Huangshi Ruixin Electronic Technology Co. , Ltd.

Chip companies face tough times amid weak demand

By the continued weak demand for mobile phone market, market news, mobile phone chip manufacturers mediatek, Qualcomm have revised next year's film volume. In fact, it's not just cell phone chip design firms. The rest of the components are also facing the same test. Most of them are conservative about next year's consumer electronics market. For IC design firms, the flexibility of the amount of cast pieces, multi-product line layout to become the key operating next year. At this moment at the end of the third quarter, IC design manufacturers are negotiating with wafer foundries for the amount of films to be released next year. At the beginning of this year, most manufacturers are optimistic about the market conditions for next year, coupled with the tight supply of production capacity previously, as a result, most of the projected projection volume is too optimistic. As the timeline progresses, whether it is the impact of US interest rate hikes, inflation and other factors, making the inventory piled up from the second quarter, the second half of the peak season is not busy, will be the top priority destocking inventory.


From the optimistic expectation at the beginning of the year to the sharp turn down at present, most of the businesses believe that the next progress of destocking stocks will depend on individual applications, and most of them will probably be relatively healthy until the middle of next year, demand for the phones is less clear, especially since the non-apple camp has fewer apple fans to back it up with, and the market is mostly betting against non-apple sales next year. In the mobile phone market next year, inflation will bear the brunt of the squeeze on consumer spending, with only the top consumers of the pyramid, or e-sports players, making entry-level devices the first to hit the market, demand for flagship phones and esports is relatively clear, a phenomenon that can be seen in the iPhone this year, with only the high-end Pro model selling well in the iPhone 14 series. Better still, the medium-and long-term trend of increasing 5G penetration is not changing. Next year's penetration is expected to grow from 50% this year, while the purchasing power of 4G models in emerging markets is also under pressure.


For next year, there are several points to watch in the operation of IC design firms. One is whether they can grasp the layout of a diversified product line, as in the case of mediatek, although the demand for the mobile product line is unclear, but non-mobile product lines such as Netcom, automotive and other relative demand is clear, will also be one of next year's momentum. Second, whether it maintains a close cooperation relationship with the wafer foundries, especially when the capacity side is loose, and many manufacturers have reduced the amount of sheets, if the market improves, whether it can have the means to adjust the amount of sheets flexibly, master customer order demand, will also be affecting next year's performance, inventory important key. Third, whether the price of the wafer foundries has been relaxed, because in the short term, the price of the wafer foundries has not been relaxed, but most IC design manufacturers are conservative in their estimates of the amount of pieces to be cast, this will be a big test of whether the foundries can maintain capacity momentum next year, so it is worth worrying about the possibility of price easing in the fourth quarter or the first quarter of next year, whether the wafer foundry to yield to the supply chain, will also affect the IC design manufacturers pricing key factors.

Fourthly, IC design firm's pricing strategy and the ability to maintain profitability, under the current market active destocking inventory, hope to be able to stimulate customers and consumer gas through haggling, chinese manufacturers, in particular, are using government subsidies as leverage to drive a hard bargain. For Taiwanese manufacturers, can they respond with cost optimization and diversified product portfolios when the cost side is not yet loosened, to maintain next year's gross margins and profits will also be key. Taken as a whole, the number of revised films only reflects the forecast of next year's market conditions. Behind this trigger, whether it will lead to price changes in wafer foundries, or even stimulate demand, is the key observation that will affect next year's operations.



Semiconductor demand hits the brakes global shipments contracted for the first time in 32 months as home demand stalled and inflation led to a drop in demand for products such as smartphones, it has also put a brake on semiconductor demand and sent global shipments into contraction for the first time in 32 months. The Nikkei reported that demand for semiconductors has been put on the brakes because of a slowdown in the residential economy and a slowdown in China, the main market for products such as smartphones, the semiconductor boom has been back in recession since the second half of 2018. Global semiconductor shipments fell 1.8 percent to $44.4 billion in July 2022 from a year earlier, according to the World Semiconductor Trade Statistics Association -WSTSWSTS) , it was the first contraction in 32 months since November 2019. The report pointed out that previously, demand outstripped supply, leaving semiconductors in a seller's market, but with the housing economy demand has stopped, coupled with rising global inflation pressures and the closure of Shanghai, China, and other factors, it has also led to significant changes in the business environment in which sellers have an advantage, particularly in the memory sector, where falling price pressures have mounted as inventories have increased. According to TrendForce, a research firm in Taiwan, DRAM prices are expected to fall 10-15% in the july-september period compared with the previous quarter (april-june) , and NAND Flash Memory prices are also expected to fall 30-35% . According to the report, compared with 2018, despite the rise of new demand for electric vehicles (EV) , supply and demand for some semiconductor products are still tight, but it is still unable to fill the gap of slowing demand for smartphones and pcs, which account for nearly half of overall semiconductor demand. According to IDC, smartphone shipments in China fell 15% from April to June 2022 compared with the same period last year.



At the end of August, WSTS revised down its 2022 global semiconductor sales (including chips, discrete components, leds and other optoelectronic components and sensors) from its previous estimate of US $646.4 billion (June 2022) to US $6, the $33.2 bn annual growth rate was revised down to 13.9 per cent from 16.3 per cent, with PC/smartphone shipments falling as personal consumption slowed, the annual growth forecast for 2023 semiconductor sales was revised down to 4.6% ($662.3 billion) from 5.1% ($679.6 billion) . Jpmorgan: the real pain of the chip industry comes next year! While there has been a“Broad correction” in some parts of the semiconductor industry, Morgan Stanley, the investment firm, says the industry as a whole is not likely to feel real pain until next year. A team of analysts led by Joseph Moore pointed out that there could be inventory adjustments in the semiconductor sector. While there have been“Some softness” in the market, the inventory upheaval“Is likely to be pervasive across all markets”.


After further research, the team found demand problems in this area, mainly in the consumer electronics market, especially PC and console games. It is understood that in Malaysia and the Philippines and other areas of demand is still negative growth. Among the companies surveyed, Morgan Stanley cut its 2022 earnings per share forecast for AMD to $4.02 from $4.24 a AMD.us , it cut its forecast for 2023 earnings per share to $4.40 from $4.72. The bank noted that AMD had a strong market share but lowered its expectations for the company led by Lisa Su. However, the company also noted that AMD's Genoa line of products is on schedule, which should help it continue to drive market share growth, because of delays in its intc.us rival, Intel's Sapphire Rapids chipset. Morgan Stanley analysts wrote: “While there is some anxiety about the need for these forecasts to decline, we note that they are still higher than we originally expected [ in 2022] .” Earlier this month, Stifel, an investment firm, turned its attention to AMD, highlighting its strong execution and“Expanding intellectual property portfolio”.


As for Qualcomm (qcom.us ) , it said recently that design revenues in its car business had risen from $19bn to $30bn. Morgan Stanley said it expected a valuation“Slightly below consensus expectations” for the fourth quarter and next year, but that the stock was“Very attractive”, and there are signs that the recent price increases should continue. In addition, Morgan Stanley said GlobalFoundries was likely to continue to benefit from continued trade tensions, noting that the gfs.us shortage had helped provide greater visibility for its customers, because the company has become a“Business model transformation of the preferred partner.”. The western wdc.us is likely to continue to see a “Very weak” trend in NAND, with a loss expected in the December quarter, Morgan Stanley added, because it is the company that has faced the“Biggest challenge” in recent times. By contrast, Microchip Technology (mchp.us ) is benefiting from the current environment to help deleverage its business. Morgan Stanley believes its performance was“In line” with that of other broad-based companies when the economic downturn hit. At present, Microchip has been able to generate enough cash, which may make it beneficial to investors.


Companies that spend more, such as Intel and micron, are seen as “Inexpensive” in terms of historical price-earnings ratios and book mu.us , but they are more expensive in terms of free cash flow. Finally, equipment stocks such as Ramm Research (URL) and applied materials (amat.us ) are likely to face “Tougher times”, but even with a 20-25 per cent drop in fab equipment spending next year, they may also be able to maintain cash flow.
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