"Core" original - NO45
The prospects of the industry have been clouded with a new haze.
Wen I Ten Lane.
Reported by i Core Tide IC
id i xinchaoic
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After surviving the challenging year of 2023, the development prospects of semiconductors in 2024 seem to be still full of uncertainty amid the industry's expectations for the recovery of the industry.
In a series of financial reports released by chip companies, it can be seen that the industry has formed a strong "Matthew effect", with a few companies closely related to AI significantly stronger, while others have not met expectations due to the limited recovery of semiconductors.
EspeciallyAs one of the "ballast stones" of the semiconductor industry, the analog chip track is still weak.
As we all know, analog chips have always been known for their "stability" in the semiconductor market. Even in the market downturn cycle in the past two years, most companies have complained bitterly, but analog chip manufacturers have increased their revenues significantly, and TI's revenue in 2022 will exceed $20 billion for the first time; ADI also posted seven consecutive quarters of record revenue, making it its most profitable year in history. All of them fully demonstrate the resilience of analog chips.
However, the two major analog manufacturers Texas Instruments (TI) and STMicroelectronics (ST) have recently released their latest financial reports, and pessimistic expectations and industry warnings for the future have cast a new haze on the prospects of the entire industry.
Texas Instruments: Biggest drop in more than a decade
According to the financial reportTexas InstrumentsFourth-quarter fiscal 2023 revenue was 40US$800 million, down 10% sequentially and down 13% year-on-year; Net profit was 13$700 million, down 30% year-on-year, both below analysts' expectations.
Texas Instruments Q4 results (**TI financial report).
Judging from the full-year results, Texas Instruments' sales in 2023 also fell by 13%.This is the company's biggest drop in more than a decade, each business unit has been challenged to varying degrees.
Taking Q4 as an example, Texas Instruments' analog business revenue was 31200 million US dollars, down 1231% -69%；Embedded processing business revenue was 7$5.2 billion, down 1016% -155%；Other business decreased by 25 percent year-on-year45% to 20.5 billion US dollars, down 291%。
Texas Instruments Q4 revenue from different businesses.
TI Financial Report).
Texas Instruments CEO H**IV Ilan said in a statement: "The automotive marketFor the first time in more than three years, there was a sequential decline due to customer destocking, the shipment volume of industrial and personal electronics is much lower than demand, the number of cancellations in 23Q4 and 24Q1 is large, and customers are adjusting inventory levels. ”
As Texas Instruments, which has the largest customer list and the most diverse product line in the chip industry, it is becoming a demand indicator for the economic development of the entire industry. But its slew of data and expectations suggests that orders from key industries are taking longer than expected, which may not bode well for the broader semiconductor market.
Even if it is as strong as Texas Instruments, it is difficult to stand alone.
Rafael Lizardi, chief financial officer of Texas Instruments, said that the company's inventory days at the end of the fourth quarter increased by 14 days quarter-on-quarter to 219 days, and inventory increased by $91 million quarter-on-quarter to $4 billion.
For its Q1 FY2024 guidance, Texas Instruments expects revenue to be in the range of 34500 million-37$500 millionSignificantly below average analyst expectationsof 40$900 million.
Foundry giant TSMC has also raised concerns about overcapacity in analog chips, which require relatively old technology to produce compared to the equipment used to build advanced AI chips. As a result, there may be excessive inventory accumulation in terms of analog chip manufacturing capacity.
But in addition to the impact of the decline in automotive market demand, since the second quarter of 2023,The analog chip war set off by Texas Instruments may also be another important factor leading to the decline in its performanceThis part will not be repeated here.
STMicroelectronics:
Industrial chip marketor a sustained downturn
Following TI, another analog chip giant issued a pessimistic guidance.
Q4 23,STMicroelectronics:Total revenue 42800 million US dollars, down 32%。
STMicroelectronics' Q4 results (**ST earnings report).
Jean-Marc Chery, CEO of STMicroelectronics, said: "Customer orders were lower in the fourth quarter compared to the third quarterThere was no significant increase in the personal electronics market, the terminal demand of the automobile market was stable, and the demand of the industrial market was further weakened
Looking ahead, STMicroelectronics expects net revenue of $3.6 billion in the first quarter of 2024, down 15. year-over-year and sequentially, respectively2% and 159%；It is expected that the full-year revenue in 2024 will be 15.9-16.9 billion US dollars, which will also decline year-on-year.
This ** once again underscores the pressure and uncertainty faced by the entire semiconductor industry, indicating that the demand for industrial chips will continue to be weak.
This is despite the fact that the automotive market, which accounts for 41% of ST's revenue, grew 33% year-on-year5%, becoming the area with the strongest pulling effect. However, STMicroelectronics has also expressed some concerns about the long-term nature of the automotive market driving overall revenue. Jean-Marc Chery said that the end demand in the automotive market is stabilizing, and business growth is slowing, so that the overall revenue growth space is limited.
Whether it is Texas Instruments' "disappointing" quarterly earnings report, or STMicroelectronics' future expectations for both declines, it is indicatedAutomotive and industrial market demand continues to declineindustry trends.
In the past year or so, with the sharp change in the relationship between chip supply and demand, analog chips represented by consumer electronics applications have been greatly affected, but in this process, automotive and industrial analog chips have become one of the few chip categories with the strongest resistance to cyclical changes.
Today, however, the situation seems to be changing.
The consumer electronics market began to gradually recover and improve, and memory chips** continued to rise. Automobiles and industry, the two strongest tracks of the past, are no longer in their former glory.
Car chips don't smell good?
Looking back at the epidemic period, the shortage of "cores" storm hit all the world's electronic markets, and the automotive industry became one of the largest "disaster" areas, and almost all traditional automobile giants fell one after another.
At that time, grabbing production capacity and hoarding chips became the top priority of automobile OEMs, and the demand for chips surged.
Traditional automotive chip manufacturers such as Texas Instruments, Infineon, and STMicroelectronics have begun to invest in new production lines and expand new production capacity. At the same time, in the face of the rare incremental track in the industry at that time, a number of cross-border players have poured into the automotive chip market, and many automobile factories have also begun to choose to develop their own chips, or some automobile factories have directly signed supply guarantee agreements with chip factories, skipping the role of tier1 "middleman".
For a time, automotive chips have become the "hope of the whole village" in the semiconductor industry, and the competition pattern has become white-hot.
However, it is impossible for car companies to accumulate inventory forever, and the shortage of automotive chips has gradually eased as early as the beginning of last year; At this time, with the short-term huge expansion of the first business and the release of more production capacity, the inventory level continues to be high, and the supply-demand relationship of automotive chips gradually begins to show signs of imbalance.
Since the second half of last year, the automotive chip market has begun to roll up wildly, and the industry has begun to worry about the prospects of the industry. Until the beginning of this year, the price of some auto chips fell seriously, the inventory was too large, and the giant's auto sector began to loosen and decline.
In the latest financial report for the fourth quarter of 2023, it can be seen that Texas Instruments' automotive-related embedded processing business revenue has declined by 10% year-on-year.
It is worth noting that revenue growth from the automotive segment has been the only bright spot in Texas Instruments' performance in previous quarters, with declines in other areas other than automotive. Texas Instruments executives had said in a previous meeting with analysts that customers outside the automotive market continue to cut new chip orders and instead rely on existing inventory.
And now, the original hard-to-find automotive chip is "falling off the altar".
In fact, before that, another major automotive chip manufacturerON Semiconductor, in its Q3 2023 earnings report, it warned of the challenge of an imminent decline in automotive market demand.
According to its financial report, onsemi's automotive business unit reached a record $1.2 billion in revenue in the third quarter, a year-on-year increase of 33%. However, onsemi gave a pessimistic outlook for fourth-quarter revenue.
CEO Hassane El-Khoury said bluntly at the earnings briefing: "We are starting to see some weakness, with European Tier1 customers dealing with inventory and increasing risks to automotive demand due to high interest rates, and this impact is likely to continue to expand in the future." ”
At the same time, it is affected by changes in the automotive market and future performance expectationsonsemi also announced layoffs of about 900 people at the time。This has further sparked concerns that the weak demand in the automotive market is beginning to impact automotive chips.
It is not difficult to understand that in recent years, the large capacity and strong demand of the automotive chip market have led to almost all chip companies planning their own automotive products, and at the same time, the world's top leading manufacturers have also tilted their production capacity to the automotive business.
Therefore,Overcapacity of automotive chips is actually a doomed result
When all companies regard automotive chips as the last straw, then this straw is difficult to bear such a weight, and everyone has to float in the water and cannot get ashore.
Under this trend, the delivery time of many automotive chips has begun to fall. BroadcomThe car is expected to dive sharply, returning from tens of dollars to a few dollars, and the transaction is gradually decreasing; InfineonThe demand for vehicle specifications has fallen, and the demand for Internet celebrity materials has fallen a lot, especially for automotive MCUs.
In April last year, Morgan Stanley issued a warning: the downside risk of the automotive chip market has increased significantly, especially the weak demand for automotive MOSFETs, and automotive power management IC manufacturers have gradually lost their pricing power. In October, Morgan Stanley once again emphasized that the demand for automotive MOSFETs and PMIC from global IDM factories has dropped sharply.
A number of major automotive chip manufacturers have released concerns about the expansion of automotive chip inventories.
NXPHe said that he is "interested in reducing shipments of products from the automotive industry" to reduce the risk of inventory inflation and help customers reduce inventory rather than blindly executing long-term agreements. Some automotive chip factories such as Renesas and onsemi have also begun to reduce chip testing orders.
But in essence,At present, the demand for chips in the automobile market has only undergone some structural changes in the short term, and the long-term improvement of the automobile market is still the basic consensus judgment in the industry.
According to the industry**, the size of the automotive chip market will almost double in 2025 compared to 2021, and the average semiconductor cost per car will rise from $700 in 2020 to $1,138 in 2028.
The potential of the automotive market is also driving Texas Instruments' ongoing ambitious plant upgrade program, a move that will give it an edge over competitors that rely on outsourced manufacturing, but will put pressure on profitability in the short term. Rafael Lizardi, Texas Instruments CFO, said: "The recent downturn has been different from the past, with multiple industries declining on different timelines, but now is the time to persevere. In the long term, we are confident in the growth of semiconductors, and fluctuations in demand will not cause the company to abandon its expansion moves, and will continue to invest in the industrial and automotive sectors. ”
onsemi also said: "The electric vehicle market will grow, but not as fast as expected. I see EVs as a long-term growth opportunity, and even in the current context of various significant headwinds, the customer's design is not slowing down. ”
For the automotive business, the wafer foundry giantTSMCIt has also been pointed out that the demand for automobiles has been very strong in the past three years, but from the second half of 2023, automobiles have entered inventory adjustment mode. Despite this, as in-vehicle functions become more abundant, car shipments will continue to increase, and TSMC is still optimistic that the demand for automobiles will grow significantly again in 2024.
Comprehensive analysisIn the future, the automotive industry will present a short-term supply-demand mismatch and structural shortage, that is, some automotive chips have been alleviated, and some automotive chips are still in demand, and the delivery time has been continuously extended. But in the long runWith the increase in the value of chips mounted on bicycles and the continuous growth of the scale of new energy vehicles, the automotive track is still one of the most potential application fields in the semiconductor industry.
The industrial market continues to be weak
In addition,The first signs of weakness in the automotive sector have also contributed to the continued weakness in the industrial sector
Both Texas Instruments and STMicroelectronics emphasized that demand for industrial semiconductors is cooling. The market expectations of the two giants indicate that the demand for industrial chips will continue to be weak, and the ** of orders in key industries may take longer than expected.
A survey by the Management Institute (ISM) also showed that as of November last year, indicators of industrial activity in the U.S. manufacturing sector remained subdued, with factory employment falling further as hiring slowed and layoffs increased. This phenomenon reflects a trend of further deterioration in demand in the industrial sector, and this state of affairs is likely to persist for at least the next few quarters.
adiIn the last quarter's earnings report, it also said that the demand for industrial semiconductors is weak, almost all application areas are declining, and revenue and profit are expected to be lower than market expectations in the first quarter of 2024, as it is struggling to deal with the continued surplus problem in the semiconductor industry. Affected by the unfavorable performance, ADI even launched a new round of layoffs at the end of last year.
Actually,These analog chip giants are not only facing the continued downturn and instability of the industry, but also increasingly facing the impact from Chinese chip manufacturers。To this end, the chip giants represented by Texas Instruments will expand their production by about 40% from 2023, and even do not hesitate to launch a war to comprehensively reduce the general analog chips in the Chinese market, especially power management chips, in order to seize more market share.
Warnings for analog vendorsZhu Jing, deputy secretary-general of the Beijing Semiconductor Industry Association, pointed outThere is a high probability that the analog chip market this year, especially the high-end ones, will not be too good. First, there is an oversupply of analog chips in the automobile and industrial markets; Second, domestic enterprises have substitution capabilities on high-end analog chips, and TI will form a "more lose" situation when rolled up; Third, the recovery of the consumer market is relatively slow, and the analog chip market is too fragmented, and there is no other obvious incremental market.
Conclusion
From the perspective of the development of the entire semiconductor industry, this round of downward cycle has lasted for a long time since it reached its peak at the end of 2021. After a period of full adjustment, in the Q3 quarter of 2023, global semiconductor sales and financial indicators of major manufacturers have recovered to a certain extent, and the semiconductor boom may be close to dawn.
In particular, the recovery of the consumer market and the storage industry is steadily underway.
The chip industry is trying to recover from a severe economic slowdown, but the prospects of the a-mentioned analog chip giants for the industrial and automotive sectors** are not good news for the broader market.
From the perspective of long-term development momentum, the prospect of the analog chip market is undoubtedly good, and the leading manufacturers can rely on their own strong funds and stronger anti-risk capabilities, and can maintain a certain market competitiveness during market fluctuations. Taking Texas Instruments as an example, its analog chip product models have accumulated more than 100,000, and there are tens of thousands of general-purpose models.
For small and medium-sized enterprises, they may be cautious, after all, the high inventory of customers, as well as the high production capacity and low production capacity of the head enterprises, may bring them a lot of competitive pressure, especially the analog chip manufacturers that use the fabless model, due to the greater dependence on the upstream chain, they must be prepared in advance to face market fluctuations, pay attention to technological innovation, develop unique application products in their own areas of expertise, and build technical barriers.
Looking ahead, TSMC said that although there are still customers to adjust inventories at this stage, the semiconductor downturn seems to have bottomed out because the semiconductor inventory level is close to the Q4 level in 2021. In addition to continued strong demand for AI, demand for smartphones and PCs is also picking up. As for the industrial and automotive electronics markets, which benefit from long-term momentum, demand will also be quite strong next year after a brief inventory adjustment.
TSMC's ** is undoubtedly a shot in the arm for the chaotic situation in the semiconductor industry.