In the field of foundry, China Taiwan is the most important role.

 

According to data from the DIGITIMES Research Center, in 2022, Taiwan's four major wafer foundries (TSMC, UMC, PSMC and World Advanced) will have a combined revenue of US$89.4 billion, an increase of 31%. According to their previous statistics, the global foundry revenue will reach 137.2 billion US dollars in 2022, which means that the four major fabs contribute more than 65% of the global foundry.

 

However, according to a report released by TrendForce today in March, the output value of the top ten wafer foundries in the fourth quarter of 2022 will experience the first decline in 14 quarters, with a quarter-on-quarter decrease of 4.7%, or about US$33.53 billion (and face Due to the uncertainty of the traditional off-season and the general environment, it is expected that the decline will be deeper in the first quarter of 2023.

 

A few days ago, Taiwan's four foundry giants released their latest financial reports, which also confirmed this statement.

 

TSMC falls 15%, first time in four years

 

Until the last quarter, TSMC, the leading wafer foundry, was still triumphant all the way, but now, the chill that started in the second half of last year has finally passed to TSMC.

 

They said on Monday that the company's March revenue fell 15 percent to NT$145.41 billion from NT$171.97 billion a year earlier, the first drop in nearly four years. The data also shows that TSMC's revenue in the first quarter of this year increased by 3.6% year-on-year to 508.63 billion Taiwan dollars (about 16.73 billion U.S. dollars), which was at the low end of the previously expected range.

 

It is worth mentioning that this is the second consecutive quarter that TSMC's sales have not met expectations, indicating that the demand for global electronic products continues to be weak, the downturn in the chip industry has not yet bottomed out, and rising interest rates, soaring inflation and the unabated banking crisis continue to weaken consumer confidence. According to the latest data from IDC, global PC shipments fell 29% in the first quarter, led by Apple's Mac line of products.

 

According to Digitimes, the decline in TSMC's performance has a lot to do with the fact that Apple and MediaTek have cut orders, and related chips such as Sony and Broadcom (Broadcom) have also reduced orders at TSMC. However, TSMC responded that the exchange rate fluctuates greatly, and if the first-quarter revenue is denominated in real US dollars, it still meets the previous financial forecast target.

 

The unsatisfactory performance has an impact on TSMC not only itself, but a series of chain reactions that follow.

 

For example, according to Taiwan media reports, some supply chains pointed out that due to weak demand, TSMC has slowed down its production expansion and factory construction. Among them, the original goal of the 3nm process is to reach a monthly production capacity of 60,000-70,000 pieces per month in the middle of this year, but the current monthly production capacity is about 40,000 pieces, and it may reach more than 50,000 pieces in the second half of the year.

 

In addition, TSMC's plan to build a plant in Kaohsiung also has variables. According to the previous plan, TSMC originally planned to build two plants in Kaohsiung, including 7nm and 28nm plants. Among them, the 7nm plant was stated at the investor meeting in the middle of last year due to the impact of weak demand in the smartphone and personal computer (PC) markets. There are adjustments; the market has recently reported that the 28nm plant will also be adjusted. According to Taiwan media reports, the relevant mechanical and electrical engineering bids of TSMC's Kaohsiung plant have been postponed for one year, and the related clean room and installation operations have been postponed.

 

Related reports further pointed out that TSMC has even pushed back on 2nm factories. However, according to Nikkei's report at the end of March, TSMC's 2nm factory is still under construction. According to the Nikkei report, even though the market is so bad, TSMC has not slowed down the pace of investment, but according to the supply chain, TSMC has revised the 2024 orders to equipment manufacturers, and the capital expenditure in 2024 will drop by a year-on-year or double-digit percentage.

 

For TSMC, another challenge that needs to be faced is the subsidy issue of the US chip bill.

 

At the end of last year, TSMC held a machine-on ceremony at a semiconductor foundry invested in Arizona, USA. The company, Liu Deyin, announced on the spot that it would increase the investment amount of the US fab to 40 billion U.S. dollars, a substantial increase from the original 12 billion U.S. dollars. However, after the United States announced the relevant application rules for the chip bill this year, TSMC was caught in a dilemma.

 

According to reports, the United States requires subsidized manufacturers to comply with additional conditions in the United States, including: detailed financial forecasts and other information about trade secrets, the need to share a certain percentage of profits with the federal government, and subsidized companies must not Expand semiconductor manufacturing capacity in "countries with doubts" such as mainland China, and cannot participate in joint research and technology licensing. In this regard, Liu Deyin, chairman of TSMC, said bluntly that some of the restrictions in the bill are too harsh, and TSMC "cannot accept it"! It is also necessary to discuss with the US government, so that the operations of Taiwanese manufacturers cannot be negatively affected.

 

According to the latest report from Reuters, the European chip bill has also allowed TSMC to find a new way out.

 

UMC's annual decrease of 20.09% is full of challenges

 

As another representative of Taiwan's wafer foundry, UMC has not had a good time recently.

 

According to the data released by them a few days ago, UMC, a major wafer foundry, will have a self-consolidated revenue of 17.688 billion yuan in March 2023, a monthly increase of 4.88% and an annual decrease of 20.11%. . The cumulative consolidated revenue in the first quarter was 54.209 billion yuan, a quarterly decrease of 20.09% and an annual decrease of 14.53%, which was the lowest point in the past seven quarters, and the performance was slightly lower than expected, but it was still the second highest in the same period.

 

The investment advisory legal person estimates that UMC's first-quarter earnings per share is estimated to fall to 1.01 yuan, which is the lowest point in the past seven quarters. Although the semiconductor industry is in the inventory adjustment period, UMC should be able to cooperate with global customers through differentiated product portfolios. Overcoming this cyclical fluctuation, it is estimated that this year's earnings per share will be about 4.92 yuan under the operating recovery in the second half of the year.

 

In the previous report on the wafer foundry industry issued by American foreign capital, it is believed that the semiconductor industry will continue to destock in the first half of the year, but the reduction rate has slowed down compared with the previous two quarters. As the peak of inventory depletion in the downstream supply chain has passed, it is expected that the semiconductor industry The utilization rate of the foundry industry is expected to stabilize in the second half of the year.

 

American foreign investors pointed out that the demand for mature 12-inch wafer foundry processes in the first half of the year was more stable than that of 8-inch wafers, and the demand for 28-nanometer OLED panel driver ICs and 40-nanometer eFlash for automotive microcontrollers (MCUs) is still tight. The utilization rate of UMC's 28nm process is currently stable, but it is still necessary to observe the possible withdrawal of Samsung's outsourcing orders and its impact on demand this year and next.

 

When it announced its 2022 revenue at the beginning of this year, UMC said that looking forward to the first quarter of 2023, UMC estimated that wafer shipments will decrease by 17-19% quarterly (high teens), and the average selling price (ASP) in US dollars The capacity utilization rate dropped from about 90% in the fourth quarter to 70%, and the gross profit margin dropped from 42.93% in the fourth quarter to about 34-36% (mid-30%). According to the estimation of the legal person, the revenue in the first quarter may decrease by 20% quarterly.

 

Wang Shi, general manager of UMC, said that in 2023, the global economy will be weak, the inventory days of customers will be higher than normal, and the visibility of orders will be low. It is expected that the first quarter will be full of multiple challenges. In response to the current downturn, the company has implemented strict cost control measures and postponed some capital expenditures as much as possible.

 

In terms of capital expenditure, UMC's capital expenditure in the fourth quarter of 2022 will be approximately US$1.167 billion, reaching approximately US$2.7 billion for the whole year, a reduction of 10% from the previous estimate of US$3 billion. The capital expenditure in 2023 is about US$3 billion, of which 90% will be used for 12-inch capacity and 10% will be used for 8-inch capacity.

 

However, in the long run, UMC is still optimistic. With the company's differentiated leading position in special process technology, diversified production capacity supply, and excellent quality and operation, the company can grasp the demand driven by continuous digital transformation across industries. To be the preferred wafer fabrication partner for leading customers.

 

UMC pointed out at the time that benefiting from the long-term trend of automotive electronics and automation, it is expected that automotive electronic ICs will continue to be an important growth driver in 2023 and beyond. Through the fab's comprehensive automotive-grade process technology and compliance with strict automotive quality standards, while continuing to establish solid partnerships with world-class automotive leaders, the company is ready to serve the vast automotive electronics market.

 

In February, related reports pointed out that the company plans to provide 10-15% price discounts to customers who increase wafer production in the second quarter. However, recent news said that this does not include the company's 28nm production capacity, because the source said that UMC's production capacity is close to full capacity, and it is expected that quotations and long-term orders will remain stable by the end of 2023.

 

However, the termination of long-term customers like Weijie Chuangxin has brought new uncertainties to UMC.

 

The local radio frequency giant Weijie Chuangxin stated that due to the decline in demand in the terminal consumer electronics market, the integrated circuit industry chain has entered a destocking cycle, and the original production capacity guarantee agreement wafer purchase price has caused the company to bear higher costs. Continued implementation of the agreement will lead to the company’s product competitiveness. decline. In order to ensure the interests of the company and small and medium investors, the company has prudently decided to terminate the production capacity guarantee agreement in order to seek better cost advantages and advanced technology. Therefore, the two parties have recently reached an agreement on the above-mentioned cancellation of the production capacity guarantee agreement, according to the provisions of the production capacity guarantee agreement.

 

This may become an X factor affecting the development of UMC in the future.

 

PSMC and the world's advanced, take a sharp turn

 

In the early two years, PSMC and the world's advanced companies were not ideal.

 

First of all, look at PSMC. According to the latest forecast, the company’s consolidated revenue in March 2023 will be 3.826 billion yuan, a year-on-year drop of 46.88%. This is three consecutive months of such poor answers after January and February. The data shows that in February 2023, PSMC’s consolidated revenue was 3.69 billion yuan, a decrease of 6.14% from 3.932 billion yuan in January, and a decrease of 44.25% from 6.62 billion yuan in the same period last year, falling to a low of nearly 29 months. The cumulative consolidated revenue in the first two months was 7.623 billion yuan, a decrease of 43.55% from 13.504 billion yuan in the same period last year, which was the lowest point in the same period in nearly three years.

 

According to the legal person, PSMC’s revenue in the first two months and its combined revenue reached about 63% of the estimated revenue target in the first quarter, which was lower than expected. In order to achieve the first-quarter financial forecast target, the consolidated revenue in March needs to increase by 20.3-26% month-on-month, rising to about 4.44-4.656 billion yuan. However, judging from the performance in March above, it is difficult for PSMC to achieve its wish. However, according to Xie Zaiju, general manager of PSMC, it is expected that the utilization rate may continue to drop to about 60% in the first quarter of 2023, resulting in a quarterly decrease of about 15% in revenue.

 

However, Xie Zaiju said that the market also has positive news. The inventory of customers has eased in the fourth quarter of last year and is expected to decrease significantly in the first quarter of this year. The demand for discrete components such as automotive and industrial control also remains good. Demand for short-order bids from bulk chip customers has emerged. Although the price requirements are more challenging, the demand has begun to show signs of recovery.

 

In terms of long-term contracts, Xie Zaiju revealed that the technical restrictions on the customer’s film production process have been canceled to provide customers with more flexibility in film production, and the part that is insufficient for film production will not be deducted immediately, which will increase the customer’s one-year performance time and guarantee deposit It will also be refunded according to the progress and proportion of the filming.

 

Regarding whether this year’s operation is better than the overall wafer foundry industry, Xie Zaiju said bluntly that the company’s products are different from TSMC. It is a second-tier wafer foundry. The degree of decline is greatly affected by the PC and consumer markets, and the degree of fluctuation in operations will be even greater. For TSMC, the expected decline of 3% will not be the bottom line.

 

Looking at the world's advanced, the performance is also half a catty.

 

A few days ago, World Advanced announced its revenue for March 2023. The data shows that the company's self-consolidated revenue is 2.5 billion yuan, a monthly increase of 0.64% and an annual decrease of 50.67%, which has rebounded from a three-year low. Affected by the off-season and inventory revisions, World Advanced previously expected that the revenue in the first quarter would drop to RMB 7.9-8.3 billion, and the utilization rate was expected to continue to drop by 10 percentage points, so that the gross profit rate would drop to 29-31%, and the profit margin would drop to 14.5. ~16.5%. Based on the median estimate of the financial forecast, the revenue will decrease by about 15% quarterly to a low point in nearly three years, while the gross profit margin and profit margin will drop to the low point in nearly five and a half years and 10 years respectively.

 

According to the world's advanced estimates, wafer shipments in the first quarter are expected to decrease by 7-9% quarter-on-quarter, the average selling price (ASP) will decrease by 1-6% quarter-on-quarter, and the monthly production capacity will be about 270,000 8-inch wafers. Fang Lue, chairman and general manager, expects that the first quarter of operation is the coldest season, and the follow-up should be expected to improve quarter by quarter. The second and third quarters are expected to recover moderately, but the extent of the recovery remains to be seen.

 

According to a report issued by foreign investors from the United States, a single-digit percentage of the world's advanced production capacity was used for advance stocking in the first quarter, and it is expected that the plan may end in the second quarter. The revenue growth in the second quarter can be driven by the advance stocking in the first quarter. It is expected that the quarterly growth rate will be lower than 10%, which is lower than the market expectation of 13-18%. It is believed that the improvement in utilization rate may be limited, and the gross profit rate may be higher than the first. season continued to decline.

 

At the same time, the US-based foreign investment survey predicts that the average selling price (ASP) of power management chips (PMICs) in the first quarter will decrease by 2-6% quarterly, but power management chips contributed 78% of the world's leading revenue last quarter. Therefore, foreign investors in the United States believe that this may transfer the pressure to the world's advanced wafer foundries, and related applications are still challenging. In addition, the world's advanced automotive revenue contributes more than 10%. American foreign investors have recently discovered that some automotive power management chip factories have begun to experience product price reduction pressure, which may pose a risk of downward revision of the automotive semiconductor business.

 

There is no doubt that the current wafer foundry field, like many semiconductor markets, is going downhill. However, in the eyes of many people, the dawn seems to be ahead.

 

Huang Chongren, chairman of PSMC, said when he was asked about the industry’s prosperity earlier that, generally speaking, these demands will slowly come back. From last year to this year, there should be quite a lot of inventory adjustments in half a year. Now we can see that each company’s inventory will drop. Especially NB and PC are moving. At the same time, he pointed out that inventory digestion is relatively fast now, and the world is very sensitive to inflation. This has also caused changes in the judgment of the economic climate. I believe that the economic climate will gradually recover.

 

The International Semiconductor Industry Association (SEMI) forecast report data also shows that although global fab equipment spending is expected to decline by 22% year-on-year in 2023. Egg knives will grow by 21% year-on-year in 2024, returning to a revenue scale of US$92 billion (about 632.04 billion yuan).

 

As the main indicator of the fab, we also see the industry's confidence in the rapid recovery of semiconductors.