Will new energy vehicle chips become the life-saving straw for chip manufacturers in 2023 (2023)

Will new energy vehicle chips become the life-saving straw for chip manufacturers in 2023?

In 2022, the global smartphone market will drop to freezing point, and the annual shipments will drop by 11% year-on-year, reaching the lowest level in ten years. The Chinese market is also bleak, with sales down 19% year-on-year, falling below 300 million units for the first time in eight years. In addition, the rest of the consumer electronics market also performed weakly.

The coldness of the terminal spread to the upstream, and IC design factories have encountered a decline in revenue and issued pessimistic forecasts, especially Intel, which issued "the most pessimistic financial report in history." However, many major manufacturers have expressed optimism about the automotive market. Both NXP and ST have indicated that the automotive business has soared; the operating rate of wafer foundries is worrying; equipment factories have started layoffs...

The following is the beginning of the year for some of the chip manufacturers we have compiled.

Will new energy vehicle chips become the life-saving straw for chip manufacturers in 2023 (1)

Part 1 IC design

Due to weak demand for consumer electronics such as smartphones and PCs, most IC design factories will experience a decline in performance in 2022. Intel, which is mainly engaged in PC chips, issued "the most pessimistic financial report in history" in Q4.

In addition, memory chips, as the "semiconductor weathervane", will also enter the darkest moment in 2022: there will be a surplus of chips in stock, customers will reduce orders, product prices will plummet, and storage leaders Samsung and SK Hynix will also experience a sharp drop in profits.

However, under the background of recession, many manufacturers also expressed their expectations for the auto market.

Chip giant Intel recently released its financial reports for the fourth quarter and full year of 2022. The financial report shows that Intel's fourth-quarter revenue was US$14 billion, a year-on-year decline of 32%. Moreover, Intel's main business-Intel's client computing business unit revenue, including PC chips, fell 36% year-on-year, lower than the consensus estimate of $7.68 billion.

Some analysts said Intel's latest results and outlook were "very weak" and there was no full-year forecast, adding to the uncertainty.

But it's not all bad news. Intel Foundry Services (IFS) has secured an order from a major "cloud, edge, and data center solutions provider." Together with previous partners, IFS is expected to bring more than $4 billion. income.

Samsung Electronics' operating profit in the fourth quarter of last year was 4.3061 trillion won, a year-on-year decrease of 68.95%. Profits at the chip division plunged more than 90 percent to 270 billion won ($220 million) in the fourth quarter of last year as customers continued to deal with large inventories.

At present, Samsung's storage chip inventory has more than tripled, and the inventory level has reached a record level of 3-4 month supply. And, Samsung and its rivals are losing money on every chip they make. It is estimated that in 2023, the total loss of the world's major memory chip factories will be as high as US$5 billion.

Texas Instruments (TI), known as the "weather vane of the semiconductor industry", has experienced its first decline in revenue since 2020, and has warned that customers are canceling orders. As customers are actively digesting inventory, it is expected that the decline in demand this quarter will be stronger than past seasonal effects Big. In addition, the analog and logic semiconductor market is expected to slow down due to increased customer cancellations at Texas Instruments.

The chief executive, who will step down in April, said the auto market was the only exception to weak demand. However, some analysts pointed out that orders in the auto market have begun to slow down, but have not yet turned negative.

Recently, more than 80 domestic semiconductor companies have successively released performance forecasts for 2022. Affected by changes in the overall semiconductor environment, the performance of some companies has plummeted.

Among the companies that have been released so far, 41 have reported losses, accounting for more than 50%, and consumer electronics and semiconductor design companies have become the hardest hit areas. Among them, Minxin shares forecast the largest decline in profits, and 12 companies are expected to lose more than 100%, and these 12 companies are all losing money for the first time.

In the last quarter, STMicroelectronics' net revenue was US$4.4 billion, a 24% increase from the same period last year; the revenue of the automotive business unit was US$1.7 billion, a year-on-year increase of 38.4%; the quarterly gross profit margin was 47.5%, higher than 45.2% on average. In 2023, STMicroelectronics plans to invest about $4 billion in capital expenditures, mainly to increase 300mm fabs and silicon carbide manufacturing capacity.

"Automotive and industrial will be the main growth drivers for our revenue in 2023," ST's chief executive said on the earnings call, with strong demand and increased capacity boosting sales.

NXP's latest financial report shows that revenue in the fourth quarter of 2022 will be US$3.312 billion, a year-on-year increase of 9%, exceeding market expectations; gross profit margin is 58%, exceeding expectations of 57.7%; net profit is US$734 million, a year-on-year increase of 20%.

Among them, the revenue of automotive chips increased by 17% year-on-year to US$1.805 billion, accounting for 54.5% of the revenue.

AMD's fourth-quarter and full-year financial report for fiscal year 2022 shows that AMD's revenue in the fourth quarter was US$5.599 billion, an increase of 16% compared with US$4.826 billion in the same period last year; 974 million US dollars compared to a decrease of 98%.

Some analysts believe that AMD will become one of the few semiconductor companies to achieve growth in 2023, and is optimistic about its competitiveness in data center chips.

Infineon is continuing to build up silicon carbide (SiC). Recently, in order to continue to expand silicon carbide production capacity, Infineon announced that it has signed a multi-year supply and cooperation agreement with Resonac (formerly known as Showa Denko) to supplement and expand the agreement between the two parties in 2021. Resonac will supply Infineon for the next 10 years. SiC wafers with a double-digit share of estimated demand.

At present, Infineon is also actively expanding its silicon carbide production capacity, and its new plant in Kulim, Malaysia is expected to be put into operation in 2024. Infineon aims to increase silicon carbide semiconductor production capacity by 10 times by 2027 and achieve a 30% market share by 2030.

In its outlook for 2023, Renesas stated that it is optimistic about the fields of industry, automobiles, infrastructure and IoT, as well as the data center field, with a focus on the automotive field.

Renesas believes that due to the development of new energy and intelligence in automobiles, the demand for automotive semiconductor technology innovation will also increase, including process and architecture. To this end, Renesas will mainly promote 28nm Flash technology automotive MCU products.

Part 2 Foundry

IC design manufacturers have encountered a decline in revenue. In order to clear inventory and reduce costs, many companies have cut orders, and the pressure has been placed on wafer foundries. TSMC, which is the leader, is not immune. It is estimated that the capacity utilization rate of Q1 in 2023 will drop to 75%, and Q2 will further decline. The operating rate of other foundries has also declined severely, but the impact on revenue has not yet appeared in the financial report.

Although the capacity utilization rate has declined, the foundries have stated that they will not reduce the foundry price, and expressed optimism about the recovery at the end of the year.

Demand for chips from South Korean chip foundries such as Samsung, DB Hitek, Key Foundry, Magnachip and SK Hynix System IC has also declined as demand for chips has slumped due to slumping demand for consumer electronics.

In early December 2022, foreign media reported that the capacity utilization rate of many foundry companies in South Korea declined sharply, except for Samsung Electronics. But in January, Korean media said that for 8-inch wafers, the operating rates of Samsung, DB Hitek and Key Foundry were all between 60% and 70%. But for 12-inch wafers, the operating rate of Samsung's 12-inch fab remains at around 80%.

Earlier, TSMC released its financial report for the fourth quarter of 2022. Despite a sharp slowdown in demand for consumer electronics such as smartphones and PCs, TSMC posted a record fourth-quarter profit. The financial report shows that TSMC’s net profit in the fourth quarter increased by 78% year-on-year to NT$295.9 billion (approximately US$9.42 billion). Revenue increased by 42.7% year-on-year to NT$625.53 billion.

However, TSMC may not be optimistic this year. Taiwanese media DIGITIMES Asia continued previous reports that the capacity utilization rate of TSMC’s 5/4nm process node will drop to about 75% in the first quarter of this year, and may drop below 70% in the second quarter.

Apple has scaled back chip orders for its new iPhone and MacBook lines in preparation for weaker demand in the first quarter, sources said.

Counterpoint Research released data forecasts that TSMC will continue to dominate the global semiconductor processing market in the fourth quarter of 2022. Samsung Foundry, UMC, GlobalFoundries, and SMIC will rank 2-5 in the market, with revenue shares of 13%, 6%, 6%, 5%. SMIC ranked fifth, and its market share dropped from 6% to 5%.

Part 3 Semiconductor equipment factory

One of the three major chip manufacturing equipment suppliers in the United States, Lam Group recently announced the layoff of about 1,300 people, equivalent to about 7% of its employees, in order to reduce expenses in a declining market.

The CEO of the company said that the overall market size of chip equipment is expected to drop to about 75 billion U.S. dollars this year, a decrease of about 20 billion U.S. dollars from last year. Its chipmaker customers are slowing production lines, delaying construction of new factories and reducing improvements to existing facilities. Electronics companies that buy chips are stockpiling unused parts that are rippling through the supply chain.

In recent news, 3M's latest quarterly profit fell short of expectations, with sales falling from $8.61 billion to $8.08 billion, compared with analyst expectations of $8.05 billion. In addition, 3M issued a downbeat full-year profit outlook, expecting sales to decline by 2% to 6%. Based on this, 3M plans to cut 2,500 global manufacturing jobs.

Although 3M has a monopoly position in the global semiconductor coolant market, some time ago, it announced that by the end of 2025, it will stop the production of all fluoropolymers, fluorine-containing liquids and PFAS-based additive products, and will stop its production by the end of 2025. The use of PFAS in all products may have an impact on the semiconductor manufacturing industry.

Recently, ASML released its dazzling financial reports for the fourth quarter and full year of 2022. Net sales in the fourth quarter of 2022 were 6.4 billion euros. At the same time, the gross profit margin was also affected by the additional upgrades and insurance compensation caused by the ASML Berlin factory fire last year, reaching 51.5% higher than expected.

In addition, ASML pointed out in a recent law conference that the order in hand has reached a record high of 40 billion euros, of which the demand for extreme ultraviolet (EUV) exposure machine equipment is the strongest, indicating that although the semiconductor market may decline this year, it includes Major manufacturers such as TSMC, Intel, and Samsung are still actively expanding advanced process capacity.

Semiconductor equipment manufacturer Kelei (KLA) recently announced its financial report for the second fiscal quarter of fiscal year 2023 ending December 31, 2022. In the fiscal quarter, Kelei’s total revenue was US$2.984 billion, a year-on-year increase of 26.82%, and a month-on-month increase of 9.54%; GAAP net profit was US$979 million, a year-on-year increase of 36.54%, and a month-on-month decrease of 4.58%.

It is worth noting that the semiconductor export control measures introduced by the United States in October last year had a relatively large negative impact on leading semiconductor equipment manufacturers such as Applied Materials and Fanlin Group, but they accounted for 29% of their revenue in mainland China. % KLA seems to have less effect.

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