Electronics

In recent years, the output of the domestic integrated circuit industry has maintained rapid growth, especially in 2021, China's integrated circuit output will be 359.4 billion pieces, a year-on-year increase of 33.3%, which is the highest year-on-year growth in the past 10 years. But what is unexpected is that in the first half of 2022, the domestic integrated circuit output was only 166.1 billion pieces, a year-on-year decrease of 6.3%, which also set a negative growth for the first time since 2009.

From the perspective of specific months, since 1997, domestic integrated circuit production has maintained a rapid growth trend, even if the epidemic in early 2020 has not affected its rapid growth. However, since the beginning of this year, the monthly growth rate of China's integrated circuit production has shown a downward trend throughout the first half of the year, with an average drop of more than 10%.

On the contrary, domestic integrated circuits have shown a "thriving" trend in the import and export market. The growth rate of import and export volume in the first half of the year was 5.5% and 16.4% respectively. Among them, the high growth in the export value of the integrated circuit market is particularly noticeable under the current decline in production.

The recent shortage of cores caused by many factors such as trade disputes, supply and demand imbalances and the epidemic is gradually returning to rationality. So is the current decline in domestic integrated circuit production and the surge in international trade exports related to this?

Core reason: Demand is the key

To analyze the root cause of this problem, we need to analyze the output of integrated circuits and international trade exports separately. In terms of the reduction in domestic integrated circuit production, the following two reasons cannot be ignored:

In the short term, the epidemic in Shanghai at the beginning of the year affected the operation of the supply chain to a certain extent.

As we all know, Shanghai, as the core production base of the domestic integrated circuit industry, has a number of wafer foundries such as SMIC, TSMC and Hua Hong. The production and operation of other links have a greater impact.

In the long run, the impact of sluggish terminal demand for downstream home appliances and consumer products is the root cause of production reductions. Domestic wafer foundries are mainly concentrated in this field, and the impact is relatively large.

From the beginning of 2021, affected by the repeated epidemics, poor economic situation and sluggish demand, the demand for consumer products and home appliance industries represented by smartphones has declined significantly, triggering a number of upstream chip suppliers including Qualcomm, MediaTek and Qorvo. 's cut bill.

It is reported that the current wave of consumer orders reduction has further spread to the foundry side. In the first half of the year, including UMC, PSMC and the world's advanced companies, all have orders defaulting information "exposure". In general, domestic branches such as UMC and TSMC, as well as SMIC and Hua Hong, account for a relatively large proportion of consumer products and are subject to large fluctuations.

The long-term contract customers of consumer products are facing the pressure of inventory adjustment. There have been cases of default and abandonment of the goods. The capacity utilization rate in Q3 will decline by 5% to 10%.

From the perspective of the increase in international trade imports and exports, there are also the following two reasons:

First, from the overall background of the semiconductor industry, the chip market is still improving in the past two years.

Unlike the sluggish demand for home appliances and consumer goods, the incremental demand including automobiles, industrial control and new energy (energy storage, photovoltaic, etc.) still maintains a high degree of prosperity. According to WSTS forecast, the global semiconductor market will reach US$646 billion in 2022, an increase of 16.3%.

Second, the domestic epidemic has resumed work and production well, and the competitiveness of integrated circuits has been continuously strengthened.

Taking Shanghai as an example, it took less than a month from the extended shutdown of the epidemic to the resumption of work, which is more favorable for restoring confidence in the industry. In addition, with the continuous strengthening of the competitiveness of a number of manufacturing and packaging and testing enterprises represented by SMIC, Hua Hong and Changjiang Electronics Technology, relying on a stable supply chain, the competitiveness in the international trade export market has been continuously strengthened.

From the data, since 2015, the average unit price of China's integrated circuit exports has shown a steady upward trend. The average unit price of circuit imports fluctuates, and there is still a certain downward trend in prices before the epidemic. In contrast, the competitiveness of the domestic integrated circuit industry has been making progress.

To sum up, the domestic integrated circuit industry is mainly concentrated in low-end fields such as home appliances and consumer products. Affected by sluggish demand and repeated epidemics, short-term output will inevitably decline. In the long run, driven by the new incremental demand for automobiles, industrial control and new energy, the domestic and foreign semiconductor markets still maintain high development expectations, but the turmoil brought by the downturn in the traditional market cannot be ignored.

Some views on the future development of the semiconductor industry: Increment is the core

In general, as chip manufacturers open up new production capacity, the superimposed surplus production capacity of consumer/home appliances is transferred to shortage areas such as automobiles and industrial control. Previously, due to the imbalance of supply and demand, trade disputes and repeated epidemics, there was a shortage of cores. It is returning to rationality, and the problem of core shortage is gradually alleviated.

In the short term, from the perspective of various segments of semiconductors, the trend of chip supply and demand differentiation is obvious. Specifically, "automobile/industrial control/new energy (expansion) and consumer electronics (mobile phones, PCs and tablets, etc.)/home appliances (reduction) demand differentiation - distribution growth slowing down/original structural shortage - foundry capacity. Alleviation/decline - decline in packaging and testing", the change in terminal demand is gradually transmitted to the upstream chip OEM/distribution and manufacturing links (foundry/packaging and testing), the second half of the year will be the turning point of this round of chip market "from prosperity to stability".

In the long run, as smart cars, cloud computing and new energy enter a stage of rapid development, potential incremental demand will be the key to supporting the high prosperity of chips in the next few years. At the same time, due to geopolitical disputes and repeated epidemics, the future direction of the semiconductor industry is still unknown. Superimposing the support policies of various countries for the local chip industry will also be an uncertain factor affecting the semiconductor industry in international trade in the next few years. Cooperation and gaming will become the "main theme" of the global semiconductor industry.