Company Trend(August 28)
As Huawei uses up its 5G chips in stock, Qualcomm to further increase its chip price
Qualcomm, as the worlds leading chip manufacturer, has gained a near-monopoly position in the high-end chip market. As Samsung stopped R&D on high-end chips, Huawei could not find a foundry to fabricate chips for its mobile phones, and its Kirin 9000 chips in stock have been used up. Moreover, the high-end chips fabricated by Media Tek cannot compete with those of Qualcomm. Therefore, Qualcomm has no rivals in the high-end chip market, thereby increasing its chip price willfully. To cope with their over-reliance on Qualcomm chips, Chinas mobile phone companies have greatly increased the adoption rate of Media Teks chips in their products, making Media Tek overtake Qualcomm to become the worlds biggest smartphone chip vendor in terms of market share. However, Qualcomms monopoly position has not been challenged. By developing the world’s first 5G SA and 5G SOC chips, Huawei held a leading position in the 5G mobile phone market, and its market share even reached nearly 50 percent. This forced Qualcomm to offer more discounts to Chinese mobile phone companies, which reduced their cost of purchasing 5G chips. However, as the foundries were not allowed to fabricate chips for Huawei, the shipment of Huaweis mobile phones dropped rapidly. In order to extend the use life of its 5G chips in stock, Huawei had to sell its mobile phone brand Honor rapidly and cut down the models of its low- and mid-end mobile phones.
Market Trend(August 29)
Race for SK hynixs DRAM
Recently, Meta, a US-based tech giant, visited South Korea to discuss next-generation DRAM with SK hynix. Nvidia, an AI semiconductor company, is also planning a visit soon. According to industry news on August 27th, the officials of Meta visited the SK hynix headquarters in Icheon, Gyeonggi Province, on August 24. During their visit, they inspected the production facilities for DDR5, high bandwidth memory (HBM), and EUV equipment at the Icheon park, and conducted a quality audit of DDR5. The industry players speculate that the two companies discussed DDR5 supply during their meeting at the Icheon plant. Driven by the growing demand of AI, the server DRAM is currently shifting from DDR4 to DDR5 rapidly. Earlier, SK hynix developed a 10 nm 4th generation (1a) DDR5 and, achieved the world’s first compatibility certification with Intels new Sapphire Rapids CPU in January this year, thereby pioneering a new server memory market. Nvidia is also planning to visit SK Hynixs Icheon plant this week. It is expected that Nvidia will review SK hynixs 5th generation HBM, the HBM3E production line. As Nvidia is considering quadruple the production of its latest AI GPU, H100, both sides are expected to discuss additional HBM supplies.
As the stock along the whole industry chain of memory chips is reduced significantly, the price trend has improved. The spot prices of mainstream and niche DRAM have stabilized, the price decline has slowed down significantly, and the contract price of DRAM has bounced from bottom. Moreover, the price of DDR5 module has recently shown a slight upward trend, and the spot price of NAND has also basically stabilized. SK hynixs shipments of HBM and DDR5/LPDDR5 are higher than expected, and ASP also increased. The combined revenue growth of the two categories above has increased more than two times and is expected to increase more significantly in H2 this year. In order to secure the supply capacity of high-density DDR5/HBM with limited capital expenditure, SK hynix is trying to improve productivity, shorten equipment lead period, and reduce investment in other areas.
Company Trend(August 29)
ZTE announced self-developed 7nm chip with its own chip design and development capability
ZTE recently announced its success in self-developed 7nm chip and said it has design and development capability, thereby making it another Chinese company with such capability second to Huawei. ZTEs self-developed 7nm chip is a major breakthrough in the chip competition and a strong back-strike to the ban of the US Department of Commerce. Earlier, the US Department of Commerce prohibited American companies from selling parts, goods, software, and technology to ZTE, causing ZTE to fall into deep waters. By independently developing chips, ZTE can reduce its reliance on external supply chains and ensure that it will survive under similar constraints in the future. Apart from ZTE and Huawei, there are other domestic companies with the capability to independently design and develop chips. For example, Xiaomis Pinecone Electronics released its first self-developed chip Surge S1 in 2017. Compared to 7nm chip, although Surge S1 chip was fabricated using 10nm process node process or 14 nm process node, it displayed Pinecone Electronics capacity of designing and developing chips. In addition, Xiaomi partnered with Ali to establish Nanjing Big Fish Semiconductor Co. Ltd. to develop IoT chips. Although they have not yet entered the 7nm process node, they have already had some strength and achievements in the IoT chip field.
ZTE was once cornered by the ban issued by the US Department of Commerce. The two major businesses of ZTE are consumer business and communication operator services. For consumer business, ZTE mainly provides mobile terminal products such as cell phones; for communication operator services, ZTE mainly provides base station products, and both of its businesses rely on chips. Although ZTE enjoyed a good market share at home and abroad, it immediately came to standstill due to the cut-off of chip supply after the US ban was imposed. This also makes Chinese people realize the weaknesses of Chinas semiconductor industry. Only with independent R&D of chips can Chinas relevant industry really get rid of external constraints.
Market Trend(August 29)
South Korean chip giants work together to develop advanced packaging
The South Korean Industry Ministry said on Tuesday that it signed a memorandum of understanding (MOU) with Samsung Electronics, SK hynix and other chip firms to cooperate on technology development for advanced semiconductor packaging. According to the Ministry of Trade, Industry and Energy, the government and chipmakers agreed to work together to secure leading technologies in advanced semiconductor packaging and to nurture companies in the final steps of semiconductor manufacturing under the MOU. The two South Korean chip giants, as well as LG Chem, several outsourced semiconductor assembly and test firms and fabless companies jointly signed the agreement. It is reported that advanced packaging projects include catch-up project and leading projects. The former project is designed to enhance domestic capabilities in areas such as heterogeneous integration, wafer-level packaging (WLP), panel-level packaging (PLP) and high-density flip chips. These areas are currently dominated by TSMC in Taiwan, Amkor in the United States, and Changjiang Electronics Technology Co. Ltd. in China.
Earlier, the government of South Korea recognized the strategic importance of semiconductor packaging technology and initiated a major packaging technology R&D project - "Semiconductor Advanced Packaging Leading Core Technology Development Project". The project aims to help enterprises to catch up quickly with leading international companies such as TSMC in advanced packaging. Artificial Intelligence (AI) triggers the increasing demand for servers, advanced chips and advanced packaging. The global landscape of competition for advanced packaging shows that advanced packaging is in short supply. The government of South Korea is boosting new R&D projects in the fields of advanced packaging and systematic semiconductor to take a lead in the global market. Advanced packaging requires state-of-the-art technologies. With the ever-increasing demand for multifunctional devices, it is gaining momentum as the next technological breakthrough.
Trends of some domestic industries
1.Silergy: A tangled fight for analog chip continues（August 28）
Recently, Silergy Corporation held an earnings conference. In view of the competitive landscape of the PMIC industry, the chairman said that the domestic analog chip market is in chaos at present, the pricing of products is also under pressure, but as the end brands reduce suppliers, it is expected that the overall competitive intensity will be alleviated in three years. In H2 2023, the demand of vehicle-mounted chips and LED lighting chips has rebound, and there are urgent orders in the field of laptop computers, so the revenue will pick up season by season. However, the end-user stock of consumer electronics has not been used up, so the normal stock level will resume next year. Over the past two or three years, the chip industry faced the shortage of chip supplies due to the COVID-19 pandemic. Consumer electronics companies in China Mainland also chose many local small enterprises as their suppliers, but when the overall demand slumped, small companies started to cut prices, which affected the overall market order. However, recently it can be felt that customers have begun to reduce the number of their suppliers, and it is expected that small companies will gradually disappear with the market no longer supporting them. It is estimated that several core suppliers will survive in the market in the next two to three years. In addition, as for overseas competition, the current competitive landscape has not changed, but because large analog chip players have been consolidated, the number of suppliers at the client side has decreased, which will create business opportunities for the company.
2.A Jiangsu chip maker with total investment of RMB 13 bn entered into bankruptcy and liquidation process(August 28)
After failing to secure new rounds of financing, Jiangsu Advanced Memory Semiconductor Co., Ltd. ("AMS") has fallen into a serious financial distress, and entered into the bankruptcy and liquidation process. According to the National Enterprise Bankruptcy Information Disclosure Platform, the Huaiyin District Peoples Court of Huaian City, Jiangsu Province officially accepted the bankruptcy and liquidation case of AMS on July 10, 2023 and auctioned an ASML mask aligner publicly. However, the auction of the equipment has been withdrawn due to lack of potential buyers. ASM, established in 2016, is committed to developing and producing memory products based on the latest PCM technology. The company announced to invest RMB 13bn to develop PCM chips. Its chips adopted the same technological roadmap as that of Intels Optane chip. The company claimed to have complete intellectual property rights and be the third company owning the storage technology and independent intellectual property rights following Samsung and Micron. According to its plan, ASM would first produce medium- and low-density PCM chips with the RMB13bn investment project. In 2019, ASM would introduce 2D XPoint, a high-density PCM chip and phase II PCM products such as MLC, 3D Xpoint, and neural network intelligent storage products in 2021.
3.Hua Hong Semiconductor achieved revenue of RMB 8.844bn in H1 with outstanding performance in power discrete devices(August 29)
Hua Hong Semiconductor Limited announced its semi-annual report in the evening of August 29, saying that its H1 revenue was approximately RMB8.844bn, up 11.52% YoY. According to the company, in H1 2023, its sales amount and sales volume of embedded/independent non-volatile memory ("eNVM") increased by double-digit YoY; and its revenue of power discrete devices increased by more than 30% YoY, becoming an important engine to drive the stable performance of the company. By calculating, Hua Hong Q2 revenue reached RMB4.47bn, up 2% QoQ, and its net profit was RMB 545 mn, down 48% QoQ. The results are in line with Hua Hong’s previous performance guidance. Hua Hong, as the second largest wafer fab with the most comprehensive characteristic processes in the industry in China Mainland, currently takes 8 inch wafer foundry business as its main revenue source, and 12 inch wafer foundry business is becoming its new growth point. Its 12-inch production line was put into operation in Q4 2019, and Hua Hong said in its semi-annual report that the Wuxi Phase I 12-inch factory (Factory 7) was running smoothly in H1 2023, that the capacity utilization rate remained high, and that the construction of 94,500-unit capacity is expected to be completed by the end of the year.