In-depth observation of China's materialistic chip industry
In the semiconductor annual income qualifying competition, Intel defeated Samsung and regained the "top spot". Nvidia stole the show and rose to second.
In 2017, Samsung surpassed Intel for the first time to become the world's largest chip manufacturer. Two years later, Intel overtook Samsung. In 2021, Samsung will surpass Intel again. Two years later, Nvidia was in second place, and Samsung was in third place.
In 2023, the total revenue of the global semiconductor industry decreased by 8.8% from 2022 to $521.3 billion.
The total revenue of the global semiconductor industry decreased by 8.8% from 2022 / Source: Omidia
The global semiconductor industry remains in a delicate balance between supply and demand due to a slowdown in corporate and consumer spending. After the reshuffle, the "Big Three" Intel, Nvidia and Samsung have risen and fallen, which means the situation and prospects of PC, data center and storage respectively.
Nvidia, which entered the top five for the first time, has the most special status - replacing Tesla to become the target of "new money" in the US capital market, and forming a characteristic asset portfolio in the 20s of the 21st century together with Bitcoin and gold. The development of this portfolio has sometimes made the "analysis of the Fed" meaningless.
Top spot
Intel regained the "first place", mainly because Samsung was not doing well.
Last year, sales of DRAM (memory) and NAND (flash memory) declined severely, and the smartphone market was sluggish. Samsung struggled, with annual revenue plummeting 38% to $43.4 billion. Intel is not having a good time, but it is not as bad as Samsung. PC and server shipments fell more than 16% to $50.5 billion in revenue.
In contrast, Nvidia is on the AI Express. As technology companies scramble for GPUs and AI data services, Nvidia's chip business revenue nearly doubled to $44.3 billion, up 86% year-on-year. The revenue ranking jumped from 10th to 2nd place, breaking into the top five for the first time.
Jensen Huang at the NVIDIA GTC conference/Source: Visual China
In 2023, the key word in the semiconductor industry is "down".
According to Counterpoint Research's latest global semiconductor revenue report, only six of the world's top 20 semiconductor suppliers reported year-on-year revenue growth, with the world's top 20 semiconductor suppliers contributing 71% of the market share, down from 76% in 2022, and revenue down 14% year-on-year.
The memory industry has experienced the strongest headwinds – weak demand in the PC, server and smartphone industries, oversupply, and overstocking in the overall market. The segment's revenue in 2023 fell 43% year-on-year. SK hynix and Micron's revenues fell sharply by 33% and 36%, respectively.
Notably, there is a strong demand for high-bandwidth memory (HBM) that integrates with GPUs to facilitate AI. SK hynix is a leader in this segment. The HBM market grew by 127% year-on-year in 2023. According to forecasts, HBM is likely to record a growth rate of 150-200% in 2024, which is expected to lead the growth of the memory market.
HBM is forecast to grow by 150-200% in 2024 / Source: TrendForce
Part of the good news came from automotive chips, where revenue rose more than 15% to $75 billion. The increase in electric vehicles and the integration of intelligence and automobiles account for about 14% of the total market. Last year, Infineon and STMicroelectronics saw year-on-year revenue growth of 11 percent and 7 percent, respectively, moving up from the previous 10th place to 9th and 10th place, respectively.
Artificial intelligence is the biggest outlet in the semiconductor industry. Nvidia's chip business revenue increased by 86% year-on-year, setting a record for the highest growth rate of semiconductor companies in 2023. AMD is another beneficiary of the trend, coming in at No. 7 for the second year in a row, despite a 4% drop in revenue to $22.6 billion. The two companies are expected to further develop and expand their AI chip business in the coming years.
The continuous change of hands of the "top spot" itself is caused by the fluctuations and trends of the industry cycle. 2023 can be said to be a year for semiconductor companies to fine-tune their strategies or outlooks, manage and adjust their inventories, and prepare for the AI boom.
Storage respawn
Since the beginning of this year, the market demand for mobile phones, PCs and servers has gradually recovered, the production capacity of storage factories has been reduced, and the prices of some storage products have begun to bottom out.
Storage plumbing, Samsung Prophet.
On April 5, Samsung said it expects operating profit to increase by 931% in the first quarter. At the same time, it is expected that the sales of the memory semiconductor division in 2024 are expected to recover to the level of 2022. Samsung also made a bold statement - within two to three years, it will regain the first position in the global chip market.
New big customers have also arrived. Last month, Nvidia CEO Jensen Huang hinted at an interest in purchasing Samsung's HBM chips. Some Korean media broke the news that Nvidia will buy a large number of Samsung Electronics' 12-layer HBM3E from September at the earliest. If the "revelations" are realized, Samsung's performance will grow further.
Nvidia CEO Jensen Huang
SK hynix was the first storage giant to achieve a company-wide turnaround in a single quarter.
According to the financial report, SK hynix achieved a turnaround in revenue of 11.306 trillion won and an operating profit of 0.346 trillion won in the fourth quarter of fiscal 2023, and got rid of the operating loss since the fourth quarter of 2022 for the first time in one year.
Relying on the "revival" of the two major storage companies, South Korea's chip exports increased by 35.7% year-on-year to US$11.7 billion in March, the best monthly performance since March 2022.
Micron also ushered in a rise.
On March 20, Micron announced its financial results for the second quarter of fiscal year 2024 as of February 29, 2024, benefiting from the simultaneous increase in DRAM and NAND demand and prices, with revenue of $5.8 billion in the quarter, up 58% year-on-year and 23% quarter-on-quarter.
According to the financial report, the price increase of products has driven Micron's overall gross profit margin to increase by 19 percentage points. Micron's revenue, gross profit margin and net profit in the quarter exceeded expectations, and successfully ended five consecutive quarters of losses and turned losses into profits.
Micron's financial report for the second quarter of fiscal year 2024, with revenue of $5.8 billion in the quarter, an increase of 58% year-on-year and 23% quarter-on-quarter/Source: Micron's financial report
The follow-up to making money is to expand production.
Samsung plans to increase its investment in its semiconductor factory in Texas, USA, with a total size of about $44 billion. SK hynix announced that it will build a production facility for AI-based memory advanced packaging in West Lafayette, Indiana, U.S., and plan to invest USD 3.87 billion in semiconductor research and development cooperation with local research institutes such as Purdue University in the U.S.
Last month, Micron broke ground on a new packaging and testing facility in Xi'an, China. According to Micron management, the budget for new factories and equipment will be maintained at $7.5 billion to $8 billion in fiscal 2024 and projects will continue in China, Japan and India.
The periodicity of memory chips is obvious. Generally, a cycle of 3 to 4 years is currently at the beginning of the fifth cycle.
The World Semiconductor Trade Statistics Organization predicts that the global semiconductor market will reach $588.4 billion in 2024, a year-on-year increase of 13.1%. Among them, the proportion of the memory segment will rise to 22.06%, and the market size will rise to 129.8 billion US dollars, an increase of 44.8% year-on-year, ranking first in the semiconductor segment.
New money arrived
The significance of Nvidia rushing to the "second list" cannot be limited to the semiconductor industry.
At present, Nvidia, together with Bitcoin and gold, has become an asset package for "new money" blockbuster bets, carrying the prelude to the coming of a new era.
The emergence of this new asset portfolio is first reflected in the "abnormal movement" of gold prices. On 16 February, gold prices diverged from expectations for the US dollar, interest rates, and interest rate differentials – interest rate expectations changed to no rate cuts, the dollar strengthened, interest rate differentials rose, and Treasury yields rose. Commodities such as oil have a soft landing signal. Gold, on the other hand, has risen from $2,000 an ounce.
February 16 is the announcement date of NVIDIA's fourth-quarter 2023 earnings report.
Ahead of the fourth-quarter 2023 earnings report, Nvidia's stock price fell. The intraday decline once reached 6.7% and closed down 4.35%, the highest one-day decline in 2024.
Nvidia's fourth-quarter financial report, Nvidia's revenue in the quarter was $22.1 billion, an increase of 265% year-on-year and 22% quarter-on-quarter/Source: Nvidia
According to the fourth-quarter financial report, Nvidia's revenue for the quarter was $22.1 billion, an increase of 265% year-on-year and 22% quarter-on-quarter. Net profit was US$12.3 billion, a year-on-year increase of 769%. Full-year revenue hit an all-time high of $60.9 billion, up 126%. It also expects revenue to rise to $24 billion in the first quarter of 2024.
The day after the earnings report was announced, the artificial intelligence sector led by Nvidia ushered in a wave of gains. In less than a week, Nvidia shares surged 16%, the biggest one-day gain in Wall Street history. Subsequently, the market value once exceeded $2 trillion, ranking second only to Microsoft and Apple.
According to Reuters analysis, "new money" has bought Nvidia plus bitcoin plus gold asset package in the last two quarters, which is a significant preference. At the same time, investors believe that the computing power of Nvidia's hardware is strongly correlated with Bitcoin, and the "legalization" of Bitcoin under regulation has contributed to the bundling of asset portfolios and spilled over to gold.
In other words, with no other correlation in the anchor of interest rates, exchange rates, and FICC (fixed income, foreign exchange, commodities), there is a clear pass-through pull effect from NVIDIA to Bitcoin and then to gold. In terms of gains, the largest is Nvidia, followed by Bitcoin, and gold is only about 15%.
Unlike the "old money", which is anchored to energy, oil, and the dollar, the "new money" clearly values computing power, algorithms, artificial intelligence, and electricity. The preference for "new money" is quite consistent with the trend of the development of productive forces.
Huang demonstrated how multiple humanoid robots powered by the GR00T can accomplish a variety of tasks at NVIDIA's GTC conference
According to foreign media reports, 70% of this "new money" comes from Asia.
According to public data, the total global cryptocurrency market capitalization is more than $2.7 trillion, of which Bitcoin has a market capitalization of $1.4 trillion. Nvidia has a total market capitalization of $2.2 trillion, and if you add its related derivatives, its overall volume also exceeds 3 trillion. The total market capitalization of gold reached $14 trillion. Together, that's about $20 trillion.
Asian "new money" is trying to counter European and American "old money".
The Russia-Ukraine war and the Palestinian-Israeli conflict continue, and the sensitive capital world has already begun to engage in political avoidance. Wall Street already has the WW3 (World War III) expected portfolio of assets that put together a bunch of assets of important strategic resources.
Nvidia chips are sensitive strategic materials. Where is NVIDIA's latest Blackwell B200 graphics processing unit exported, it is not only a problem of enterprise revenue and computing power layout, but also a problem of "faith" that is harvested or harvested.
Author | Rong wisdom
Editor-in-Chief on Duty | Zhao Jinghan
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Typography | Fifi