Bad news seems to follow. In the second half of last year, the smart phone market went down, and the shipment stall became more obvious after entering 2022. In addition, the demand for downstream terminals such as PC is in the doldrums, and relevant semiconductor design companies are frequently under pressure to cut orders. Unexpectedly, the supply chain will "catch fire" again recently, and the price increases of wafer foundry giants TSMC, Samsung and liandian are heard again. Coupled with the uncertain impact of epidemic prevention and control, semiconductor design companies can be described as "going south and going south".
It is reported that TSMC will comprehensively raise the OEM price by 5% - 8% from January 2023, less than a year from the previous round of price increase; Samsung reported that it was negotiating with customers and would raise the foundry price of wafers by as much as 20%; Liandian plans to carry out a new round of price increase in the second quarter, with a price increase of about 4%. Previously, liandian has raised the quotation of wafer foundry almost every quarter or two since 2021.
The semiconductor design industry suffering from "splint" may ask: will the world be good?
Price rise inevitable
The surprisingly "consistent" rise of the OEM is due to many complex interweaving behind it.
Cheng Hao (a pseudonym), a representative of a domestic semiconductor design enterprise focusing on vehicle application processors, mentioned that due to the global lack of core, big country game, epidemic, data center, intelligent driving, VR / AR and other applications, the large chip market with high computing power and high performance is rising. With the depreciation of the US dollar, large US design companies are trying to hoard goods to maintain value. At the same time, due to the increased uncertainty, the future variables are difficult to predict, so the production capacity is frequently locked**
" in this situation, the price increase of TSMC and other OEM factories is to cover the increased cost of raw materials and equipment, squeeze out 'water' through the price increase, and increase the head effect. " Cheng Hao further analyzed.
Chen Xiang, a senior analyst at Jiwei consulting, also said that the price rise stems from the rise in the price of raw materials and market demand. The target of the price rise is all customers of the OEM factory.
Aiji micro previously reported that TSMC last announced a comprehensive price increase. In August 2021, its 7 / 5nm and other advanced process products increased by about 7% - 9%, and the other mature process products increased by about 20%, the largest increase in a decade. The reason given by TSMC this time is that inflation is imminent, costs are rising, and large-scale expansion plans are under way. It is reported that it has approved a capital budget of nearly NT $500 billion for the expansion of advanced, mature and special processes and advanced packaging capacity.
What is more noteworthy is that in the first quarter financial report of TSMC in 2022, its revenue reached US $17.57 billion, the overall revenue of HPC increased significantly by 26%, and the revenue reached US $7.2 billion, a year-on-year increase of nearly 60%, slightly exceeding that of smart phones. This is also the first time in the history of TSMC to release the signal of great change.
TSMC, Samsung and liandian now account for two-thirds of the world's wafer foundry market by virtue of their sustainable customer order advantages, diversified production capacity supply and the world's leading technology R & D progress. At the time of the "general rise" of OEM prices again, semiconductor design enterprises have to face the impact of supply chain price rise again.
Different effects
According to the different process and chip size, coupled with factors such as yield, a wafer can cut about ten to hundreds of K chips. For designers, the impact of wafer price rise depends on the process and gross profit margin.
If the price of a 12 inch wafer with a 28nm process increases by 5% - 10%, it will rise to $6300-6600. It seems that there are not many chips, but the range of chips allocated to different processes and areas is also different.
Data show that after TSMC's capacity conversion in 2021, there will be about 2.8 million 8-inch wafers per month, and about 1.96 million wafers when converted to 12 inches. According to TSMC's 2021 financial report, its 5nm operating revenue accounted for 19%, 7Nm 31%, 16nm 14% and 28nm 11%. Among them, the 5nm process increased by 188% year-on-year. By geographical region, Chinese Mainland accounts for 10%.
Yang Jian, CTO of Muxi, a large domestic GPGPU manufacturer, believes that from the perspective of OEM price rise, the process of 28nm and above has the greatest impact, while the impact of 14-7nm is small, and the design manufacturers in mainland China can hardly get it under 7Nm. Further, the manufacturing process of relatively high-end chips in China is mainly 7-28nm. Since major international manufacturers are trying to catch up with the most advanced 7Nm, 5nm and below, the capacity of 16nm-12nm will have more margin**
When it comes to gross profit margin, it is also a matter of joy and sorrow.
Lihongyu, CEO of Hefei Lianrui Microelectronics Technology Co., Ltd., believes that the high and low end of the design company's chips are not necessarily related to the progressiveness of the process. The impact of the price rise mainly depends on the gross profit margin**
"If the cost of a chip is 50 yuan, for example, if the wafer cost accounts for 30 yuan, if the wafer price rises by 10%, it means that the cost rises to 33 yuan and the overall cost rises to 53 yuan. If the original gross profit margin is 50%, it will fall to 47% after the price rise. If the company invests 20% of its sales in R & D, the net profit margin will fall from 30% to 27%." For example, Li Hongyu said.
If the gross profit margin was 40% and the cost was 60%, if the wafer cost accounted for 60%, after the price increase of 10%, the wafer cost increased from 36% to 39.6%, the overall cost increased to 63.6% and the gross profit margin decreased to 36.4%. If 20% is invested in R & D, the net interest rate is 16.4%.
" the net profit of the former is reduced to 90% and that of the latter to 82%. Obviously, this will accelerate the elimination of low gross margin chips. " Li Hongyu concluded, " therefore, TSMC's move is also a business strategy to eliminate a means of OEM products with low gross margin. In the future, the companies that can be in TSMC current chips are basically companies that maintain high gross margin. "
Another representative of a design company mentioned that the new round of price increase of the OEM has a great impact on the design companies using the 28-40nm process, and other processes are relatively less full load. Although the price increase has had a certain impact on the company, due to the long-term cooperation of the OEM factory, it has also appropriately given certain preferential strength. Relatively speaking, the cost increase will not be greater than that of the friendly business.
Undoubtedly, the shortage of OEM and the rise in price have led to a new round of cost rise, and the test of the bargaining power of the design company has been upgraded again. Whether the design company has bargaining power, price transmission and production capacity have become the key to ensure profitability and gross profit margin. According to the report of capital securities, OEM price increase process will accelerate the industry to gather to the head manufacturers with more barriers to products, while manufacturers with weak bargaining power will face the risk of upstream and downstream squeeze and lower gross profit margin** While the OEM quotation remains high, some IC application requirements have been significantly revised, mainly focusing on smart phones, PCs and home appliance MCU.
Investment cold
One thing we should pay attention to is the ripple response caused by the price rise.
Cheng Hao made it clear that for mainland design companies, low-end products will become saturated in the future, and some design companies have been cut off. In the case of large international factories occupying advanced process capacity, it will be more difficult for mainland design companies to obtain advanced process capacity in the future, and even the cost will rise, which means that profits will decline or affect subsequent R & D and expansion.
Qi Yaoliang, the managing director of Yuanhe Puhua, pointed out that the cyclical decline in consumer terminal demand and the rise in prices in the supply chain have a huge impact on consumer design companies and a heavy blow to their gross profit. If consumer design companies cannot occupy a higher share and recover the high return on investment as soon as possible, subsequent R & D and development will face many challenges**
" from the perspective of the whole track, first, there are too many players involved. Second, due to the impact of the epidemic and the economic level, the growth may continue to decline compared with before, which indicates that there are not many opportunities. " Qi Yaoliang further said.
In this regard, Li Hongyu's view is that no matter which track, we must achieve sufficient gross profit margin, so as to maintain continuous R & D and iteration, resist risks and uncertainties and get advanced**
Reflected in investment, or half is sea water and half is fire.
" due to the eye-catching performance and rising valuation of automotive and industrial track design companies after listing, compared with consumer design companies, investment institutions are more inclined to pay attention to and invest in simulation, industrial and automotive design companies. " Qi Yaoliang said bluntly.
Coping strategies
Churchill once said "don't miss every crisis". For continental semiconductor design companies that are ready to go, they may have to face this increasingly severe challenge.
In the short term, Chen Xiang proposed that for the price rise of the supply chain, if semiconductor design companies want to maintain the original price or less, they need to make technological breakthroughs to reduce costs. At the same time, OEM and design enterprises in the mainland can cooperate to break through these technical difficulties, which will also bring great progress to chips in the mainland**
If we want to make progress and breakthroughs in advanced manufacturing processes, in addition to increasing investment in mainland OEM factories and solving problems such as lithography machines, design companies should also go in multiple ways to seek an antidote.
" the number of semiconductor design companies in mainland China is basically more than 100 times that of American design enterprises, which is unsustainable. There is still a large gap between China and foreign giants in terms of revenue and R & D revenue. In the future, we must accelerate the integration and strive to achieve high gross profit margin. "
Li Hongyu stressed.
In this regard, Yang Jian analyzed from the perspective of design and talents, on the one hand, mainland semiconductor companies must optimize the design and architecture for a long time and use 2-3 generations lower than the most advanced technology to compete. On the other hand, there is a serious shortage of domestic design talents, especially the back-end layout and wiring talents of 7Nm, and the shortage of software talents is more serious than that of hardware talents. There is no joint force due to too many and scattered design companies. In the future, we should further strengthen the talent training, and design enterprises should speed up the integration**
Figure: the total global semiconductor market in 2021 was US $556 billion, and the distribution of semiconductor demand by end use
Source: WSTS
In addition, we should also see the chain reaction caused by the current downturn in the financial market. Qi Yaoliang said, this will make some small enterprises encounter financing difficulties, so as to speed up the M & A integration of design companies. From a longer-term perspective, this integration is conducive to the development of design companies**
Finally, we should maintain an open and cooperative attitude. Cheng Hao finally suggested that domestic design companies should still strive to go global and set up joint ventures with foreign countries to solve the problems of designers and production capacity. In addition, some chips need to go to the concept of localization in order to go to the global market.