Under the surge, the chip has hidden crisis

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Last Friday, chip stocks exploded. Semiconductor materials, packaging and testing, and equipment rose across the board. The Science and Technology Innovation Board 50 index rose 4.18%, and the semiconductor sector rose 6.83% in a single day. Among them, dozens of shares, such as Guoxin Technology, Huafeng Measurement and Control, Xinyuan Share-U, Longxin Zhongke, Ming Microelectronics, Tongfu Microelectronics, Jingfang Technology, Silan Microelectronics, Northern Huachuang, Lyon Microelectronics, rose and closed.
Meanwhile, the EDA company, Guangli Microenterprise, which was listed on Friday, closed up 155.78%, making 45000 yuan in theory.
After a long period of decline, semiconductors have again ushered in a new round of enthusiasm.
Three reasons for growth
There are no more than three reasons for what caused the semiconductor to break out again.
Under the influence of external environment, supply chain security has been given priority attention
On August 2, Pelosi arrived in Taiwan, China, China, which attracted the attention of Chinese people.
At the same time, the US Chip and Science Act, which has been delayed for more than one year, has passed the vote of the House and Senate, and the US President Biden has signed into force, with a total amount of US $52.7 billion. In addition to subsidies and tax incentives for chip factories, one of the investment restrictions for China is particularly noteworthy.
The Chip Act requires that companies that receive US federal funds are prohibited from significantly increasing the production of advanced process chips in China for a period of 10 years. Companies that violate the ban or fail to correct the violation may need to refund the federal subsidy in full.
The heart of Sima Zhao in the United States is well known. As commented by Economic Daily, the Chip Act tries to restrict the development of China’s chip manufacturing industry by allowing international chip giants to choose sides and stand in line through exclusive “geopolitical clauses”.
The Chip Act and Pelosi’s visit ignited the mood of the Chinese people, which is why the semiconductor sector rose sharply.
The United States has just announced a ban on the sale of EDA tools to China, and domestic EDA concept stocks have begun to break out. China’s largest local EDA enterprise, Huada Jiutian, directly raised its limit after its listing. Guangli Microenterprise, which also has EDA as its main business, rose by 160%, while Introduction Electronics and Opit also rose sharply.
The geopolitical tension has made us more aware of the importance of autonomy and control.
Announcement of rising performance in the first half of the year
According to the statistics of the Securities Times, 24 semiconductor industry concept stocks in the A-share market have issued a pre-increase announcement for the first half of the year. From the perspective of the expected median year-on-year growth of the net profit attributable to the parent company, the net profit attributable to the parent company of 11 shares is expected to increase by more than 100% year on year, and the growth of the net profit attributable to the parent company is expected to be the top of the list.
The rising performance in the first half of the year also injected confidence into China Semiconductor.
The wave of “bottom localization”
China’s semiconductor industry has started “bottom localization”.
In 2022, under the demand of chip shortage, major wafer factories are accelerating preparations. SMIC’s three 12-inch wafer plants in Beijing, Shenzhen and Shanghai have maintained normal construction progress; GTA Semiconductor has disclosed that it plans to spend more than 26 billion yuan on the capacity expansion of the 12-inch wafer factory in Shanghai Lingang Economic Development Zone; Huahong Semiconductor has also raised 18 billion yuan to expand the capacity of its Wuxi 12-inch wafer factory.
According to the capacity planning of each equipment company, China will enter the stage of intensive production and mass production by the end of 2022. Due to the expansion plan of major wafer plants, the capital expenditure and localization procurement ratio of domestic semiconductor equipment has increased from 10% to 60% in 2022.
This also ignited the market’s enthusiasm for semiconductor upstream industry chain, semiconductor equipment and materials.
Semiconductor enters the downward cycle
Although the semiconductor sector has gained momentum recently, the entire semiconductor industry seems to have entered a downward cycle. As we all know, the semiconductor industry is actually a cyclical industry. After a period of high tide, it will enter a low valley, and then it will enter a high tide again after a period of time.
A complete semiconductor cycle has seven stages: demand explosion – shortage rise in price – investment expansion – gradual release of capacity – demand contraction – overcapacity – price decline.
Consumer terminals represented by smart phones have taken up about 40% of the demand for semiconductors. However, as the demand for consumer smart terminals has weakened, the relevant semiconductor market has also been greatly affected.
According to the statistics of CINNO Research, in the first quarter of 2022, the average inventory turnover days of domestic consumer IC design companies increased to 201 days, and the market demand weakened significantly; The average inventory turnover days of domestic analog IC design manufacturers increased to 135 days, which was less than the average inventory turnover days of domestic IC design manufacturers.
Many international semiconductor giants have sent out negative signals.
Intel’s revenue in the second quarter was US $15.3 billion, down 17% from US $18.5 billion in the same period last year, and less than the US $17.92 billion expected by analysts. The revenue of its main product, PC-side chip, was poor. Intel Chief Financial Officer Zinner said that given the weak economy, the speed of small and medium-sized enterprises purchasing computers slowed down. He also stressed: “We really think we have reached the bottom.”
AMD is also “thunderstorm”. Despite the strong growth of operating revenue, the guidance for the third quarter was released that was lower than Wall Street’s expectation. Lisa Su, CEO of AMD, said on the earnings call: “Our outlook for PC business is more conservative. A quarter ago, we thought this business would decline, let’s call it” high single digit “. But our current view is that it will decline by about 15%. ”
Qualcomm’s revenue for the fourth quarter was lower than the $11.9 billion that analysts generally expected, mainly due to the impact of the soft smartphone market.
On the domestic side, it is also affected by the downward cycle. Before Friday’s rise, semiconductor stocks had fallen for a long time, and some enterprises even touched the limit. At the same time, the data released by the National Bureau of Statistics showed that the output of integrated circuits fell by 4.2% in the first three months of this year, which was the worst quarter since the decline of 8.7% in the first quarter of 2019.
Power to cross the downward cycle
If the waves rise and fall, the cycle of semiconductors is also cyclical. International giants have already experienced multiple cycles, but for “young” domestic semiconductor enterprises, they need to find the strength to cross the downward cycle.
Find new growth points in the downward cycle
In the face of the downward semiconductor cycle, not all enterprises have the same strength as Samsung and can make “countercyclical” investment with strong financial resources. Especially for domestic semiconductor enterprises, adhering to a “unique” product will inevitably be affected by the market cycle.
For example, Huiding Technology, which once became the first semiconductor with a market value of 100 billion, fell from 170 billion to more than 20 billion after its main business, fingerprint identification chip, was affected by the cycle.
Looking for new growth points is a major force to cross the cycle.
From the earnings of TSMC, the largest foundry in the world, we may see the growth point of future demand. In the business with continuous high growth, the proportion of HPC in revenue exceeded that of smart phones for two consecutive quarters. HPC has surpassed smart phones as the main engine of growth in the semiconductor industry, and has the ability to process data at high speed and perform complex calculations to solve performance-intensive problems.
High-performance computing is just the tip of the iceberg in the high-speed growth of the semiconductor field. In terms of mature manufacturing process, the demand for smart cars has already become the other pole of growth. From the performance of various domestic semiconductor enterprises, whether it is Weir’s shares in the layout of automobile CIS, or Mega’s innovation involving the automobile standard MCU, these enterprises that extend their products to the field of automobile electronics have achieved good revenue performance in the downward semiconductor cycle of this year.
Use technological innovation to cross the downward cycle
It is difficult to say how long a cycle of prosperity will last, but relying on technological innovation is another trick to cross the downward cycle. The Chinese semiconductor market has always been the largest in the world, but the share of Chinese semiconductor enterprises in the Chinese market is not very large. According to the track, in the field of MCU, foreign MCU enterprises account for nearly 80% of China’s market share; In the field of memory chips, China’s self-sufficiency rate is less than 16%.
Such vacancy and the demand for localization give Chinese semiconductor enterprises a chance to breathe in the downward cycle. In the face of the downward cycle, start-ups can take advantage of customer demand and differentiated competitive advantages to penetrate the market segments.
In fact, the common technology R&D strategies of leading enterprises are also differentiated innovation. For example, TSMC is also pursuing the innovation of “surpassing Moore’s Law” to gain the product differentiation advantage. Third-generation semiconductor enterprises develop semiconductor materials other than silicon-based materials, such as compound semiconductor materials such as silicon carbide (SiC) and gallium nitride (GaN), which are more suitable for high-power and high-frequency applications.
Zhang Xuena, CEO of Shenzhen Egon Semiconductor Technology Co., Ltd., once said: “Only by achieving technological differentiation advantages through innovation and solving the actual problems of wafer manufacturing customers can we continue to gain market opportunities and not be trapped by the cyclical development of semiconductors.”
Semiconductor is unbreakable
In the downward cycle, China Semiconductor has entered a critical moment. The transfer of the global semiconductor industry to China, the sustained domestic development policy support and industrial investment have brought vitality to semiconductor enterprises.
China’s chip domestic demand and self-sufficiency rate continue to increase. It is estimated that by 2030, the supply of Chinese semiconductor companies will account for 42.03% of China’s semiconductor market, compared with 16.62% and 4.42% in 2020 and 2010, respectively.
As the foundation of modern society, the semiconductor industry has involved many mitigation, and the types of chips are even more numerous. Different products vary greatly. Due to the long semiconductor industry chain, it is also impossible to flexibly adjust the output, which makes the coexistence of supply and demand surplus and structural shortage normal.
Industry insiders also said: “If you want to go through the downward cycle, on the one hand, start with research and development to improve the core competitiveness of enterprises; on the other hand, start with cost, find ways to reduce costs, and save strength in the ‘cooling moment’.”
Cycle is the norm. Facing the downward cycle, “young” semiconductor enterprises need to have the courage to stand firm.

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