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The second half of semiconductor 2020 is fierce

Time:2020-07-17 Views:377
In July, the global semiconductor industry ushered in the second half of 2020. Looking back at the performance in the first half of January-June, although the Covid-19 epidemic swept the world and had a huge negative impact on the economy of various regions, observing the semiconductor industry seems to be particularly strong in this area.

The American Semiconductor Industry Association (SIA) and WSTS gave data on chip sales in major markets worldwide in January, February, March and April. Continuing the recovery of the global market at the end of 2019, and Covid-19 has not erupted in January. In January 2020, the global chip market was basically flat year-on-year. However, on the whole, the global semiconductor market started fairly well in 2020. For the first time in more than a year, there have been regions with positive year-on-year growth, mainly in the United States and China.

In January this year, the global chip market size was US$35.39 billion, a 2.2% month-on-month decrease from December 2019 and a 0.3% year-on-year decrease from January 2019. The year-on-year growth in China and the Americas almost completely compensated for the 5% market decline in Europe, Japan, and Asia Pacific (excluding Japan and China). Especially in the Chinese market, the average sales of this market in January were 12.23 billion US dollars, an increase of 5.2% over January 2019.

In the following February and March, China became the hardest hit by Covid-19, but after two months of hard work, China controlled the epidemic at the end of March and early April. But it was during that time that the epidemic began to spread around the world, especially in the United States and Europe, where the semiconductor industry is developed, has become a hardest hit area. This inevitably caused people to worry more about the global semiconductor industry at that time. Soon after the year‘s downturn, will it enter the recession period again?

From the sales data in April, the situation is not as bad as people expected. As shown in the figure below, global chip sales in April were US$34.43 billion, a year-on-year increase of 6.1%. The increase was only slightly lower than the 6.9% in the previous month.

Among them, the growth rate of the American market is faster, with a year-on-year increase of 24.5%, while the growth of the Chinese market (about one-third of the global total) has slowed, and the growth rate has dropped from 4.5% in the previous year to 4.4%. However, Europe is becoming a weakness in the global market with an annual market contraction rate of 7.1%.
Overall, global chip sales in April decreased slightly compared with the previous month, which is consistent with seasonal trends, but greatly exceeded April 2019 sales. At the time, it was believed that the global economic recession caused by the Covid-19 pandemic would have an impact on the semiconductor industry in the third quarter of this year. But how long will this negative effect last? There is still great uncertainty.

From the perspective of the industry‘s development in the past two months and the resulting second half of the year, Covid-19‘s impact on the semiconductor industry throughout 2020 is really not as serious as people think. This is evident from the global semiconductor equipment sales and fab capital expenditures and revenue.

Strong demand for semiconductor equipment

According to SEMI statistics, North American semiconductor equipment manufacturers shipped US$2.346 billion in May, an increase of 2.9% month-on-month and an increase of 13.6% year-on-year. Cumulative shipments from January to May were US$11.560 billion, an increase of 21% year-on-year. twenty four%.

BOC Securities believes that the 8 global semiconductor equipment listed companies had revenue of US$16.2 billion in the first quarter of 2020, a decrease of 7% from the previous month, mainly due to the epidemic affecting the equipment delivery schedule and revenue confirmation rhythm, but the first quarter revenue still showed year-on-year growth 12%, continuing the year-on-year recovery of positive growth momentum in the fourth quarter of 2019
ASML‘s first-quarter revenue growth rate slowed to 9.5% year-on-year, but it still maintained positive growth. The company‘s second-quarter sales reached 3.3 billion euros, a 35% increase from the first quarter. Gross profit margin reached 48.2%, a significant increase compared to the first quarter. This is mainly due to the improvement of EUV cumulative installed management gross profit margin and the optimization of the sales DUV system product portfolio. ASML delivered a total of 9 EUV systems during the quarter, and achieved sales revenue for 7 systems. There are 4 EUV systems delivered in the first half of this year, which will be included in sales revenue after the completion of customer acceptance in the second half of the year. The company‘s new orders in the second quarter reached 1.1 billion euros, of which 461 million euros came from three EUV equipment.

While several other listed companies, in the first quarter, on the basis of the sharp rise in the fourth quarter of last year, the gross profit margin fell slightly, but it is still close to the normal level of 45%. Among them, applied materials, TEL, Lam Research, KLA, etc. The interest rate was basically flat month-on-month.

Lam Research mentioned in the first quarter conference call that customer demand for equipment continued to be strong in the first half of 2020, because fab capital expenditures were mainly caused by its strategic investment motivations, including process nodes for foundry and memory technologies Transformation, these investments are long-term and strategic.

Fab is not bad money

The investment in advanced integrated circuit production lines can reach tens of billions of dollars, of which more than 75% is invested in the purchase of semiconductor equipment.

In the first quarter of this year, ASML‘s EUV orders increased by 40% month-on-month, and 3 EUV orders were added in the first quarter of last year, totaling 390 million euros, an increase of 285%. As ASML‘s advanced equipment, especially EUV, is mainly sold to TSMC, Samsung and Intel, the above sales data indicate that TSMC, Samsung and other advanced process investments are strong, and short-term factors have not affected the fab‘s advanced process strategy investment.

The advanced process has a strong demand for equipment. Taking TSMC as an example, the investment amount of each node is rapidly increasing. The 10,000-wafer production capacity of 16nm process requires about 1.5 billion US dollars of investment, and the 10,000-chip production capacity investment of 7nm process is estimated to be 3 billion US dollars, and 5nm requires about 5 billion US dollars.

Yesterday, TSMC released its second quarter results, with consolidated revenue of NT$310.7 billion and net income of NT$120.82 billion (approximately US$4.1 billion). Compared with the same period last year, revenue increased by 28.9% in the second quarter, while net income and diluted earnings per share increased by 81.0%. Compared with the first quarter of 2020, revenue was basically the same.

TSMC raised its industry and company operating outlook. President Wei Zhejia said that due to the strong momentum of 5G-related applications, it will continue to drive the growth of the semiconductor industry. It is estimated that the output value of the semiconductor industry (excluding memory) will be flat to a slight growth this year; The annual increase is 14%-19%.

In addition to raising its outlook on industrial output value and company operations this year, TSMC also raised its capital expenditures this year. The company‘s chief financial officer Huang Renzhao said that despite the impact of the epidemic, the demand for advanced processes such as 5nm and 7nm is still strong. This year‘s capital expenditure is raised to 16-17 billion yuan, an increase of about 6% from the original amount; Compared with 15 billion US dollars, it has increased by 13%-15%.

Samsung, another major fab, has successfully delivered 10nm-class DDR4 modules based on EUV technology in the first quarter of 2020. The new EUV-based DRAM has been evaluated by customers worldwide for advanced PC, mobile, enterprise server and data center applications. EUV will be fully deployed in Samsung‘s future DRAM from its fourth-generation 10nm class or 14nm class DRAM. Samsung expects to begin production of DDR5 and LPDDR5 memory based on D1a in 2021. These all require huge investment, which will play a role in promoting the semiconductor equipment and memory industry in the second half of this year.

In addition, according to SEMI statistics, although the epidemic is still ongoing, semiconductor equipment spending in mainland China will increase by 5% year-on-year. This year is expected to exceed 12 billion US dollars, and will increase by 22% in 2021 to 15 billion US dollars.

Recently, China International Tendering Network showed that Changjiang Storage issued the 40th and 41st batch of equipment procurement tender announcements, which involved a variety of semiconductor equipment. In addition, the market value of SMIC, a wafer foundry that has just landed on the science and technology board, exceeds 600 billion. It may raise about 50 billion in the A-share market, focusing on the construction of advanced process production lines. Among them, the purchase of equipment is huge. The development of the semiconductor industry has an increasingly strong leading role.

Single-digit growth is expected in 2020

IC Insights believes that although Covid-19 has had a disastrous impact on the global economy this year, it is expected that the global IC market will still show single-digit growth in 2020.

IC Insights believes that the 1Q/4Q quarterly IC market change is a good indicator of the direction and intensity of the annual IC market change.
From 1984 to 2019, the average seasonality of the IC market declined continuously by 2% in the first quarter. In the first quarter of this year, the IC market decreased by only 3% compared with the fourth quarter of 2019, slightly lower than the 36-year average. Excluding the years following the severe decline of the IC industry in 1985 and 2001. This model is a good indicator of the direction of the IC industry’s annual growth rate because of the seasonality of the IC market itself.

Overall, when 1Q/4Q performance for a given year is better than 1Q/4Q performance for the previous year, it can be expected that the annual growth rate for that year will be higher than the previous year. When the current 1Q/4Q performance is worse than the same period last year, the situation is usually reversed. Since -3% of the 1Q20/4Q19 IC market changes better than -17% of the 1Q19/4Q18 IC market, IC Insights believes that the IC market in 2020 may be better than the 2019 IC market by 15%. More, it is expected to achieve a slight positive growth.
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