to be busy shifting their business, from consumer to automotive and engineering fields. TSMC has listed the automotive market as a priority project in the next few years, and it is reported that on the mainland side, the automotive business of domestic MCU players such as GigaDevice Innovation, Zhongying Electronics, and AMEC is also becoming more and more obvious.
Specifically, GigaDevice entered the customer sample testing stage with its first automotive-grade MCU product in March, and is expected to achieve mass production this year; Zhongying Electronics is mainly used for the body control MCU part, and it is expected to return in the middle of the year; AMEC Semiconductor showed its determination to develop automotive chips in its prospectus, and its IPO plans to raise 729 million yuan, of which 283 million yuan will be used for automotive-grade chip research and development projects.
After all, the localization rate of domestic automotive computing and control chips is less than 1%, the localization rate of sensors is less than 4%, and the localization rate of power semiconductors, memory, and communications is 8%, 8%, and 3%, respectively. Domestic new energy vehicle manufacturing is menacing, and the entire intelligent ecology including autonomous driving will consume a large number of semiconductors in the later stage.
And how hard will it be to continue to stick with consumer chips?
It was previously reported that Samsung once suspended the procurement of all business units, including panels, mobile phones and memory chips, and even many Korean memory manufacturers will take the initiative to reduce prices by more than 5% in exchange for sales. Nuvoton Technology, which specializes in consumer electronics, also saw its profit soar more than 5.5 times last year, with a net profit of NT$7.27 per share. The performance became flat in April and May this year, with revenue falling by 2.18% and 3.04% respectively month-on-month.
One may not explain anything, but Wind data shows that as of May 9, 126 semiconductor companies around the world have announced their financial reports for the first quarter of 2022, of which 16 have experienced a year-on-year decline in net profit or even a loss. Consumer chips are accelerating their fall out of favor, and automobiles and industrial control have become the next profit-seeking point in the chip market.
But is it really as simple as it seems?
Especially for some domestic chip manufacturers, moving from the field of consumer electronics to the automotive field is far more than the market heat. First of all, domestic chips should have downstream, and the consumer field ranks first, accounting for 27%. Even if you look at the world, the domestic market is also the largest semiconductor market, data shows that in 2021, the Chinese mainland market semiconductor sales reached 29.62 billion US dollars, a year-on-year increase of 58%, is the world’s largest semiconductor market, accounting for 28.9% of the world’s total semiconductor sales.
Secondly, the chip industry itself has a larger profit margin in smart phones and 5G-related fields. For example, TSMC shipments account for 70% of the automotive MCU market, but automotive chips only account for 3.31% of its 2020 revenue. By Q1 2022, TSMC’s smartphone and HPC segments will account for 40% and 41% of net revenue respectively, while IOT vehicle DCE and others will only account for 8%, 5%, 3% and 3% respectively.
The demand is less, but the profit is still there, and the dilemma is probably the biggest headache in the semiconductor market.
03 After the boom, consumers reveled?
When the price of chips is shaken, the happiest is consumers, mobile phones, cars and even smart home appliances have become the consumption carnival area that is frequently expected after the price of chips is reduced, especially mobile phones. Not long after the chip price avalanche, there were people shouting on social platforms to buy mobile phones in the second half of this year.
Immediately after, the price of new energy was reduced, the price of electronic products was reduced, and the price of home appliances was reduced… Voices like this come and go. However, there is no clear trend for the time being whether there will be a corresponding price reduction on the product chain, but frankly speaking, this wave of chip price reduction will not cause a large-scale price reduction in the consumer market.
First look at the most influential mobile phone field, in recent years, mobile phone manufacturers are constantly raising prices, low-end silence, high-end swagger, the possibility of price reduction for a while is very low. In addition, the gross profit of domestic mobile phone manufacturers has not been high. At the Huawei Developers Conference, Yang Haisong, vice president of Huawei’s consumer business software Department, said that the profit of Chinese mobile phone manufacturers is pitifully low, and the domestic mobile phone market share is more than half, but the profit is only about 10%.
Also, the chip is indeed down, but the price of other components is not so polite, such as sensors and screens, high-end models are increasingly becoming mainstream, mobile phone manufacturers on the supply chain requirements are naturally more and more stringent, it is reported that OPPO, Xiaomi once customized exclusive sensors to Sony and Samsung.
In this way, it is a blessing for consumers that the price of mobile phones does not increase.
Looking at new energy, the mainstream chip that cut the price this time was originally not in the field of car manufacturing, not to mention, the price increase in the new energy car circle in the first half of the year was not even, and the reason behind it was not all chip trouble. The price of bulk materials is rising, whether it is nickel, steel, aluminum including positive and negative electrodes, the price only increases, the cost of batteries remains high, and various factors obviously cannot be attributed only to the chip.
Of course, the car making circle is not a little chip return can not be seen, since this year, LED light-emitting chips and driver chips have a 30%-40% price decline, which will undoubtedly play a certain buffer role in the subsequent cost of the car owner.
In addition to smart phones, the biggest impact of consumer chips is probably smart household devices such as air conditioners and refrigerators, and the demand for MCUs of the three major domestic white appliances is indeed not low, from 570 million in 2017 to more than 700 million in 2022, of which air conditioning MCUs account for more than 60%.
However, the chips used in the smart home field are basically some low-end chips with backward processes, which are diametrically opposed to advanced processes such as 3nm and 7nm, generally higher than 28nm or 45nm. You know, these chips are widely used due to their low technical content, and the unit price is not high.
For home appliance companies, low technology means they can even achieve self-sufficiency. In 2017, Gree’s microelectronics division was established; In 2018, Konka announced the official establishment of the technology division of semiconductors; In 2018, Midea announced its entry into chip manufacturing and established Meiren Semiconductor Co., Ltd., and in January 2021, Meiken Semiconductor Technology Co., Ltd. was established, with a current annual mass production scale of about 10 million MCU chips.
According to incomplete statistics, many traditional home appliance companies such as TCL, Konka, Skyworth, and Haier have laid out the semiconductor field, in other words, this field is not constrained by chips at all.
Down, or not down? This chip price reduction is more like a false shot, upstream manufacturers are temporarily unhappy, let alone consumers.
Post time: Dec-29-2022