PC chips, positive turning point

Looking back at the development of the semiconductor industry, the emergence of PC (personal computer) has led to the rise of the first giants of the semiconductor industry, whether it is Intel, Micron Technology, AMD, NVIDIA, etc. have enjoyed the dividends of the PC era and have grown rapidly. However, in the past 2022, the PC market is in ruins.

01

PC shipments collapsed

According to Gartner's preliminary statistics, PC shipments totaled 65.3 million units in the fourth quarter of 2022, down 28.5% from the fourth quarter of 2021 and the largest quarterly decline since Gartner began tracking the PC market in the mid-1990s. PC shipments for the full year 2022 totaled 286.2 million units, down 16.2% from 2021.

Global recession expectations, rising inflation, and rising interest rates have all had a significant impact on PC demand. Many consumers have already purchased relatively new PCs during the pandemic, so there is no incentive to buy when they can't afford it, which has caused consumer PC demand to drop to its lowest level in many years and spread to the PC chip market, making it full of crises and challenges.

Due to the sluggish PC market, a number of PC chip technology giants have expressed caution about the outlook and are preparing to weather the winter - cutting expenses and downsizing.

Intel's PC chip business (CCG) saw revenue of $6.6 billion in the fourth quarter of 2022, down 36% year-over-year, and profit down 82% year-over-year. Under the premise of Intel's sharp decline in performance, Intel's forecast for this year's PC market has also become "cautious". In January this year, Intel had predicted that the total potential PC market in 2023 would reach 270 million to 295 million units (292.3 million units shipped in 2022).

AMD CEO Su Zifeng said that the overall global PC market will decline by about 10% in 2023, noting that "the first quarter will be the bottom of our personal computer market."

Memory chip giant Micron Technology has also made a forecast for the PC market, the company believes that PC shipments will decline by more than a dozen digit percentages in 2022, and expects to continue to decline in 2023 in the low single-digit percentage, close to the 2019 shipment level.

In addition, the market structure of PC processor chips is also quietly changing.

02

The chip market landscape has changed

The competition in the X86 market is intense

In previous decades, Intel has advanced with the X86 architecture to dominate the world's PC processors and become one of the world's largest chip companies. However, from the market share of Intel and AMD in the X86 market in the fourth quarter of 2022, it can be seen that Intel's long-term "king" processor market pattern in the x86 architecture is being changed.

According to the market research report, in the fourth quarter of last year, AMD's market share in the central processing unit market has reached nearly one-third, reaching 31.3%. Although Intel still holds the leading position in the x86 processor market, with a market share of 68.7%, its market share has been gradually eroded by AMD.

The slowdown in the PC market has had a very different impact on AMD and Intel. Contrary to Intel's poor revenue, AMD exceeded expectations with revenue of $5.6 billion in the fourth quarter of 2022. AMD has made such significant progress more thanks to the success of its Zen architecture processor, Zen, Zen2 helped AMD stand firm, driven by the Zen3 architecture, AMD's Ryzen 5000 processor not only multi-core performance continues the previous advantages, single-core performance also exceeds the core of the time for the first time. Today, the Zen4 architecture Ryzen 7000 on its desktop and notebook platforms has been shipped in large quantities.

It can be seen that the competition between Intel and AMD is becoming more and more intense.

ARM is on the rise

Another change in the PC processor market is the growth of processors based on the ARM architecture.

A few years ago, when talking about architecture in the chip field, it was nothing more than x86 and ARM architectures. The division of labor between these two architectures is clear, x86 occupies more than 95% of the PC market, and ARM monopolizes the mobile phone market. However, with the popularization of mobile Internet and smart terminals, a large number of mobile applications have spawned the continuous evolution of computing power architecture, and ARM architecture that can build higher performance and lower power consumption computing platforms is becoming the mainstream of computing power development. ARM's penetration into the PC and server markets is increasing.

In 2022, driven by Apple's self-developed chips, ARM's market share in the PC chip market reached 13.3%, up from 10.3% in 2021. However, it is worth noting that in 2020 its market share is only about 3%.

In addition to Apple, Google's Chromebook notebooks have also begun to use mostly ARM architecture processors, Microsoft has released the Surface family ARM version series in recent years, and announced in 2021 that the Canary channel has released an Edge browser version for the ARM platform.

MediaTek and Qualcomm are also actively promoting ARM chips for PCs and servers. Qualcomm is expected to launch an Oryon CPU this fall. Qualcomm and MediaTek's solutions could grow by more than 50% year-over-year on ARM laptops during 2024-2025. Huawei has launched a number of commercial PC chips, which are often based on the ARM architecture.

Counterpoint Research, a research firm, expects laptops with ARM chips to capture 25 percent of the market within five years. The strength of the future ARM architecture in the field of PC chips cannot be underestimated. However, in a short period of time, ARM PC chips are still difficult to compete with X86 architecture processors.

The rebirth of RISC-V

Today, RISC-V has become the third largest processor architecture after x86 and ARM, and is highly sought after in the field of energy-efficient IoT with its advantages of open source, instruction simplification, scalability, and modularity. However, this does not mean that RISC-V cannot enter the PC and server market with higher performance requirements.

In this process, a large number of domestic and foreign manufacturers aiming at high-performance RISC-V have emerged, gradually exploring the application of this architecture from low-end microprocessors into the field of high-performance computing. Previously, the most significant label of RISC-V is low power consumption, and Pingtou Semiconductor took the lead in launching the Xuantie C910 with a maximum frequency of 2.5GHz in 2019, breaking through the industry's performance imagination of RISC-V; at the end of November last year, domestic RISC-V chip manufacturer Saifang Technology launched the world's first high-performance RISC-V chip for PC applications - Fang Shocking 8100; Last December, chip startup Ventana Microsystems unveiled the world's first server-oriented CPU, the Veyron V1, at the RISC-V Summit.

Although some countries are currently interested in designing RISC-V-based PC chips, the target sales volume is small compared to other PC chips. Therefore, it is unlikely that the PC chip market will significantly shift to RISC-V technology in the short term. For example, China is planning to use RISC-V technology to build laptops that support a variety of open-source browsers, producing 2,000 PCs by the end of 2022, and Russia plans to sell 60,000 new PC processors based on RISC-V cores in 2025. However, these targets are small compared to the annual sales volume of about 300 million units in the global PC market in 2020.

Nevertheless, some research institutions predict that in 2022, the market opportunity of RISC-V-based chips in PCs will be close to 300 million, and the volume will increase rapidly in the future.

It is worth noting that in previous years, Intel and AMD occupied an absolute market share in China's PC/server-side processor chips, and the shipments of the two companies accounted for nearly 100% of the market share, close to complete monopoly. However, with China's Huawei, Haiguang, Feiteng, Zhaoxin, Loongson, Shenwei and other more powerful manufacturers are also launching various types of general-purpose processor products with different instruction sets and architectures through various ways and methods, and equipping them in the products of various domestic server manufacturers, showing fast product iteration speed, large differences in technical architecture, and different development characteristics of manufacturers focusing on scenarios. In the future, the competition for the PC processor market will be more intense.

03

When will it pick up?

At present, the PC chip market is accelerating the pace of inventory. TSMC's three major customers, including Apple, AMD, and NVIDIA, have also collectively lowered orders.

It is reported that because Apple's first shipment target for mobile phones has been cut in half, Apple has lowered TSMC's chip orders; AMD and NVIDIA had to adjust order planning to TSMC because of the sharp decline in PC market demand and the fading of the "mining" boom, and the sales of CPU and GPU chips of the two companies were not as good as in the past few quarters. Previously, MediaTek has cut orders for 5G chips in the fourth quarter by 30%-35%; Qualcomm also lowered the production of the high-end Snapdragon 8 series by 10%-15%. After cutting new orders, destocking has become an important means of digesting the high backlog of chips.

At present, chip manufacturers have said that in the face of weak market demand and high inventory, chip suppliers have been under pressure to find solutions to consume excess inventory and achieve year-end targets; Externally, they need to prepare for headwinds, such as offering greater price concessions and finding new incremental markets. For example, Intel is actively negotiating with specific PC brand customers to reduce prices for the previous generation of Alder Lake processors. The previous generation i9 processor had the largest price reduction, with a price difference of as high as $70-80, a decrease of about 20%; The second largest decrease was for the i7 processor, which reduced the price by $40-50.

Intel had expected hope in the second half of 2023.