ST high-end chips can't be sold

The MCU market in 2023 is not only a volume, but also a volume.

The original factory can reduce the price without a bottom line, and it has become the norm for traders to sell at a loss, and ST's MCU, which has skyrocketed dozens of times during the core shortage tide, also began to invert in price last year, and even in the second half of last year, even the high-end H7 series could not hold up and began to invert.

What happened to ST's MCU last year? Everyone is shouting domestic substitution, how is ST's Chinese market now? Is it doing well?

01

MCU involution

The ST high-end series is also starting to hang upside down

2023 can be said to be the year of MCU's involution.

Domestic chips are bloody, the price of the original MCU can be as low as 5 cents, and traders let the profits and lose money to ship, and the ST MCU, which has skyrocketed dozens of times in the past two years, was also "rolled" into a price inversion last year.

From "Best Wealth Management Product of the Year" to price inversion no one wants, what happened to ST's MCU?

MCU was in the limelight during the core shortage tide, and ST's MCU was the pioneer of price increases, and many people complained that "it rose faster than Shenzhen's housing prices". At this time, the turning point of the MCU market began in June 2022, which coincided with the lifting of the lockdown in Shanghai, and the core shortage market for more than a year came to a turning point and began to weaken. ST's typical 32-bit MCU STM32F103C8T6 was still 45 yuan in May 2022, and it was only 13 yuan in July, and the replacement GD chip fell from 12 yuan in May to 9 yuan in July.

In the second half of 2022, although the price of ST general-purpose MCUs continues to decline, the magnitude is small, such as the prices of the 01 and 03 series are stable, and the overall delivery time has not been significantly shortened, while the price inversion of domestic MCUs has occurred.

Time enters 2023, in February, Taiwanese manufacturer Sheng Qun comprehensively lowered the price of MCU for traders, adding a chill to the MCU market, and ST General Materials began to compare prices with customers, and from April to May, the price began to invert. At this time, ST's demand mainly comes from industry and automobiles, and personal electronics and consumer goods have begun to weaken.

By the middle of 2023, ST's MCU began to fully clear inventory, in addition to the original factory, agents, spot dealers, terminal factories also began to regain inventory, when overseas leaders began to "dump", the MCU market fell into a bargaining battle.

Regardless of ST, domestic mainland and Taiwanese MCU manufacturers, the price reaches 1 yuan or a few cents abound. The upside-down phenomenon of ST's general materials has been aggravated, and the STM32F103C8T6 has come to the "historical low price" of 5.1 yuan.

And H7 such a high-end MCU series also began to upside down, there was still demand in May, and the price was also above 100 yuan, but in October there was only 65 yuan left, and at the end of the year, it fell to about 30 yuan, and began to be upside down. In addition, as the end of the year approaches, everyone wants to dump their goods and go home for the New Year, and most ST MCUs have bottomed out in the second half of the year.

Even industrial demand can't stand it, ST said that Q4 MCU demand in China's industrial market is less than expected, the industrial market order visibility is low, only the demand in the automotive market is still strong. ST MCU delivery times and capacity utilization rates also gradually returned to normal in the second half of the year.

In 2023, the price of ST's MCUs will decline all the way, and the general materials will begin to invert from April to May, and the high-end series will also begin to invert in the second half of the year. After entering 2024, the current price of general-purpose MCUs has increased slightly, and the inversion phenomenon has been alleviated. For example STM8S003F3P6TR the quotation rebounded to 1.3 yuan, and the STM32F103C8T6 price returned to about 5.8 yuan, getting rid of the upside down.

At the same time, the inverted models of domestic GD MCUs began to decrease, and the price of 32-bit MCUs also began to rebound slightly at the beginning of the year.

However, overall, the overall demand for MCUs is still relatively cold, and the slight rebound in prices may be related to the easing of market inventory.

02

I don't buy it if it falls

ST China's revenue has almost halved

ST, which used to be able to win the first market share in China's MCU market, is now "not popular". Even though it has fallen to the price of cabbage, the previous "scumbag" behavior has been deeply rooted in the hearts of the people, and many customers have rushed to the arms of domestic MCUs, and ST has also fallen from the position of the boss.

ST's MCU was able to enter the Chinese market that year, largely because of the Atmel price hike and the big out-of-stock, the original AVR single-chip microcomputer within 8 yuan was fried to dozens of yuan and even could not be bought, and a gap was vacated in the market, and then ST relied on the product function on the basis of making the price cheap enough (only a fraction of other brands in the same period), and relied on service and cooperation, and at the same time captured the hearts of engineers and domestic small and medium-sized enterprises and emerging companies, and successfully became the leader of China's MCU market in 2019, with a market share of 20.87%。

Isn't this process a little familiar? It seems that ST's bullet that was fired at Attmel at a low price back then will hit ST's eyebrows again in 2023.

The downstream applications of China's MCU market are somewhat different from the world, the largest part of the global MCU market is automotive electronics, and then industrial and consumer, while China is the largest proportion of consumer electronics. According to the data of the China Business Industry Research Institute, in 2023, China's MCU market sales will be concentrated in consumer electronics, accounting for the largest proportion, reaching 26%, followed by computers and networks, automotive electronics, IC cards, and industrial control, accounting for 19%, 15%, 15%, and 10% respectively, which is significantly lower than the global level.

Data source: ICInsight, China Commercial Industry Research Institute

Compared with the high barriers of automotive electronics, the difficulty of consumer MCU is much smaller, and the market is the largest. Therefore, the first impact of the rise of domestic MCUs is ST's strong field: consumption and industry.

In the past two years, ST's skyrocketing price and shortage of goods have brought huge opportunities, and domestic MCU manufacturers have opened up full horsepower to quickly replace them.

First of all, the number of companies alone has skyrocketed, and hundreds of MCUs are doing it.

According to the 2018 research report of the Foundation Evergreen Economic Research Institute, at that time, the only listed companies in China with MCU as the main business were Zhongying Electronics and GigaDevice, and the revenue scale did not exceed 400 million yuan, which was obviously different from foreign giants. According to the statistics of Xinwen Road No. 1, as of September 10, 2023, there are as many as 23 domestic listed companies that can provide MCU products.

The number of MCU companies that are not listed has skyrocketed. At the end of 2019, according to industry veterans, there were nearly 100 domestic MCU manufacturers. By 2024, some industry experts said that there will be more than 400 domestic MCU manufacturers.

Hundreds of MCU manufacturers, but most of them are piled up in the low-end 8-bit, M0+ and M3 (mainly STM32F103 compatible materials) field, of course, they are very rolled, but they also roll up the results and successfully take away part of the cake of ST.

According to brokerage data, ST will account for 8.5% of China's MCU market in 2022, ranking third, down 12.35% compared with 2019. At the same time, from 2019 to 2022, GigaDevice increased from 2.09% to 7%, and Zhongying Electronics increased from 2.31% to 4%.

The market has become bigger, and the revenue has definitely improved, and from 2018 to 2022, the revenue scale of Chinese MCU manufacturers has increased significantly. GigaDevice and Zhongying Electronics, mentioned above, will also become the leader and second in the revenue ranking of Chinese MCU manufacturers in 2022.

Official account: Xin Xiaoer's afternoon tea

In addition, once the MCU market is snatched away, it is not so easy to get it back.

Most of the large-scale domestic substitutions this time are small and medium-sized enterprises in the field of consumer goods, and the soaring price of chips is difficult for them to afford, which is not highly profitable. At that time, ST's MCU skyrocketed dozens of times, and some solution providers complained to us that he only sold a board for dozens of dollars, and he could only do it at a loss, and the more he did, the more he lost, and of course the customer was unwilling to increase the cost, and even had to stop work in the end. Therefore, in the face of the soaring price of ST MCUs in the first two years, many companies actually "had to change".

Moreover, for end customers, the replacement of MCUs has to go through a long process, and the replacement cycle from planning to commercialization generally takes at least one to two years. So, once a plan is finalized, there are usually no major changes, at most a few more options are prepared.

After being "forced" to find alternative materials this time, many terminals found that the original domestic chip technology had developed well, and it was cheap and there was no need to worry about running out of stock, so most of them chose to continue to use domestic chips.

In the past two years, domestic manufacturers have achieved rapid supply substitution in the field of low-end MCUs, and it is impossible for ST not to be injured.

In 2022, ST's CEO said at the Munich electronics show that China accounted for about 30% of its total revenue, and he was also the first CEO of a global semiconductor company to visit China after the outbreak of the epidemic that year, and the importance of the Chinese market can be imagined.

And in 2024, ST's CEO said that China now accounts for 15% of the company's revenue.

Less than a year and a half between the two speeches, but revenues from China have plummeted and almost halved.

At present, the localization rate of China's MCU market is about 16%, and some industry insiders said that in the long run, the localization rate of MCU will inevitably reach 20%, 30% or even 50%. By then, how much will ST's cake be taken?

03

ST, there is more than just MCU

Although the revenue of the Chinese market has decreased significantly, in fact, in the past two years, ST has had a good life.

Judging from its financial reports in recent years, since fiscal year 2019, total revenue has increased year by year, and revenue in fiscal year 2021 and 2022 during the core shortage wave has increased by more than 20% year-on-year.

The lukewarm fiscal 2023 total revenue rose 7.2% year-on-year, with automotive/industrial/personal electronics/communications and computers accounting for 41%, 30%, 19% and 10% of revenue, respectively.

Source: ST official website

Compared to 2022, the revenue share of the MDG division (MCU and digital IC) remained unchanged at 32% in 2023, while the revenue share of the ADG (automotive and discrete devices) division increased from 37% to 45%, and the performance of the division is getting stronger.

Source: ST official website

When it comes to ST, the first thing that comes to mind is STM32 MCU, but in fact, MCU accounts for less than 1/3 of its total revenue, in fact, ST also performs well in other fields: ST has a market share of more than 50% in silicon carbide MOSFETs, ranks second in the world after Infineon in the field of power semiconductors, with a market share of about 20%, and ranks relatively high in audio amplifiers, satellite reception, and GPS navigation.

In the past two years, ST's focus has begun to shift more towards automobiles, and in 2023, ST's annual revenue of silicon carbide products will be $1.14 billion, an increase of more than 60% year-on-year. ST also built an 8-inch silicon carbide manufacturing plant with Sanan Optoelectronics last year, and with continued capacity expansion in Morocco and Italy, ST is expected to have an annual silicon carbide revenue of more than $5 billion by 2030.

In addition, after the consumer product cake was robbed, ST seems to be planning to rely on automotive products to win the Chinese market share again.

ST's CEO said that local Chinese manufacturers are investing in production capacity on a large scale, which is certainly a risk but also an opportunity. ST believes that access to the Chinese EV, digital power control and renewable energy markets is critical, and ST's continued investment in China, including a joint venture with Sanan to produce silicon carbide, will increase ST's penetration in the Chinese market.

However, this is all for later, and ST's main goal in 2024 is to "go" first.

ST expects sequential revenue growth in personal electronics until the second half of the year, industrial is expected to fall sharply in the first half of the year before returning to single-digit year-over-year growth in the second half, and growth in the automotive business is also expected to slow and is expected to be mid-single-digit year-over-year. At present, ST's MCU is still in the inventory adjustment stage, although the market price has risen slightly, but whether it can recover depends on the order booking.

04

Conclusion

In the past few years, the MCU market has experienced a roller coaster, from skyrocketing and out of stock to inverted involution. And after the madness, the people at the table have changed, the mentality has changed, the pattern has also changed, the domestic chips have been put on the table, and ST has stepped down from the C position.

Although ST, as a global chip giant, can still live well on other businesses, it is difficult to get back the Chinese MCU market that it took more than ten years to win. ST, which has been labeled as a "scumbag", wants to recover the market, how long will it take?

The prices in this article are from third-party websites and are for reference only.