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Company Trend（August 22）

ARM files for the worlds largest IPO of year

On Monday, US Eastern Time, Arm Ltd, the chip designer owned by Japanese conglomerate SoftBank Group, submitted documents to SEC to apply for going public on NASDAQ, with the stock code of ARM. However, the company did not disclose its valuation, IPO pricing and listing scale in the documents. Arm announced that all proceeds from IPO will be owned by Softbank. Barclays, Goldman Sachs, JPMorgan Chase, Mizuho, Bank of America and Citigroup act as the underwriters of this IPO. In this IPO, Arm will decide pricing according to the feedback from institutional investors, and the market expects that the total market value of Arm will exceed US$ 60 billion. It is expected to be the worlds largest IPO in 2023 and a third largest IPO just second to Alibaba and Meta (formerly Facebook) in the history of science and technology. According to the documents, Softbank spent about US$16.1 billion to buy back the 25% Arm stake it sold to its Vision Fund unit in August. The purchase reportedly valued Arm at US$64 billion. However, Softbank said that the purchase price "may not indicate or intend to reflect" the expected value of Arm. Arm also disclosed in the documents that it does not have any debt at present, but it will not pay dividends.

Comments

From seeking dual listing in Britain and the United States to listing only in the United States, Arm faces a big difference in terms of regulatory standards between Britain and the United States in IPO review and supervision of listed companies, which will inevitably affect the development of its international business with deep globalization. In addition, as the global consumer electronics market is still in the down turn, the biggest challenge faced by Arm may be RISC-V, an open source instruction set architecture (ISA), which is more frequently adopted by emerging and mature applications. Although the RISC-V-based SoC has been used to solve the problems of emerging applications such as smart electric meters and sensors, it has recently been used in AI and HPC applications, making it a cash cow of companies such as Nvidia. Arms listing, if successful, will not only become a beacon of hope for Softbank, but also become the most important listing since Rivian Automotives US$13.7 billion IPO in 2021.

Company Trend（August 23）

TSMC denies cutting revenue guidance

When announcing its Q2 results in July, TSMC already lowered its expectations for 2023 for the second time this year, down 10%, due to the global economic conditions such as weak demand of the end market and the unexpected long lasting supply chain problems. According to the report of Wccftech, due to the slow growth of the semiconductor industry facing a comprehensive impact, it is rumored that TSMC may cut its revenue guidance for the third time this year, and may further cut it, with a 12% dip in revenue. TSMC denied such rumor, saying that it would still maintain its original revenue guidance. In fact, the securities market is not so confident in TSMCs performance. Recently, TSMCs stock price performs weak, and many people think that under the circumstances of slowdown demand, low inventory turnover and high overall cost, TSMCs declining free cash flow will affect its payment of dividends. In addition, it is also rumored that TSMC began to reduce chip prices in a disguised form in July, mainly involving analog IC chips fabricated with 8-inch wafers, with a drop of 10% to 20%, even to 30%. This may impact its performance more or less.

Comments

TSMC still holds a leading position in advanced process, and the demand is relatively stable, which accounts for most of its revenue. TSMC will perform better in H2 than in H1 this year. Such result was benefited from the orders from Apple for its new products, and will also be driven by the hot sales of Nvidias AI-oriented data center products. In addition, the inventory turnover days represent the change in the IC design industry upstream of the semiconductor industry chain, but if it is in the fab, they will only represent the time from receiving orders to output, so the TSMC inventory turnover days are lengthened, which mainly represents that the yield of the 3nm process has not yet reached a high level, so the number of orders received is large, the yield is not high, and it naturally takes longer days to produce the number of wafers required by customers.

Market Trend（August 23）

Foundries start warm shutdown due to sluggish mature process market

According to the report of Taiwan Economic Daily News, due to the weak market conditions of mature processes, foundries price discounts have not achieved a satisfactory effect. In order to further reduce the cost, major foundries, headed by Samsung, began to start "warm shutdown" for some mature process production lines, and the wave has spread to UMC, Vanguard International Semiconductor Corporation, PSMC and others. According to the report of South Korean media, the recent capacity utilization rates of South Korean foundries such as Samsung, Key Foundry and SK Hynix System IC just fall in the range of from 40% to 50%. Due to the sluggish demand of end users, the aforementioned three South Korean foundries have decided to turn off the power supply of some mature process equipment to conduct "warm shutdown", and the wave also spread to UMC, Vanguard International Semiconductor Corporation, PSMC, and other foundries, indicating that these players expect that the situation of declining orders will not pick up in the short run, and the market of mature processes will continue its down turn. Relevant industry players have not commented on the rumor above.

Comments

This season sees no sign of strong recovery in the market demand. Customers are conservative in stocking, and the low visibility of orders has been continued for three months. The expected capacity utilization rate remains the same as that of last quarter, with some equipment adjustments and routine maintenance included. As a result, it is not unexpected that warm shutdown will be done in response to customer demand. When the capacity utilization rate is not too high, all costs, including electric charge, should be taken into account, and the companies will reorganize and manage their production lines and control their cost. During this period, apart from saving cost, they should reserve their R&d capacity. When wafer foundries mainly engaged in mature processes, consistently control their output, even if they cant reverse the situation immediately, they still have the opportunity to curb the decline trend of the industry. However, although the mature process market remains weak, relevant manufacturers continue to enhance their competitiveness of processes and gain momentum for a better market in the future.

Company Trend （August 24）

Nvidia net profit surged 843% in Q2 financial report

According to the report of Chip News on August 24th, Nvidia released its Q2 financial report (as of July 30th, 2023), and the GPU giant recorded revenues of US$13.5 billion, up 101% YoY and 88% QoQ, respectively, and also achieved US$ 6.19 billion in net profit, rocketing up 843% YoY. In the Q2 financial report, the CEO of Nvidia said that the new era of accelerated computing has come. Companies across the world are transforming from general-purpose computing to accelerated computing and generative AI. The value of global data centers installed on cloud has reached about US$ 1000 billion, and data centers worth billions of US dollars are accelerating transition to accelerated computing and generative AI. Looking ahead, Nvidia forecasts that its Q3 sales will reach US$16 billion, fluctuating by 2%, much higher than US$12.59 billion expected by Wall Street. Nvidia CFO said in a conference call that the growth in the next quarter is expected to be mainly driven by data center business. At the same time, Nvidia also announced that its board of directors had approved a plan to buy back US$ 25 billion of stock without expiration time and it plans to continue to buy back stock this fiscal year.

Comments

Some IT system and software vendors have announced a strategic cooperation with Nvidia to introduce its AI into various industries. "An application-generative AI competition has begun." The chip demand of the AI industry is not a flash in the pan, but a long-term demand due to the industry transformation. The data centers around the world are increasing their capital expenditure in full swing, which will make a trillion-US dollar chip market. In the next one or two years, the chip demand will continue and increase.

However, since the United States has implemented export restrictions against China, Nvidia expects that the additional export restrictions imposed on data center-purpose GPUs will not immediately cause a substantial impact on its business performance, but in the long run, once the restrictions on selling data center-purpose GPUs to China are implemented, they will cause Nvidia to lose competition and leading opportunities in China, one of the world’s largest markets.

Trends of some domestic industries

1.Shandong Grinm Semiconductor Materials starts the expansion project of silicon materials and wafers for etching equipment（August 21）

According to the news of the official Wechat Account of Tianqu New District, Dezhou, Shandong Province, Shandong Grinm Semiconductor Materials Co., Ltd. formally held the groundbreaking ceremony for the expansion projects of silicon materials and wafers for etching equipment, with a total investment of RMB 741 million. It is reported that the expansion projects of silicon materials and wafers for etching equipment is a project with funds raised in the stock market by Shandong Grinm Semiconductor Materials Co., Ltd. Of which, the total investment in the silicon material project for etching equipment will be RMB 375 million, aiming to produce processed large-size single crystal silicon products used for IC etching equipment. After being completed, the project will have a new capacity of 204 tons of silicon materials per year, with an annual operation revenue of RMB 390 billion; The total investment of the 8-inch silicon wafer expansion project will be RMB 384 million, and the products are 8-inch silicon polished wafers with for the IC industry. After all the designed capacity is reached, the new production capacity of 8-inch silicon wafers will be 1.2 million units per year, with an average annual operating revenue of RMB 240 million. According to the data, Shandong Grinm Semiconductor Materials Co., Ltd. is a leading enterprise engaged in producing semiconductor materials. At present, its products are widely used in IC, power devices, and other fields, especially focusing on meeting the needs of Internet of Things, automotive electronics, industrial manufacturing, mobile phone cameras and other fields in China.

2.Gree invests in a chip manufacturing company（August 22）
According to the recent news of its official Wechat account, Gree Group invested in Sinosemic (Zhuhai) GaAs R&D headquarters, and the construction of the phase II project of Gechuang-Chip Valley 5.0 Industrial New Space officially started. It is reported that in March this year, Zhuhai Gree Financial Investment Management Co., Ltd. and China Fortune-Tech Capital Co., Ltd. jointly led the investment in Sino-Semiconductor Integrated Optoelectronics Cooperation to help its core team to complete financing of hundreds of millions of yuan. The model of "promoting investment by attracting investment" drove the Sinosemic (Zhuhai) GaAs R&D headquarters to settle in Zhuhai, and a 6-inch GaAs fab with a capacity of 15,000 units/month will be constructed in Zhuhai, and the total investment is about RMB340 million. At the same time, Gree Group invested about RMB 621 million through its construction investment sector to build a new customized 5.0 industrial space with a total construction area of about 82,600 square meters for Sinosemic in two phases. Data shows that Sinosemic is the worlds fourth and Chinas only chip manufacturer adopting IDM to mass produce 25G&56G Pam4 Vcsel chips. In addition, the Gechuang-Chip Valley Phase II (Zone B and Zone C) project will focus on developing in the semiconductor industry, and it is expected to be completed and accepted in H2 2024. At present, 12 enterprises have intention to move in the chip valley.

3.The worlds first Specification for 4H-SiC Homoepitaxial Wafer officially released（August 23）
In the second quarter of this year, Semiconductor Equipment and Materials International (SEMI) officially released the worlds first Specification for 4H-SiC Homoepitaxial Wafer officially for the SiC homoepitaxial wafter industry. This standard was compiled by Epiworld International Co., Ltd., and 12 units including the Institute of Semiconductors, CAS, Zhuzhou CRRC Times Electric Co., Ltd. and Wolfspeed participated in the compiling. The project lasted nearly three years. SEMI is the global industry association committed to the formulation of international standards, actively promoting the overall development of supply chains of microelectronics, flat panel displays, solar photovoltaic and other industries, representing the call and demands of global industries and is a wind vane of the industry development trend. The promulgation and implementation of the international standard Specification for 4H-SiC Homoepitaxial Wafer will play a far-reaching significant role in regulating the orderly development of the international SiC semiconductor homoepitaxial industry, reducing the cost of international trade cooperation and accelerating the promotion of new technologies around the world.