Electrical Equipment / Components & Telecoms

Will the crisis of global chip surplus since the second half of last year be alleviated? With the disclosure of chip industry data in 2023, the industry's view on this issue is hardly optimistic. Some analysts believe that this contradiction between supply and demand may turn around at the end of the year. Industry experts said that the US ban on chip exports to China, which began in the second half of last year, is profoundly changing global supply and demand, continuing to cause chip supply imbalance in 2023, Huacheng Import and Export Data Observation reported.

Samsung LG "Transcript" shocked South Korea

According to the Huacheng Import and Export Data Observation Report, the two Korean electronics giants, Samsung Electronics and LG Electronics, handed over their dismal report cards on the sixth day. Samsung Electronics' profit in the fourth quarter of 2022 decreased by 69% year on year to 4.3 trillion won (about 23.2 billion yuan). This is the first time that Samsung Electronics' quarterly profit has fallen below 5 trillion won in nearly eight years. LG Electronics' profit in the fourth quarter of last year dropped 91.2% year-on-year to 65.5 billion won, falling below 100 billion won for the first time since the fourth quarter of 2018.

The biggest reason for the "shock" of Samsung Electronics' earnings is the sluggish semiconductor business. The demand for semiconductors in all industries is decreasing. It is estimated that the shipments of Samsung Semiconductor may continue to decline. The Korean Chamber of Commerce and Industry released a questionnaire survey on 128 semiconductor enterprises, 84 battery enterprises and 88 biological enterprises on the 4th. The results showed that 72.7% of the surveyed enterprises believed that the global supply chain this year was "similar" or "will be worse" than last year. The factors that the above enterprises are most worried about affecting the global supply chain this year are the protracted conflict between Russia and Ukraine, followed by the rise of domestic prioritization caused by China US competition. 62.3% of the respondents said that they were damaged by the international supply chain crisis last year, and 39.7% of the respondents said that they were considering expanding overseas production through mobile production bases in order to eliminate unstable factors.

According to the Huacheng Import and Export Data Observation Report, there are rumors that Samsung's semiconductor sector may lose money in the first half of this year. In the "post epidemic era", affected by the restructuring of the global supply chain and the friction between the United States and China, South Korea is showing signs of economic crisis.

Chip friction between China and the United States affects global supply and demand

"Semiconductor oversupply will exist for a long time." The Nihon Keizai Shimbun reported on January 4 that it is expected that the semiconductor supply and demand balance will not be achieved until the autumn of 2023. Sanjoy Morotia, CEO of Micron Technologies, said at the financial report conference last December that the market was experiencing "the most serious imbalance between supply and demand of semiconductors in the past 13 years". Wei Zhejia, CEO of TSMC, said in October last year that customers' destocking may continue until the first half of 2023.

According to the Nihon Keizai Shimbun, the semiconductor products used for smart phones and personal computers will become oversupply in July September 2022. Although the supply of semiconductors has been restrained and inventory digestion has gradually made progress, it is expected that the supply and demand balance of semiconductors for smart phones will be restored until October December 2023, and that of semiconductors for personal computers will be restored until July September 2023. According to the analysis of Nihon Keizai Shimbun, semiconductor manufacturing will take several months, and the current supply will be affected by the output in the middle of 2022.

The survey of member enterprises conducted by the Japan Semiconductor Association in December last year shows that the inventory level of enterprises using semiconductor to produce terminal products is on the high side,

According to the Huacheng Import and Export Data Observation, Xiang Ligang, a senior expert in the communications industry, said that the US ban on China's chips has affected the pattern of the world's chip industry. "The world will face a shortage of chips in 2021. This shortage does not mean that we really lack chips, but that chip companies around the world are hoarding in response to the US ban, which will eventually lead to a gradual excess of chips after the second half of 2022."

Xiang Ligang analyzed that the chip surplus is likely to continue in 2023. In order to deal with the chip manufacturing problem caused by the US ban, China has invested heavily in this field. "China will add 100 new chip production lines almost a year, and this strong production capacity will release the capacity in 2023, which will make many chip enterprises around the world face a huge adjustment in supply and demand."

Aligning with the United States will hurt you

Although the domestic chip industry is facing the pressure of supply and demand, Japan still hopes to keep pace with the United States in semiconductor policy, which is considered to "backfire" the domestic chip industry. According to Japan's Sankei Shimbun on the 6th, Japanese Minister of Economy and Industry Nishimura held talks with U.S. Commerce Secretary Raymond in Washington the same day, and the two sides reached a consensus on Japan and the United States working together to develop the next generation of semiconductors. According to the analysis of Sankei Shimbun, the reason why Japan and the United States reached a consensus is to slow down the development of China's semiconductor technology from the perspective of the United States, while from the perspective of Japan, in order to achieve the production of the next generation of semiconductors, technical cooperation must be carried out with the United States. According to the 2021 trade statistics released by the Ministry of Finance of Japan, about 40% of Japan's semiconductor equipment and raw materials exports go to China, which is the largest export target country. In the field of photoresist, Japan has a leading position in the world. A person in charge of a large semiconductor enterprise said that if Japan strengthened its policy binding with the United States to impose semiconductor export restrictions on China, it would be a serious problem for the industry.

"For the global semiconductor industry, the best situation is for everyone to support each other and form a division of labor." Xiang Ligang said that the United States is starting to break this state, and Chinese enterprises should gradually build up their production capacity in the future, and make up the shortcomings of equipment and raw materials such as lithographers and photoresists as soon as possible. If Chinese enterprises can meet their own demand for some chips, it will be a suppression to other chip manufacturers around the world. After all, this is a market worth 200 billion US dollars, Huacheng Import and Export Data Observation reported.