Image source @ Visual China
Text | Finance and economics are unscrupulous, the author | Dianliang
One day in July, at a stall in the second phase of Shenzhen New Asia Electronics City, a transaction was underway.
The subject of the transaction is a batch of 2,000 chips, the seller is the owner of this stall, the buyer is a semiconductor company affiliated with a top three private automakers in China, entrusted a trading company to come to purchase.
In the end, after the tedious inspection process was completed, the buyer paid on the spot and completed the transaction.
The transaction price is not airtight. It is said that the buyer paid 20 million yuan on the spot, which means that the unit price of each chip is as high as 10,000 yuan.
Of course, this amount is not much for stalls located in Shenzhen's core electronic trade market. But in the special market environment, the deal was amplified by the good people. Some people involved in the chip deal said that the normal price of this type of chip is about 1500 yuan.
Up to 6 times the increase, and it is taken away by the top three domestic automakers, this transaction behavior is not magnified to see.
So what led to this normal and abnormal transaction?
<h2>A ban triggered a bloody case of price increases</h2>
On May 15 last year, for reasons that are well known, the U.S. Department of Commerce announced that it would tighten export controls, particularly in the chip industry, targeting some Chinese companies.
It is believed that the export controls of the United States are the root cause of this round of global chip price increases.
Since semiconductor technology was created in bell laboratories in the United States, after several generations of engineers, the global industrial chain decades of efforts, set up a semiconductor industry chain division of labor and cooperation, countries, technical alliances, enterprises in the semiconductor industry chain in the field of various segments of the cooperation, to build the global semiconductor industry chain ecology, the United States as the main participant in the ecology, from the equipment, materials, division of labor and other aspects, the formation of a great technical control, which is also the bottom of the United States export control.
But even in 2020, when the United States is trying to completely block Huawei's access to chips through the outside world, Huawei still ranks third in global semiconductor procurement with more than $19 billion in semiconductor procurement expenditure.
Huawei's huge procurement expenditure actually covers the entire semiconductor industry chain.
From the most upstream materials, equipment, and IP, to the design, manufacturing, packaging and testing of the midstream, to the integration, development, and application of the downstream point, Huawei is more or less present.
There are as many as 150 core suppliers attending the 2020 Hua core supplier conference, and the gold medal supplier for ten consecutive years is NXP and Intel, among the 92 gold suppliers selected by Huawei, there are 33 companies from the United States, and some companies' revenue accounts for more than 50% of Huawei's procurement revenue.
The export control of Huawei has become the fuse of this round of shortage of goods and price increases in the whole industry chain, and the real detonation of the ecological explosion built by the global force is May 15, 2020.
Because Huawei only has the ability to design chips and does not have the ability to manufacture chips, the source of Huawei chips is nothing more than two: wafer foundries and upstream chip suppliers. Huawei's food for survival after September 15, 2020, chips, will increase procurement in just a few months, and this procurement is unconventional, sudden, and has been going on for a certain period of time.
If Huawei wants to continue its business, it must grab production capacity.
In fact, this has been going on since 2019, and the more Huawei's production capacity grabs, the less capacity other companies can share. In the case of this and the other, Huawei's massive purchase orders are bound to affect the production capacity plan of the fab, and Huawei's priority will naturally rise in the scheduling of the fab. In 2019, Huawei's procurement expenditure on TSMC accounted for 14% of TSMC's revenue, making it TSMC's second largest customer, while mainland enterprises accounted for 22% of TSMC as a whole in the same period.
At the same time, according to the "China Times Electronic News" report, TSMC is communicating and coordinating with Qualcomm, MediaTek, AMD, Nivdia and other manufacturers, transferring some of the production capacity of these manufacturers to Huawei, and striving to help Huawei produce enough chips within the 120-day buffer period.
Throughout the June, July, August and September 2020 deadline, almost all the news about the chip industry is inseparable from Huawei's procurement and capacity grabs.
It is understood from the industry that MTK has given up its own production capacity in TSMC to Huawei. If calculated according to the time of the impact of the anecdotal on Huawei's squeezed production capacity, the 3-month wafer production cycle plus a one-month packaging and testing cycle, the chip from the topmost raw material to the finished product, it takes at least four months, plus Huawei squeezes the production capacity for at least three months, before and after more than half a year of production capacity empty window period, so that the supply chain ecology from this time began to split.
<h2>Self-preservation panic hoarding</h2>
The first to react from the US export control is the domestic semiconductor industry and ICT industry enterprises, which are divided into three categories, one is the same as Huawei on the list of enterprises, these enterprises (and institutions) themselves have been difficult to obtain products containing US technology through normal trade channels, so before being controlled, through compliant trade channels, obtain some chips to support the normal development of enterprises. For example, Hikvision and the like, it is said that Hikvision's safety stock has increased from the regular three months to 18 months to 24 months.
In addition to Hikvision, there are more similar companies, especially the head enterprises, who have chosen to hoard goods for no more than 3 reasons:
1. Worry about the expansion of US export controls and its own impact. This concern gradually became a reality, according to incomplete statistics, in addition to 65 Huawei and its subsidiaries, there are more than 100 Chinese companies and institutions, into the control list, these companies all in a limited channel to obtain their own development needs of the products, all of them carry out large-scale hoarding.
2. Small and medium-sized enterprises throughout the Pearl River Delta and yangtze river delta are worried about the rise in market prices and procurement costs caused by the centralized procurement of large enterprises, and place orders from agents and original factories within the acceptable price range, and further expand the safety inventory cycle.
3. Other foreign companies that are not Chinese mainland, under the influence of U.S. export controls, have begun to seek multi-dimensional supply chain sources, and those who master upstream technology supply may also initiate similar controls on foreign companies. For example, Japan's embargo on Korean panel raw materials has expanded the impact of similar events from the side, leading to a global supply chain crisis, in which case major companies in various countries have also begun to purchase large-scale areas.
However, it is this panic hoarding induced by abnormal market behavior that pushes the price of chips up wave after wave.
The chip is caught in a complex dead cycle: the more it rises, the more it lacks, the more it rises.
On the one hand, downstream customer procurement, in the context of the complexity of the market environment and the deterioration of the supply chain ecology, the demand for core devices is amplified. Originally, the demand for 10K per month and the safety stock for half a year were only 60K demand devices. But now the procurement is worried that the agent and the original factory cannot be delivered, and the monthly demand may be expanded, such as expanding to 15K or even 20K, resulting in a surge in orders from agents and original factories.
On the other hand, the order management of agents and original factories also has huge challenges. The traditional order model from the customer-distributor-agent-original factory is an abnormal supply period, and great challenges have emerged, which is called the "order reservoir":
Customer A in order to meet and protect their own needs, in the supply of tight periods, will choose "eggs are not placed in the same basket" procurement policy, although chip manufacturers have a strict agent, channel provider management system, and also require the same material in the supply of the same customer, can not appear 2 or more supply channels, but in fact, most customers will default in the OPEN BOM to provide two, or even three alternatives.
Therefore, customers will choose to place demand orders at the same time in the channel providers of one supply, two supply, three supply and even more channels that are not in the supplier sequence, so that the supply of one supply, two supply and other channels may be added up to meet their own needs. However, these order sources from multiple channel providers, summarized into the hands of the original factory, are actually just the needs of a customer, but this demand, in the process of issuing out, may be magnified several times.
However, every order that ends up in the original factory is a real order, and rightly, it is a real order! These order sources, during tight supply periods, are difficult to screen. This is like a reservoir, the water coming in from all directions, constantly gathering, and there is no shipping port in a short period of time, resulting in no goods in the hands of customers, no goods in the hands of the channels, and full production capacity of the original factory.
It takes time for the original plant to reduce production capacity, especially in wafer foundries such as TSMC. To make up for the empty window period of squeezing the production capacity of other enterprises for Huawei to schedule production, it will take a long time to prepare and recover again.
In addition, Huawei's obstruction in the mobile phone market, leaving a huge vacancy, resulting in fierce competition between major mobile phone terminal manufacturers, this abnormal market behavior, in the fiercely competitive Red Sea suddenly appeared in the blue ocean, once again became a "blood sea".
Supply chain news, OPPO to the supply chain to the supply chain to increase the orders increased by 70 million units, vivo is 80 million units; and the ambition of millet increased by 100 million units, and there are even rumors that millet will be TDK's filter factory capacity packaging. Samsung, which has a very weak sense of presence in China, although it has not publicly increased the number, but from the number of Wingtech being cut by South Korean filter manufacturers wisol nearly half, it can be roughly estimated that the increase of Samsung is about 50 million units.
These increases have far exceeded Huawei's actual shipments, and they have also ignored the glory of Huawei's sales, and in the case of stock peaking and increment slowdown, huge orders have swallowed up the huge production capacity of upstream suppliers.
Coupled with the huge shipment volume of FMCG, low production costs after dilution, and high profit margins, the conversion of wafer foundries can also be understood. The explosive demand for anti-epidemic materials such as forehead temperature guns and thermometers has seized the production capacity of other industries from the side, after all, these are becoming necessities.
Natural and man-made disasters such as the global epidemic, The Texas ice disaster, factory strikes, earthquakes, water and electricity shortages, and fires have further intensified the chip gap, and price increases are inevitable.
<h2>While the price is rising, the goods are speculated</h2>
In the middle of June 2020, in some spot groups in Huaqiang North, sellers with some channel resources began to release some news: ST is going to increase prices.
As the world's largest general-purpose, vehicle-grade MCU enterprise, ST's price increase is bound to become the industry's direction.
Since then, the most commonly used STM32F103 series chips have begun to fluctuate. After entering August, after several small fluctuations, the price rose sharply and sharply.
The increase is large and the increase is fast, which has changed the normal 10-20% increase of other devices in the semiconductor industry in the past, but a growth of several hundred percent. By the end of September, another piece of news in the industry did not go away: F103, F030 are the old technology of ST, TSMC is now not taking orders for ST, 4Q must be lacking, next year 1Q is also a big opportunity to lack.
This news revealed at least two pieces of information:
1. TSMC gradually abandons the production capacity of the old process and switches to a more mature process;
2, ST price increase will continue for a period of time, according to Q4 to Q1, at least more than half a year.
Looking back now, this prediction is not only accurate, but also the time of the out-of-stock continuation is far more than the initial time, and as of now, a year has passed, and there is no sign of any relief.
Unlike the price increase in the ST spot market, domestic companies were the first to notify the official price increase last year.
On September 22 last year, Fuman Electronics (300671.SZ) issued the first round of price adjustment notice, some products on the basis of the company's original standard quotation of 2 points, and must collect cash. On October 13, Fuman issued the second round of increase notice, and some products raised 0.05 yuan on the basis of the original price, an increase of nearly 50%.
Immediately after December 16, Fuman issued a third round of price increase notice, covering the company's products.
Subsequently, the domestic chip company began a large area of price increase letters, in the process of communicating with many customers, many procurement jokes, before talking with suppliers are talking about "annual decline", and now with suppliers are talking about "less rise". What used to be a quote is now a price increase letter.
The price increase of Fuman is actually just the epitome of this round of price increases, and the real situation behind it is: no production capacity.
In the division of labor in the chip supply chain ecology, Taiwan is positioned as an OEM, and more than half of the world's wafer production capacity is concentrated in the hands of TSMC, plus UMC, Lijing, the world's advanced, etc., more than three-quarters of the world's wafer foundry capacity is concentrated in Taiwan. Chinese mainland the largest foundry in the market, SMIC's share, accounting for only about 6%.
China's most is the chip design company, they only have the design ability, no manufacturing capacity, they want to design the chip production, to rely on wafer foundry.
Throughout December 2020, the most lively circle of chips traders in the circle of friends is the domestic manufacturers who have previously seized the STM32F103 series of general-purpose MCUs at low prices. Including GigaDevice's GD series, Hangshun's HK series, BGI's HC series and Jihai's AM series, they used PIN to PIN to replace STM32F103 as a selling point, and quickly cut into the market that originally belonged to ST.
From that time, they succeeded, sending samples, testing, placing orders, thinking about the delivery of ST for half a year or even a year, at least it could be replaced. However, man is not as good as heaven. After the Spring Festival, many customers began to urge goods, and the results obtained were nothing more than out of stock and extended delivery. Either wait, or cancel the order, but also face the reality of price increases, yes, the price increase of these manufacturers is not lower than st.
Some customers who have tested multiple products and changed the circuit board many times have despaired and given up. The lack of a piece of material means that the product cannot be patched on the line and cannot produce a finished product.
There are only three paths in front of customers:
First, change the board, that is, find alternative materials. In the early stage, you may only need to find an alternative material for an MCU, with the shortage of goods in the whole industry, there are more and more cases of needing to find alternative materials, from the MCU to the power chip to the audio and video chip, may face to do the switch.
Many products from the beginning of the project selected MCU model, may be ST, but in the development process, in the ST of the public schematic to open to make adjustments, change the MCU, means to change the auxiliary materials, after the replacement of auxiliary materials, open the adjustment software, adjustment program, and then burn, into the test verification link, and so on after the verification can be, no goods.
So I began to verify others, which may be Gigabit innovation, or it may be smooth, round after round down, the MCU is good. However, the power chip is missing again, and it has begun to be replaced, and Silicon Jie in Taiwan and Shengbangwei in China have begun to rise, but they are still out of stock.
Often from 4 weeks, 8 weeks of delivery, extended to 24 weeks, 56 weeks or even no delivery, if you can not wait for the delivery, you can only choose other ways to alleviate.
Second, accept the market price, the long delivery period, so that the market further intensified the behavior of speculation. The spot market, supported by the entire Huaqiang North, is the world's largest distribution center for electronic components. There are countless agents, distributors, and distributors living here, almost all of whom are involved in speculating.
When the customer places an order, it flows to the original factory through the agent, which is called futures. In order to alleviate the pressure on production capacity, the original factory requires agents to do an appropriate amount of inventory, which is called spot. The price of futures is very low, called the order price; the price of the spot market may be very high, called the spot price.
The existence of spot price, in the normal market environment, the original factory will turn a blind eye, so that agents through the spot market to obtain a certain additional profit. Coupled with the short life cycle of finished products in the consumer goods market, many small enterprises simply cannot do half-year and one-year production plans like large enterprises or even car companies, resulting in many small enterprises being unable to enter the supply chain system of the original factory, so the source of their materials comes more from the huge spot market.
Compared with futures, the operable price space of spot is very large. Almost all original chip factories have control over the supply price, but they are powerless to do anything about the spot price.
At the end of December last year, at the same time that NXP issued a price increase letter, Honda used an NXP vehicle specification MCU, the model is MCIMX6D6AVT08ADR, the normal price is 18 US dollars or so, because the program has passed the test and certification of Guangben and Dongben, it is basically impossible in a short period of time, but the original factory is out of stock, and the delivery time is 52 weeks.
The supplier of the program can only hope for the spot market, yes, this material is found in the universal Huaqiang North, but the price is outrageously expensive: 160 US dollars, a penny is not much.
In the end, the production capacity of this model was reduced, and the demand for 50K per month was cut.
If you do not accept the delivery time, you cannot accept the high price of the spot market, then you can only cut the project.
A domestic company that produces Cisco-certified switches, starting from September last year, began to lack a chip, this chip is actually not lacking in ordinary times, the supplier of the chip is a second-tier brand in Taiwan, called Chuangwei, the model is GL3520-OVY22 QFN-88.
Because it is Cisco certified, from the project initiation to the end of the certification, it cost $220,000 before and after, which is a high-value, long-life product. However, since September last year, the information obtained from the original factory reply is: "delivery time 12 weeks", "delivery time 24 weeks", "delivery time 36 weeks", "no delivery date for the time being".
By the end of December last year, under normal circumstances, the chip, which was originally only about 20 yuan, rose to 360 yuan, and the problem was that it was impossible to buy goods. It is very important to people in the industry that Huawei was sweeping goods globally at that time, and the production capacity of many second-tier brands in Taiwan that originally belonged only to the second-tier supply was almost all eaten by Huawei.
In the end, the developer of this product waited until June this year to get the original product, but it was far from the demand of 60K per month, only 2.5K, or distributed.
<h2>Where did the capacity go? </h2>
Customers represented by automakers are the most uncomfortable this year. So why do OEMs abandon the most important original channels and buy the components they need in the spot market at high prices?
There is only one answer: there is stock in the spot market.
Taking the chip purchased by a vehicle manufacturer that is considered to be an FPGA as an example, although there are domestic manufacturers such as Gaoyun Semiconductor and Anlu Semiconductor that can be supplied, due to export controls and patent restrictions, taking Gaoyun as an example, the highest process is only 55nm, and the foreign giant Xilinx has reached the 10nm process.
As we all know, FPGA is almost all the chip design and verification to use the product, the chip is designed, a large part will first in the large FPGA "run a trip", this run requires the FPGA is strong enough, the performance is enough to eat the chip running in it, and this type of FPGA in the current international trade background, is restricted from export.
The same is the DSP chip, in some remote large audio and video conference matrix, will use a large throughput of DSP chip, such as an ADI production, model LTM4644 DSP chip, under normal circumstances the price is about 80 US dollars, but at the beginning of this year, it rose to more than 300 US dollars, this increase is very abnormal.
Since there is a spot market, why does the goods in the spot market come from in the case of a long delivery period (26 weeks to 56 weeks) or even no delivery time (no delivery deadline) in the spot market?
In fact, this has always been the survival mystery of the sellers of Huaqiang North.
Judging from public information, all the products of HuaqiangBei that involve imports are imported through normal customs declaration, so these chips can enter the mainland market and sell normally, which is definitely inseparable from the operation of speculators.
Cheng is always an agent of a certain brand, he said, only a certain brand of car grade chips, he stockpiled fifty or sixty million US dollars in inventory, and if the original factory continues to ship, he will continue to eat in. When asked if he wasn't afraid of turning these stocks into dead stocks if he didn't ship them, he said, no. The original factory will not watch this batch of goods die.
Why? Because the original factory also has to maintain profits, if the agent obtains the material through the normal order, then the original factory is to ship, and many agents who eat into the production capacity are actually inextricably linked with the original factory. This relationship makes it easy for the original factory to do something to the agent, even if it knows that the market is out of stock.
However, the agents themselves have not been able to cover up, and they have also targeted some goods to the terminal. But the price is high. For example, a crystal oscillator that originally only cost 6 mao, they are sold to the terminal, the price is at least 2 yuan or more.
This behavior of not shipping on a large scale is considered to be "protective disk". This kind of capital behavior that exists in the stock market has been artificially applied to the spot market of chips.
This round of price increases, the original factory such as ST rose as high as 15%, but some of st's product prices, the increase has exceeded 10 times. For example, the price of TI, the price of its official mall, has been very low, but most of the time is out of stock, the delivery column, almost all of them are more than 24 weeks of delivery, in the spot market, TI car standard grade products, the increase is almost 5 times more, many are the same as ST, to more than 10 times.
When the price of the entire market goes up, it is difficult to return to the conventional level, and the high price of the spot market is half supported by the long-term delivery period, and the other half is artificially speculated.
What does the future hold? The industry believes that there are almost no foundries in foreign countries at this stage for the construction of fabs, and almost all the fabs invested in new fabs in 2018 and 2019 are in China. In foreign countries, whether it is TSMC or Samsung, its new construction is only in planning.
To alleviate production capacity, it is nothing more than increasing production and expanding production.
In terms of increasing production, from the semi-annual report of 2021, TSMC's production increase has reached 20%, which means that TSMC has released almost all its production capacity. Another wafer foundry, UMC, even bought equipment to increase UMC production to meet capacity demand – but public information shows that in the past two years, the two largest fabs have not built new capacity to start production.
Among the newly built fabs in China, the fastest Guangdong core plan is to achieve tape-out in Q2 2022, and mass production in Q3; SMIC South 2 Factory, which plans to be Q1 tape-out in 2023; at the same time, Huahong's newly built Wuxi plant, 8-inch has been mass-produced, 12-inch has not seen public information, the fastest will be at the end of 2021 There is news; in addition, domestic investment in several 12-inch fabs such as Quanxin, if these fabs are put into operation, and the supporting raw materials can also be solved, the production capacity will be greatly released. Maybe then the price of the chip will return to normal levels.
As for this year, the high probability will always be out of stock, and the price, 3-4 hair onboard MCU, ironclad will not go back. At the end of August, Infineon and Microchip have issued a price increase letter, and perhaps, after September, the international manufacturers will follow and increase prices. Some domestic ones that do not have at this stage, such as large FPGAs and DSPs, may remain at a high level, after all, there is no breakthrough in China for the time being, and there is no replacement.
Depot? Even the deadest Toyota bound to the MCU manufacturer Renesas is out of stock, plus Toyota's lean management is out of stock when it does the best, is there any shortage of other homes? (This article was first published on the Titanium Media APP)