Text: The semiconductor industry is vertical.As an important hub between the original manufacturer and the end customer, chip component distributors are highly sensitive to changes in supply and demand in the market due to their meager profits. In 2023, the global chip market is sluggish, making life difficult for most component distributors, however, from the perspective of revenue, the recovery of the distribution industry seems to be earlier than the chip consumer market, and it will begin to gradually improve in the second quarter of 2023. As major market research institutions believe that the global semiconductor market will recover in 2024, it will drive the overall upward trend of the component distribution industry.
However, the European component distribution industry seems to be the opposite, in the global downturn in 2023, the European distribution industry is performing well, This is because the chip supply and demand relationship in Europe is relatively healthy, according to the statistics of the World Semiconductor ** Statistics Association (WSTS), the chip market in 2023, except for Europe, has about 5With the exception of a modest increase of 9 percent, the rest of the regions declined, with the Americas falling by about 6 percent1%, down 144% and Japan down 20%。It can be seen that only Europe has achieved growth, and the life of local component distributors is naturally better than that of other regions.
And in 2024, when the world is improving, Europe is likely to fall into a downturn. According to FBDI, a German distribution** organization, in the fourth quarter of 2023, the revenue of distributors registered with the agency fell by 201%, the number of registered chip component bookings was even weaker during this period, down 56%, and the book-to-bill ratio was 047, which indicates a difficult market situation in the coming quarters. However, the overall performance of these statistically available distributors in 2023 is good, and they still maintain growth throughout the year, with an increase of 44%, reaching a record 53700 million euros.
The above data shows that in the first three quarters of 2023, the days of European chip component distributors are generally relatively good, but in the fourth quarter, the situation has taken a sharp turn for the worse, which seems to indicate that the situation in 2024 is not good.
FBDI data shows that passive components and electromechanical related devices are the worst performers, not only in the fourth quarter of 2023, but the market for these types of products has shrunk throughout the year and has continued to this day. The passive components market fell by 159%, down 56%, the electromechanical devices market fell by 181%, down 73%。In addition, the market for sensors, displays, and power components has seen a similar decline.
Georg Steinberger, CEO of FBDI, said: "These numbers are not surprising, both in the fourth quarter and for the full year of 2023. New order levels are likely to be low in the coming quarters, so manufacturers should focus on new designs and project development. It can be seen that FBDI is not optimistic about the distribution prospects of European chip components in 2024, and hopes that relevant manufacturers can take precautions.
The performance of distributors is a mirror of the European chip market. In fact, in November 2023, the relevant institutions saw the market conditions and signs. At that time, the agency Dmass believed that the European chip distribution market had come to the end of growth through the analysis of data obtained after statistics.
Data from DMast shows that in the third quarter of 2023, the European semiconductor distribution market fell by 32%, and IP&E (Interconnect, Passive, and Electromechanical) decreased by 11%. Hermann Reiter, Chairman of DMost Europe, said: "The current slowdown is not unexpected, given the growth over the past three years, which is heavily stocked in most device segments. Overall revenue performance in 2023 is better as inventory levels remain high and orders are generally weak, but 2024 will require us to be patient until there is a substantial shift on the demand side. ”
Data for November 2023 shows that the European chip distribution market is slightly **32%。Only the United Kingdom, Germany and Turkey saw growth, while the rest fell into recession. From a product perspective, with the exception of MOS tubes and logic devices, most other products have experienced negative growth.
Among the larger countries in Europe, the chip industry in Germany was hit the hardest (especially in terms of IP&E), with a decline of nearly 17% in the third quarter of 2023 and a decline of 23 per cent, and the only country to achieve positive growth was Turkey, with an increase of 28 per cent. In terms of products, power components fell the least, and electromechanical devices (including interconnect products) fell by 93%, and passive components fell by 144%。
The backbone of the European chip industry became a soft underbellyFrom the end of 2023 to the beginning of 2024, most market research institutions around the world are optimistic about the development prospects of the global chip market in 2024, mainly due to the rapid development of data centers and artificial intelligence (AI) servers, the market is large, and the growth rate is very fast, and the demand for memory chips and high-performance processors for such applications is very large. However, this is a conclusion drawn from the perspective of the global chip macro market, and when it comes to different regional markets around the world, the situation will change.
At present, the consumer market for data centers and AI servers is mainly concentrated in the United States and China, where the demand is not only large, but also fast-growing. However, the same application is not so popular in the European market. The more traditional and slower-paced European market still relies on traditional industrial and automotive applications for semiconductor products, which are the main customer bases of European chip OEMs and distributors.
Over the past few decades, there has been a close interplay and interdependence between Europe's industry, the automotive industry and the semiconductor industry. The demand for chips from terminal enterprises has promoted the development of the European semiconductor industry, and chip companies have established in-depth cooperative relations with industrial enterprises through equity investment and other means.
Germany is the economic locomotive of Europe, and the country's development can largely represent Europe. The German automotive industry is strong, from the whole vehicle to the chip components have a strong influence. In the global automotive chip components and parts market, German related companies occupy an important position, such as Infineon, NXP, STMicroelectronics (ST), Bosch, ZF, Continental, etc., these companies have strong strength in automotive electronics. In Germany, the mutual influence and dependence between the automobile industry and the chip industry is particularly significant, the demand for chip components by automobile companies has promoted the development of the German semiconductor industry, and chip companies have established in-depth cooperative relations with automobile manufacturers through equity investment and other means, thereby ensuring the stability of the market.
Unfortunately, for most of 2023, the automotive and industrial markets in Europe are not strong, and there is an oversupply of related chip products, which will obviously affect the revenue of chip component supply-side companies in Europe. The revenue of major European chip manufacturers in the latest quarter also fully reflects the weakness of Europe's two pillar industries.
STMicroelectronics' latest financial report shows that the overall market demand in the past month is still weak, and the market inversion of some products is serious, and it is still dominated by destocking in the short term, especially in the industrial market, where there is little demand and more inventory of automotive chips.
STMicroelectronics reported net revenue of 42800 million US dollars, down 32%, slightly below analysts' estimates of $4.3 billion, and the company made a profit of 10200 million US dollars, a year-on-year decrease of 205%。Revenue for the first quarter of 2024 is expected to be $3.6 billion, down from $42.6 in the same period last year$500 million, also 11% lower than analysts' expectations. The company's fourth-quarter order book volume declined sequentially, and demand for industrial products deteriorated further.
STMicroelectronics expects full-year 2024 automotive growth to be in the mid-single-digit percentages, and we seem to be seeing signs of a decline in the automotive business compared to the high-single-digit percentage or significant growth in the automotive business three months ago**.
Regarding the outlook for industrial applications, ST said that customers are evaluating their sales and operational plans, that power energy end-use demand for infrastructure is weakening, and that customers and distributors in the construction, residential, factory automation, and robotics sectors are evaluating their end-use needs and inventory levels. Currently, the company's industrial chips are in the inventory correction phase, and based on experience, the inventory correction usually lasts for 4 to 5 quarters. At present, there are very few orders for industrial applications, especially general-purpose MCUs, and there is a significant overstock, because such chips are an indispensable part of all industrial systems, and industrial sensors, MEMS, general-purpose analog devices, and discrete devices are also in a similar situation. The company expects the industrial market to emerge in the second half of the year.
The latest earnings reports from both Infineon and NXP show that overall market demand remains weak in the latest month, and both ** and inventories will need to be digested for a long time before they return to normal. Both of these are major automotive and industrial chip manufacturers.
Not only is the performance of major European chip manufacturers poor, but the revenue performance of Texas Instruments, a leading global analog chip company in the United States, is also poor. The company's latest financial report shows that the market demand in the past month is still weak, some materials are upside down, the inventory level is high, the client transaction rate is not high, the company is still destocking, and it is difficult to improve in the short term.
Texas Instruments' fourth-quarter 2023 revenue fell 13% to 40$800 million, compared to an average forecast of $41$300 million, full-year 2023 sales are also down 13%, the company's biggest decline in more than 10 years. The company's CEO said: "During the quarter, our performance in industrial chips became increasingly weak, while the automotive industry continued to decline. "Sales for the first quarter of 2024 are expected to be 34500 million 37$500 million, below analysts' expectations. Judging from the revenue performance of Texas Instruments, the market demand for industrial and automotive chip components is still declining. From the perspective of the whole year of 2024, it is difficult for the automotive chip business to show significant growth, and even negative growth may occur.
It can be seen from the performance of the above major chip manufacturers that the industrial and automotive application market in 2023 is very poor, and as far as the current development situation is concerned, the market demand for the whole year of 2024 is not optimistic, especially for European chip manufacturers and distributors, who are highly dependent on the automotive and industrial application market. In this case, compared with the U.S. and Chinese markets, the lack of innovation in chip design and R&D in Europe is particularly prominent, which leads to a bit of disconnection between Europe and the global semiconductor development trend, which is also an important reason for Europe to develop local advanced process chip manufacturing in recent years.
In the face of the current situation of the market, relevant European institutions call for not to get involved in the war, especially if the production cost of chip components has not been reduced. We should focus on improving the innovation capacity of the European chip industry and reinvigorate the market with new ideas and products.
There are uncertainties in the global chip market in 2024In the first quarter of 2023, the average inventory of the global chip component distribution industry reached a high point, and then the inventory gradually decreased, showing a gradual improvement trend, but from the perspective of the average inventory days of major manufacturers, compared with the regular inventory level in previous years, the overall inventory is still at a high level. It can be seen from the recent distributor financial reports and ** analysis that until the first half of 2024, the whole industry will still be in an oscillating period of destocking and supply and demand adjustment.
In such an industry context, although many institutions are optimistic about the development prospects of the chip market in 2024, there are also market research institutions and manufacturers who are cautious about the market in 2024, and Future Horizons and others also warned that the overall market performance in 2024 may not be as optimistic as expected.
Malcolm Penn, founder and chief analyst of Future Horizons** In 2024, the global chip market may see two development trends, one is an increase of 16%, and the other is a recession of 4%. The agency's 16% growth forecast is basically consistent with Gartner, Semiconductor Intelligence and other institutions, but there are some differences in specific figures.
However, negative growth is also possible.
Penn noted that the market's annual growth is driven by a significant increase in average sales**, and for now, unit shipments remain flat and there can be no full recovery without new demand stimulus.
Penn believes that the automotive and industrial chip component markets have rebuilt inventories, and the fundamentals of demand are determined by the global economic development momentum, and from the current situation, the global economic outlook remains uncertain.
A research institute at the University of Pennsylvania believes that at present, the recovery trend of the chip market is the result of comparing it with the weak market at the beginning of 2023, but whether this trend will continue to rise until the second half of 2024 is still uncertain, and variables still exist.