Reporter Tan Lun reported from Beijing
When the capacity crisis caused by the global "lack of core" is still continuing, another layer of the imbalance between supply and demand in the market is also emerging, due to the sharp decline in smart terminal shipments, the risk of "cutting orders" of some types of chips is rising.
According to data released by the municipal research institute Canalys, in the first quarter of 2022, global smartphone shipments were 311.2 million units, down 11% year-on-year. At the same time, Xiaomi, OPPO and Vivo, which occupy the top three domestic mobile phone sales, have experienced a year-on-year decline of more than 20%. Another report released by the China Academy of Information and Communications Technology gives more accurate statistics, in the first quarter of this year, the overall shipment of mobile phones in the domestic market totaled 69.346 million units, down 29.2% year-on-year.
Nearly 30% of the decline was quickly transmitted to the upstream chip industry. Tianfeng Securities analyst Guo Mingji recently said that Chinese mainland android mobile phone market continues to decline, this year has cut 270 million orders. About 170 million smartphone orders were cut in March, and another 100 million may be cut by now.
Taking MediaTek, which currently ranks first in the mobile phone chip market, as an example, Guo Mingpei revealed that MediaTek's shipments of low- and middle-end products in the fourth quarter of 2021 have been cut by 30% to 35%, while Qualcomm has revised down the flagship chip platform Snapdragon 8 Gen1 in the second half of the year.
In this regard, the reporter of China Business Daily asked for verification from the relevant people of MediaTek and Qualcomm, but did not get a clear answer. However, semiconductor industry analyst Ji Wei told reporters that due to the challenges brought about by the "lack of cores" in the past two years, chip manufacturers are extremely sensitive to downstream demand, and have greatly optimized the scheduling mechanism of production lines to cope with the changing market situation. "If the existing mobile phone sales data declines significantly, it is reasonable for chip manufacturers to react." Ji Wei said.
Terminal demand has declined across the board
From the macro environment, as the new crown pneumonia epidemic enters its third year, the world's major economies are facing the risk of recession. From the perspective of specific subdivisions of the industry, after experiencing a wave of remote office demand in the early stage of the epidemic, especially since this year, the demand for electronic consumer goods represented by mobile phones has shown a significant downward trend, which has become a direct factor in reducing the demand for chips.
"Under the influence of the epidemic, China's mobile phone market itself has entered the stock market, coupled with the lack of attractiveness of 5G mobile phones, the user's replacement cycle has been repeatedly lengthened." An analyst at CINNO Research told reporters that multiple reasons have disrupted the pace of development of China's mobile phone market.
The survey data of a number of market research institutions confirms the sluggish willingness of users to change machines. Counterpoint reports show that the average replacement cycle of domestic users has exceeded 31 months, while the time given by Strategy Analytics is 28 months. As a comparison, the reporter checked the data and found that in 2019, the cycle was 16 to 18 months.
For the deep reasons for the slowdown in demand for replacement, Zhou Guijun, editor-in-chief of the C114 communication network, told reporters that according to the law, it is currently in the transition period from 4G to 5G, and the user should be in a high-frequency period to replace the 5G mobile phone, but because the 5G application is currently mainly concentrated in the to B industry field, the popular consumer-grade application has not appeared, so the motivation for users to replace the new mobile phone is insufficient.
According to data from the Institute of Information and Communications Technology, from January to March 2022, a total of 57 5G mobile phones were released in China, down 10.9% year-on-year, and shipments were 53.884 million units, down 22.9% year-on-year, accounting for 77.7% of all mobile phone shipments in the same period.
At the same time, after entering 2022, the epidemic situation in many places in China has been repeated, and the control measures in various places have had a great impact on the normal operation of mobile phone offline stores, online sales, domestic and overseas logistics and distribution, thereby inhibiting people's consumer demand for mobile phones. Recently, SMIC CEO Zhao Haijun predicted at the first quarter results meeting that global smartphone sales this year will be at least 200 million units less than previously expected, most of which will affect Chinese mobile phone brands.
It is worth noting that in addition to mobile phone chips, the demand for terminal products such as PCs and TVs has also declined. Gartner and AVC Rev data show that global PC shipments in the first quarter of 2022 were 77.9 million units, down 6.8% year-on-year; Global TV shipments were 46.4 million units, down 6.1% year-on-year, which led to a sharp trend of global panel drive chip manufacturers.
"The uncertainty of the epidemic is still continuing, and from the perspective of the market, the future expectations will remain conservative." Ji Wei said that the market performance of terminal products may continue in the future, and when to usher in an inflection point is still unknown.
Chip "slash single robbery"
The rapid transmission of the downward trend of terminal sales has also caused the suppliers of mobile phone chips to suffer the coldest spring in recent years. After cutting down 170 million units of production, according to Guo Mingxi's calculations, the estimated shipments of Xiaomi, OPPO, vivo, Transsion and Glory this year are about 160 million units, 160 million units, 115 million units, 70 million units and 55 million units, respectively. In addition, the reporter noted that Samsung's shipment target this year was also reduced by about 10% to 275 million units.
On the chip side, institutional data shows that MediaTek has slightly revised down the expected shipment of smart machine chips in 2022 to 570 million to 600 million sets. Among them, the annual shipment of Tianji 9000 chips may be reduced from 10 million sets to 5 million to 6 million sets, and Qualcomm may reduce the price of SM8450 and SM8475 by 30% to 40% after sm8550 is shipped at the end of this year to facilitate inventory clearance.
In addition, the agency predicts that global CMOS chip shipments may drop by 40% this year, only about 60% of last year's shipments; CCM (camera module) and lens shipments are expected to decline by 20% to 30% in the third quarter of this year. Taking CIS (CMOS Image Sensing Chip) as an example, the total inventory of the top five suppliers in China has exceeded 550 million units.
In this regard, MediaTek CFO Gu Dawei said on May 23 that although global 5G mobile phone shipments have declined slightly, but benefiting from entering the global market and flagship field, MediaTek's 5G chip shipment target has not changed, and this year will maintain the expected target of revenue growth of 20%.
However, industry insiders are more pessimistic. Guo Mingxi pointed out that because the front time of 5G chips is longer than that of general components, from the perspective of Qualcomm and MediaTek's single cuts, weak demand is likely to continue to the first quarter of 2023, which will also reduce the market's revenue and profit expectations for MediaTek and Qualcomm from the third quarter of this year to the first quarter of next year.
Ji Wei said that including mobile phone core chips, camera chips and panels and other devices are within the scope of this sharp cut, the affected manufacturers affect the entire industry chain, if the downstream product sales data continues to deteriorate, it is not excluded that chip manufacturers also need to further reduce production capacity plans.
The main theme of the lack of core is still the same
With the chip industry suffering from "slashing and robbing", many institutions in the market have issued early warnings. The Gartner report shows that the global chip shortage could flip in 2023, followed by overcapacity. Morgan Stanley pointed out in the report that the market underestimated the deterioration of chip manufacturers' profitability caused by the possible surplus of chips in the next 2 to 3 years.
The reporter noted that since entering the core shortage stage in 2020, the world's leading chip manufacturers have opened a boom in capacity expansion. However, due to the need to prepare for the expansion cycle, a large number of new production capacity will begin to be released in the second half of 2022, and the sudden decline in chip sales will undoubtedly lead to the problem of chip surplus.
In this regard, CINNO Research analysts told reporters that the chip surplus will focus on the impact of pure wafer foundries such as TSMC, because if the market demand shrinks, in addition to terminal manufacturers, some IDM manufacturers will also reduce the previous outsourced orders, so as to ensure that more of their own production capacity is digested. "The consequence may be that some chip inventories are too large and the price is reduced." The analyst said.
In Ji Wei's view, although the trend of slow sales of mobile phone chips, the production capacity of automotive chips and advanced process chips is still in short supply, so in the future, the problem of insufficient chip production capacity and excess will exist at the same time, and this situation will relatively hedge the performance risk of chip manufacturers.
"The demand for advanced processes and automotive semiconductors currently accounts for 45% of TSMC's revenue, so the impact of mobile phone chips will not affect TSMC too much." Ji Wei said, but it must be admitted that in addition to TSMC, which has advanced technology, the capacity utilization rate of many chip foundries in the second half of the year will still decline.
On the other hand, because the release of core chip capacity takes a certain amount of time, the market as a whole is still digesting the previous shortage of production capacity, so the core chip performance of large manufacturers in the short term still maintains a positive trend. Taking Qualcomm, whose revenue and net profit increased by more than 40% in the second quarter of this year, as an example, in its second quarter 2022 financial report, mobile phone chip sales reached $6.33 billion, a year-on-year increase of 56%.
It is worth noting that with the further recovery of overseas markets, chip manufacturers are also removing some of the pressure. Analysts at CINNO Research pointed out that the popularity of the automotive chip market will add some vitality to the chip market, and flexible capacity and strategic adjustment will be the main tone of many manufacturers' work this year.
"The atmosphere of global chip production capacity shortage will not change." Ji Wei pointed out that the global market demand is still at a high level, when the domestic epidemic is effectively controlled, the start of terminal chips will be faster, and the entire chip industry will usher in another inflection point.