Seeing that the world economy has entered a recession, Chinese mainland, the world's largest consumer market, seems to be out of the way and still maintains a steady growth trend. Behind this "anti-market" growth, China's long-term layout of independence and self-circulation in key areas is gradually being realized. This has caused a lot of trouble for some multinational companies that rely on the Chinese market.
Take, for example, semiconductor manufacturing giants Samsung and TSMC, which have long relied on chip foundry services for customers such as Apple in the past. However, after the escalation of the chip war between China and the United States, Samsung and TSMC's profits plummeted because they could no longer provide chips to Chinese companies, and it was difficult to do business. In order to save themselves, the two companies have successively released their wind, hoping to reopen the Chinese market by reducing prices and other means. But can it really work?
Drinking to quench thirst is difficult to cure the disease
Public data shows that both Samsung and TSMC have faced severe earnings declines in the past few years.
In the third quarter of 2022, Samsung Electronics' operating profit fell 31.7% year-on-year, the largest decline in eight years. Semiconductor manufacturing, the flagship business, also saw a 95% drop in net profit.
TSMC's net profit in the third quarter of 2022 also fell by 32.1% year-on-year. What is particularly worrying is that TSMC used to rely mainly on high-end processes of 7nm and below to make money, but the revenue of this part of the business fell by more than 27% year-on-year in the third quarter of 2022.
The industry generally believes that the Sino-US chip war has led to the blockage of the Chinese market, which is an important reason for the sharp decline in the performance of Samsung TSMC. In the past, China was an important chip export region for Samsung, accounting for more than 1/4 of the company's overall shipments. And TSMC's export ratio to China is also as high as about 10%.
Now, this huge business opportunity has evaporated. Samsung and TSMC are very anxious, and have said that they will cut prices sharply in the future, hoping to reopen the Chinese market and stimulate sales. For example, TSMC leaked that it hopes to reduce the foundry price of the 7nm process by 5-10%, and Samsung has also expanded its mature process capacity in China.
However, industry insiders are not optimistic about the effect of price reduction to open up the market, and believe that this approach is difficult to cure the root cause. After all, the political game of sanctions and blockades between China and the United States continues, and it is very difficult for Samsung and TSMC to return to China, and Chinese companies on the real demand side have gradually lost confidence in the two companies.
When China gradually establishes its own industrial chain system, its dependence on foreign chips will continue to decline. Taking the 28nm and above process as an example, this type of chip can already meet 90% of China's market demand. The self-sufficiency of local companies in these process areas is also increasing. For example, companies such as CIFI Optoelectronics, Yangtze River Storage, Changxin Storage, and Wuhan Xinxin are rising rapidly.
It can be seen that the price reduction policies of Samsung and TSMC are difficult to fundamentally reverse their passive situation in the Chinese market. This kind of self-help measure of drinking water to quench thirst is a symptomatic but not a cure, and it is difficult to achieve substantial results.
In the face of the Chinese market, Samsung and TSMC may have a more and more difficult time. This once glittering cake is getting more and more difficult for them to get a piece of the pie again.
China's independent innovation has ushered in an important period of opportunity
From the perspective of local Chinese enterprises, the Sino-US chip war is actually an important development opportunity.
In the Sino-US chip game for many years, Chinese companies have been forced to accelerate the pace of independent innovation, and the local exchange of blood in various key links is speeding up. Coincidentally, at a time when the performance of Samsung and TSMC was in an avalanche, the development of Chinese chip companies was extremely bright.
For example, SMIC achieved a net profit of 860 million yuan in the third quarter, a year-on-year increase of more than 183%. In addition, many companies such as YMTC, Celis, and Hua Hong Semiconductor also showed substantial profit growth. I sincerely hope that Chinese chip companies can make persistent efforts and continue to make new breakthroughs in the independent and controllable industrial chain!
If we look at the global perspective, this Sino-US chip hegemony war will also reshape the new pattern of the technology industry chain. The "decoupling" movement under the confrontation between the two powers will fragment the global market and face a profound rebalancing of the technology supply chain. This is undoubtedly a blow to the old routine of those CORS who try to maximize their interests by containing and suppressing China.
After the decoupling between China and the United States accelerates, and the global economy enters recession and deep adjustment, countries or regions with truly large markets, abundant talents and advanced technologies will surely gain the first opportunity in the new wave.
At this moment, the opportunity period of China's independent science and technology has come. Through this Sino-US contest, let us continue to work hard and strive to become the leader of the new scientific and technological revolution and industrial transformation!