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01

Company Trend(Jan. 17)

TSMC orders rebound, with capacity utilization rate surge

According to the report of Taiwan regional Digitimes, GITIMES, TSMC’s fourth quarter revenue increased by 14.4% QoQ, indicating that it has seen a recovery in customer orders quarter by quarter. At the same time, from January to February, 2024 TSMC’s capacity utilization rate is gradually recovering.

According to sources, the production line utilization rate of TSMCs 8-inch and 12-inch fabs have recovered to 70-80% and 80%, respectively. Of which, the capacity utilization rate of its 28nm process has recovered to 80% of the normal level. In addition, TSMC’s 7/6nm production line utilization rate is currently recovering to 75%. However, in the past one and a half year, its utilization rate is lower than 50%. The utilization rate of its 5/4nm production line is nearly 100%, while its 3nm process capacity utilization rate has exceeded 70% in January and is expected to reach 85% in Q1.

Recently, analysts predicted that TSMC would report a 23% decline in profits in Q4 2023, but they predicted that TSMC would achieve better growth this year driven by the recovering demand. The decline in profits also highlighted TSMCs performance in 2022, when its performance was so strong, driven by the accumulated demand after COVID-19 pandemic, and its customers included Apple and Nvidia.

Comments

At present the most insiders of the semiconductor supply chain believe that 2024 is still full of changes and challenges. From the current conservative release of customer orders, the semiconductor industry has not recovered in Q1 2024 but will turn better in Q2. As customer have run out of their inventories and will supplement them in the second half of the year, which means that the industry momentum will fully recover in June and July. TSMC has repeatedly emphasized that it will see healthy growth in 2024 and will perform better than the market as a whole.

Looking at the overall field of wafer foundry, major companies’ capacity utilization rate has increased slowly. As the inventory of the semiconductor industry declines gradually, the amount of tape-out of IC design companies recovers slowly, coupled with the stable downstream demand in 2024, the semiconductor industry market is expected to resume growth. The mature process capacity of the wafer foundry industry has expanded a lot, so the low-end process market may face fierce competition. At the same time, the foundry industry belongs to a heavy asset industry, so it has an obvious scale advantage. Therefore, the development of wafer fabs with leading technology and scale advantages will be optimistic in the long run.

02

Company Trend(Jan. 17)

Samsung Electronics Semiconductor freezes executives’ salary due to record loss!

On January 17th, Samsung Electronics held an emergency executive committee meeting for the DS division and decided to freeze the salaries of the executives except the president. It was the first time that the company froze the salaries of its executives in nine years since 2015. Samsung Electronics explained that the management and executives had formed a consensus that it is an urgent moment to devise extraordinary measures and take the lead in responding to the deteriorating business performance.

Samsung Electronics lost its top spot in semiconductor sales to Intel. According to data of Gartner, Samsung Electronics DS division’s sales (excluding foundry performance) are expected to reach US$ 39.95bn. Compared to its sales in 2022 (US$ 63.823bn), its sales declined 37.5%. Last year, Intel achieved sales of US$ 48.664bn and reclaimed the top spot in the global semiconductor industry over the past two years. 

However, the industry estimated that Samsung Electronics’ semiconductor division reduced loss due to the bottom out of the memory prices in Q4 last year. Researchers at Samsung Securities predicted that Samsung Electronics will generate sales of KRW 93.932trn and operating profit of KRW 11.49trn. Kim Seon-woo, research at Meritz Securities, predicted that Samsung Electronics’ sales will reach KRW 111trn and its operating profit will reach KRW 16.6trn.

Comments

The performance of Samsung Electronics’ DS Division was unprecedentedly deteriorating. This is mainly due to the decrease in IT demand brought by the downturn of global economy, which further caused the prices of Samsung Electronics’ flagship products such as DRAM and NAND to drop. The executives who attended the meeting expressed the need for thorough and bold internal innovation and a sense of urgency in tightening their belts to lead the semiconductor market in the era of artificial intelligence (AI) revolution and overcome the crisis. At the same time, the division resolved to ensure competitiveness and standardize management as soon as possible.

Samsung Electronics previously implemented emergency management measures in 2009, following the global financial crisis at that time, and in 2015, when it faced deteriorating performance, which included freezing the salaries of both executives and employees. Although it is widely believed that the semiconductor industry will improve in 2024, the company keeps alert about the uncertain internal and external business environment to show its determination to overcome the crisis.

03

Company Trend(Jan. 18)

AMD announced to discontinue production of several products

According to the report on January 18, AMD has recently announced the discontinuation of several products due to reduced operation rate and sustainability of suppliers. The affected product range includes XC9500XL, CoolRunner XPLA 3, CoolRunner II, Spartan II, Spartan 3, 3A, 3AN, 3E, and 3ADSP, and other commercial/industrial "XC" and "XA" series for the automotive industry. 

Although AMD produced CPLDs earlier, its current production unit is composed of Xilinx, which was acquired by AMD in 2022. Xilinx mainly produces FPGA but it also produces CPLD under the brand of CoolRunner. When AMD first acquired Xilinx, it seemed that it was pleased to accept CPLDs. Its product page for CPLDs reads "as the market leader in programmable logic solutions, AMD provides a total solution to a designers CPLD needs." The company even rewrote some history, with the same page stating CoolRunner II CPLDs were "created by AMD."

Comments

AMD does not seem to be so passionate about CPLDs and has discontinued all CoolRunner products. Although its motivations for the discontinuation arent clear, CoolRunner chips are very old at this moment, and the first CoolRunner II chips were launched in 2002. Theyre just about obsolete now as are old Spartan II and 3 FPGAs, which came out in 2000 and 2003, respectively. It seems that this product discontinuation isnt so much about CPLDs as it is about removing old products that likely dont generate much revenue. In addition, the discontinuance notice made it clear that there is"no direct replacement" for any discontinued CPLD or FPGA. If AMD does not choose to provide alternative products in the future, it will mark the end of the companys CPLDs.

04

Company Trend(Jan. 17)

SK Hynix upgrades Wuxi plant to solve embargo on EUV mask aligners with its fire-fighting experience 10 years ago

According to the report of Korean media, the insiders of the market said that SK Hynix intends to upgrade the production capacity of part of its C2 fabs in Wuxi, China and plans to use the fourth-generation (1a) 10nm DRAM chip process to make preparations for meeting the market demand.  

When the U.S. government granted SK Hynix an exemption from the chip ban in 2023, SK Hynix was able to export 18nm process technology or advanced process DRAM production equipment to its Wuxi plant in China. However, EUV equipment is still not allowed to be exported into China, which made SK Hynix still unable to produce the fourth-generation 10nm DRAM chips.

In order to solve this problem, SK Hynix chose to first transport the fourth-generation 10nm DRAM chips partially produced in Wuxi plant to its plant in Icheon Park, South Korea, where it is headquartered, to complete EUV process and then transport them back to Wuxi to complete the processing. Since EUV process is only used for single exposure for processing the fourth generation of DRAM, SK Hynix will accept increased cost arising from the transport. 

Comments

In 2013, when a fire broke out at SK Hynixs Wuxi plant, China, SK Hynix used this method to overcome the interruption of DRAM production. However, SK Hynix said that it was unable to confirm the specific operation plan for the process conversion at its Wuxi plant in China. Now, SK Hynix is playing the same game 10 years ago. Due to U.S. sanctions against China, the EUV mask aligner could not be imported into China, which undoubtedly hampered the technological upgrading of SK Hynix’s Wuxi plant. The wafers produced at SK Hynix’s Wuxi plant in China need to be transferred to SK Hynix’s Icheon plant for the production of the fourth generation of 10nam DRAM. As the semiconductor market is recovering, the expansion of the production capacity of high-performance chips is coming to the critical stage. By means of transportation, SK Hynix has a reliable solution for expanding its high-performance chip production capacity.

05

Domestic Trend

China chip imports down 15.4% (Jan. 15)

According to customs data released on Friday, the volume and amount of Chinas IC import fell sharply in 2023, although semiconductors remained ahead of crude oil as the largest imported commodity in Chinese mainland. Official data show that China imported 479.5bn pieces of IC in 2023, valued at US$ 349.4bn, down 10.8% compared to 2022, and the import amount fell by 15.4%. In contrast, China spent US$ 337.5bn in importing crude oil last year, down 7.7%.
The declining imports of IC and semiconductor devices reflect the downturn of the world’s second largest economy, especially the weak sales of smart phones and laptop computers in China. At the same time, the data were also affected by Chinas efforts to increase local IC production to reduce its dependence on imported chips.
Due to the strict U.S. export controls, China cannot directly purchase advanced chips, such as H100 and A100 designed by Nvidia. However, China is making solid progress in increasing its local production of traditional chips, including chips for vehicles and household appliances, to meet domestic market demand.

Domestic semiconductor giant announced to raise price by 5%-10%！(Jan. 15)

JJMicroelectronics (or JJM), a local manufacturer of power semiconductors in China, issued a "Price Adjustment Letter" to its customers, announcing that from January 15, 2024, the unit price of its Trench MOS products will increase by 5%-10%. The orders placed before the price adjustment date will be executed by following the original unit price and quantity while the unit price of new orders need to be confirmed with the companys business personnel.
For the reason of price increase, JJM said that “in order to constantly improve the quality of products and enrich product models, we have been increasing investment in R&D of advanced equipment and process, but due to the long-term market downturn and falling product price, we alone bore additional cost of materials, exchange rate, labor, etc. After long-term losses, it is difficult for us to adopt the original price to maintain normal supply of goods. In order to ensure the continuous delivery of stable and reliable quality products and quality services, we have to raise the price."

According to its financial report in Q3 2023, JJM was really affected by the declined demand in the semiconductor market as a whole. Its half-year report in 2023 also shows that the company’s operating cost in H1 2023 increased by 26.41% to RMB 580mn, mainly due to "increased operating costs, inadequate capacity utilization rate and increased unit costs with increasing sales at the same time."

Chinese Academy of Sciences developed the world’s first chip with AI!( Jan. 16)

China’s scientific researchers are vigorously applying AI technology in R&D, and have achieved remarkable results in using AI technology, which is really worth celebrating. According to relevant information, Chinese Academy of Sciences has used advanced AI technology to create the worlds first chip, which means that AI technology is very likely to be applied in R&D of chips in the future. 
According to relevant news, the Chinese Academy of Sciences and its domestic partners have worked together to officially generate the worlds first CPU "Qimeng No. 1” with AI. The Qimeng No. 1 chip is par with Intel’s 486 processor. Since it was manufactured using a 65nm process, it is not comparable to current mainstream advanced chips. However, it is the first chip generated by AI without manual intervention within a mere five hours. It can be said that this chip realized a qualitative leap in efficiency, and this success has created new expectations for AI. 
The Chinese Academy of Sciences has set a world record in the application of AI, and many foreign media said it was a big milestone for chips. Today AI does not have advanced performance in chip applications, but the focus lies in how it will develop in the future.