Cutting edge technology

Has the peak been passed? The global semiconductor industry

Introduction: With the gradual coming of 5G, the global semiconductor industry is facing a new round of development opportunities. At the same time, we also see that after the performance of global semiconductor manufacturers reached their peak, there are signs of a sharp decline. The profits of some semiconductor manufacturers that have announced their results in recent days are actually not "good looking."

With the gradual coming of 5G, the global semiconductor industry is facing a new round of development opportunities. At the same time, we also see that after the performance of global semiconductor manufacturers reached their peak, there are signs of a sharp decline. The profits of some semiconductor manufacturers that have announced their results in recent days are actually not "good looking." South Korea's Samsung Electronics and other eight major semiconductor manufacturers in the fourth quarter of 2018 net profit fell by about 30%. Interestingly, the “sparkling” of the decline still points to the Chinese market. Due to the slowdown in China’s economic growth, sales of smartphones such as the US Apple’s iPhone have slowed down, and the data center’s construction boom has come to an end. The development of the global semiconductor industry has also fallen into a relatively "stagnation period." With the continuous application of 5G and AI technology, the development of the chip industry is also facing a new "turning point".

The pressure on Samsung's “topping up” has increased sharply

According to a recent report by BusinessKorea, the global semiconductor market grew by 13% year-on-year, driven by the growth of the memory industry. Samsung Electronics maintained its position as the world's leading player with a market share of 15.9%; SK Hynix ranked third, with revenue up 38.2% year-on-year, the fastest among the top 10 companies in the industry. According to a preliminary report of the global semiconductor market in 2018 released by market research company Gartner, global semiconductor revenue reached US$476.7 billion last year, up 13.4% year-on-year. The share of memory chips in total semiconductor revenue increased from 31% in 2017 to 34.8% in 2018, the largest proportion.

Samsung Electronics' revenue last year reached US$75.9 billion, with a market share of 15.9%, ranking among the best in the world. The company's semiconductor revenue increased by 26.7% year-on-year. In 2018, revenue from storage semiconductors increased by 27.2%, accounting for nearly 35% of the semiconductor market. Storage semiconductors not only account for the largest share of the entire semiconductor market, but also the fastest revenue growth. Gartner said this is because the average price of DRAM memory was big last year.Part of the time is steadily rising, so revenue growth is faster. However, due to oversupply, the average selling price of NAND flash last year was reduced. Gartner believes that the growth of the memory industry may slow this year, and the company rankings in the semiconductor market may also change.

In fact, Samsung has become the leader of the global semiconductor industry in 2017, surpassing Intel. In 2018, the sales gap between Samsung and Intel further expanded. However, Samsung’s fourth-quarter results are expected to be less than expected. According to Reuters, Samsung Electronics initially estimated revenue for the fourth quarter to be 59 trillion won, down 11% from the same period of the previous year. The operating profit for the fourth quarter was initially estimated at 10.8 trillion won ($9.77 billion). It was down 29% from the same period last year. Below analysts' estimate of 13.2 trillion won. The decline in quarterly operating profit will be the first in two years, with China's economic slowdown reducing demand for its chips and mobile phones.

and Refinitiv's data show that Samsung's global smartphone business profit is expected to fall by one-fifth in the fourth quarter of 2018. In view of the decline in memory chip shipments. Samsung expects overall revenue from the chip business to decline by 5%, and operating profit is expected to decline by 3.7% to 10.5 trillion won. Among them, Samsung’s decline in the Chinese market is one of the important reasons. Samsung currently has less than 1% of the smartphone market in China, but Samsung's memory and processor chips account for more than three-quarters of its revenue. Samsung provides storage support for smartphone makers including Apple and Huawei.

The chip industry will usher in a recession?

As Samsung's profit in the chip market declines, there is a voice that also shows that the global chip industry may enter a recession cycle. As early as September last year, Morgan Stanley and Goldman Sachs warned the semiconductor industry that supply and pricing issues in the chip industry could worsen before entering 2019. However, although the weak demand for smartphones has suppressed some of the chip demand, AI chips, automotive chips, cloud computing, 5G technology and the Internet of Things will become long-term growth drivers.

South Korea's SK Hynix, US Intel, Texas Instruments, Qualcomm, NXP SEMICONDUCTORS, and Infineon Technologies (Infine)On Technologies AG) and Japan's Renesas Electronics' results showed that the total net profit of the eight major manufacturers was the lowest at the beginning of 2016, and has continued to grow until the third quarter of 2018 reached a peak of $25.4 billion. But it fell to $18.6 billion in the fourth quarter. Six companies except Qualcomm and Infineon are all in a profit downturn or loss. Perhaps another round of cycles has begun. From the bottom to the peak, the chip industry has always been ups and downs for years.

One of the main reasons for the decline in smartphone shipments. Texas Instruments' net profit fell by 20% in October-December 2018 due to the sluggish sales of analog semiconductors for smartphones. Samsung’s net profit for the same period also decreased by 36%. Semiconductor memory sales growth was weak, the division's operating margin fell to 41%, and Intel and SK Hynix, which are involved in semiconductor memory, also experienced a decline in profits. In particular, Intel Corporation, in order to supply the baseband capacity demand of Apple's new products, sharply cut off high-end CPU capacity to make way for Apple, resulting in Intel's lack of supply in the PC market affecting performance.

Can the AI ​​era welcome the shuffle?

With the rise of AI technology, AI chip applications have made the advantages of traditional chip giants no longer, and everyone is almost at a relative starting line, even including Apple plans to enter the chip market. It is reported that Apple is developing its own cellular modem technology, which may be used for iPhone, iPad and Apple Watch. According to Reuters, Apple "has transferred its modem chip engineering development from its supply chain division to its internal hardware technology division." The report said that this is "Apple is seeking after years of purchasing from external suppliers. A sign to develop the key components of its iPhone."

and Qualcomm, which has been incompetent with Apple, has shifted its focus to the 5G market, expecting the outbreak of 5G demand to drive the smartphone PC market in the future. Second growth. But more importantly, even if 5G can quickly enter the outbreak period, Qualcomm's advantage is greatly weakened, and it is no longer like the monopoly of the 3G and 4G eras. Huawei, Apple, Intel, Samsung and other companies are all deploying 5G. Entering the AI ​​era, the market generally believes that the semiconductor chip market will enter a new developmentAt the stage, the market reshuffle will not happen.

Author: Ma knife

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