Source of this article: Across the Semiconductor Industry (ID: ICVIEWS), author Feng Ning
(ChinaIT.com News) At the end of last year, major investment banks predicted that the dividends of the epidemic would disappear, and the semiconductor industry would have excess inventory. They named the five major semiconductor “miserable” industries in 2023, including consumer electronics, panels, DRAM, LED, and IC design industries.
Entering 2023, this is indeed confirmed. The consumer electronics market is sluggish, panel demand is sluggish, DRAM continues to fall, and LED and IC design industries are also miserable. A year ago, the semiconductor sector, which was a sweet momo in the A-share market, was shrouded in negative sentiment this year. This wave of downward cycle has caused most domestic semiconductor manufacturers to enter a period of pain, and have announced production cuts and cut orders.
The situation of the semiconductor market in the first half of the year is not optimistic. How about the market situation in the second half of the year? When will the semiconductor market boom pick up?
01
Semi-annual performance forecast of semiconductor manufacturers
Recently, major domestic semiconductor companies have disclosed their 2023 semi-annual performance forecasts.
As can be seen from the above figure, the net profit of most domestic semiconductor companies declined in the first half of the year, and even many suffered losses; but the good news is that the operating performance of most semiconductor companies in the second quarter increased month-on-month, showing signs of improvement in the industry.
02
The semiconductor market is booming
Semiconductor equipment remains strong
As can be seen from the above chart, the net profit of North Huachuang and Zhongwei in the first half of this year has increased significantly. According to the 2023 semi-annual report performance forecast data released by the two companies, North Huachuang expects revenue in the first half of this year to be 7.82-8.95 billion yuan, a year-on-year increase of 43.7%-64.4%; net profit attributable to the parent is 1.67-1.93 billion yuan, a year-on-year increase of 121.3%-155.8%.
In Q2 of 2023, North Huachuang is expected to achieve revenue of 3.95-5.08 billion yuan, a year-on-year increase of 19.4%-53.5%, and a month-on-month increase of 2%-31.2%. In Q2, the company’s single-quarter profitability improved significantly. In addition, North Huachuang revealed in the minutes disclosed on May 31 that the company currently has sufficient orders in hand, and that new orders in 2023 will increase by more than 30% compared with the same period last year, among which orders for integrated circuit equipment are the main ones; it is expected that the company’s revenue and profits in 2023 will continue to grow.
According to the published company performance data, the performance of Zhongwei, a leader in semiconductor etching equipment, has also achieved substantial growth. It is estimated that the semi-annual operating income in 2023 will be about 2.527 billion yuan, a year-on-year increase of about 28.13%, and the net profit attributable to the parent company will be 980 million to 1.03 billion yuan, a year-on-year increase of 109.49% to 120.18%. In addition, the company expects net profit after deducting non-existing expenses to be 500 million to 540 million yuan, a year-on-year increase of 13.45% to 22.53%. However, non-net profit deducted in the second quarter increased slightly from the previous quarter.
Different from the bleakness of other sub-sectors of semiconductors, the performance of semiconductor equipment this year has been remarkable. As early as Q1 of this year, basically all semiconductor equipment suppliers have achieved a relatively large increase in revenue and profit. In terms of net profit, North Huachuang has a year-on-year increase of 94.91%-141.32%, Shengmei Shanghai has a year-on-year increase of 125.35%-170.42%, Changchuan Technology has a year-on-year increase of 106.20%-138.27%, Huahai Qingke has a year-on-year increase of 120.4%-160.75%, and China Micro Corporation has a year-on-year increase of 6.7% 8%—18.64%.
In October 2022, the United States will implement comprehensive export controls on semiconductors in China, and the scope of controls will be expanded to advanced chips, advanced process equipment, parts and personnel, etc. Japan and the Netherlands will follow up and refine the controls to specific equipment. Under the environment of tightening regulations in the United States, Japan and the Netherlands, independent control of semiconductor equipment is imperative, domestic customers are increasingly willing to verify equipment, and the localization rate of semiconductor equipment is expected to increase rapidly.
Now domestic semiconductor equipment has made some achievements, the revenue and sales volume of key companies have increased, and the leading domestic semiconductor equipment has fully benefited from this. The performance of domestic semiconductor equipment manufacturers can be regarded as adding a bit of color to the current gloomy semiconductor market.
Steady recovery in IC design revenue
Since the second half of 2022, the IC design industry has begun to destock. Judging from the revenues announced by major manufacturers, after nearly a year of destocking, the performance of some companies has bottomed out and stabilized, and they have grown quarter-on-quarter in the second quarter.
According to the announcement released by Zhongying Electronics, it is estimated that the net profit attributable to the parent in the first half of the year will be 80 million to 90 million yuan, a year-on-year decrease of 64.76% to 68.67%. Compared with the same period last year, the decline in sales and gross profit margin led to a larger year-on-year decline in profit. However, sales in the second quarter increased slightly from the previous quarter, and non-net profit deducted increased significantly from the first quarter.
According to the announcement released by Rockchip, it is expected to achieve operating income of about 858 million yuan in the first half of 2023, a year-on-year decrease of about 31%. However, Rockchip said that in the first half of 2023, the total demand for domestic and foreign electronic products will decline, especially the decline in exports. Among them, January-February is still affected by the aftermath of customer destocking in 2022, and it will gradually improve after March. During the reporting period, the company’s operating income fell by about 31% year-on-year, of which the second quarter fell by about 24% year-on-year, but increased by about 60% quarter-on-quarter.
In the first half of 2023, Goodix Technology achieved operating revenue of about 2.02 billion yuan, a year-on-year increase of 10.5%. Among them, the revenue in the first quarter was 844 million yuan, and the second quarter is expected to achieve revenue of about 1.176 billion yuan, a sharp increase of 39.4% from the previous quarter. In terms of net profit, the net loss in the first quarter was 139 million yuan, and the net profit in the second quarter is expected to be 1.84 million yuan, realizing a quarter-on-quarter turnaround, an increase of 141 million yuan.
Zhuo Shengwei’s Q2 revenue in 2023 will also resume year-on-year growth, and the contribution of high-end RF modules will continue to increase. The company expects to achieve operating income of 1.665 billion yuan in the first half of 2023, a decrease of 25.48% from the same period last year. Among them, the second quarter of 2023 will achieve revenue of 953 million yuan, a quarter-on-quarter increase of 34.02% in operating income, and a quarter-on-quarter increase in net profit. Zhuoshengwei said that the downstream inventory reduction is coming to an end, the pace of customer purchases is accelerating, and new module products such as DiFEM, L-DiFEM, and L-PAMiF continue to increase in volume. For the whole year, although there are still uncertainties in the recovery of mobile phone demand, the company’s receiving-end module products are expected to accelerate the volume.
In addition to the above-mentioned companies, there are also IC design companies such as Jingchen Technology Co., Ltd. and Hengxuan Technology, which showed a significant increase in revenue in Q2 this year. From this point of view, in the traditional off-season of consumer electronics, although IC design continued to slump, due to artificial intelligence applications and the impact of some urgent orders, the destocking of superimposed manufacturers has come to an end, and revenue will steadily recover in the second half of the year.
Materials, packaging and testing requirements see warm
In Q1 of this year, due to the weak downstream demand and the destocking stage of IC design manufacturers, the utilization rate of semiconductor materials and packaging and testing manufacturers, which are respectively upstream and downstream of IC design, is in a sluggish state.
However, in the second quarter, with the recovery of the IC design industry market, the performance of material and packaging and testing manufacturers has also been somewhat boosted.
First look at the five semiconductor material manufacturers seen in the table. Except that the net profit of Zhongjing Technology in Q2 is basically the same as that in Q1, the other four are showing a month-on-month upward trend.
Jinhong Gas expects to achieve a net profit of 153 million to 174 million yuan in the first half of 2023, an increase of 45% to 65% year-on-year, and the comprehensive business in Q2 will continue to grow at a high rate. The net profit of Rongda Photosensitive in the second quarter was 23.109 million yuan to 29.3154 million yuan, a year-on-year increase of 123.5% to 183.5%. It has doubled its net profit for three consecutive quarters.
Leon Micro is expected to achieve a total operating income of 1.342 billion yuan in the first half of the year, a decrease of 14.2% compared to the same period last year. From a quarterly perspective, the second quarter is expected to achieve a total operating income of 710 million yuan, a quarter-on-quarter increase of 12.3%. The three major businesses of semiconductor silicon wafers, power device chips, and compound semiconductor chips all increased quarter-on-quarter.
In the second quarter, Xinlai Applied Materials is expected to achieve a net profit attributable to the parent company of 56 million to 76 million yuan, an increase of 3.70% to 40.74% from the previous quarter. Q2 single-quarter performance has improved from the previous quarter, mainly because the semiconductor sector has seen a decline in customer inventory, and orders have picked up in the second quarter.
Looking at semiconductor packaging and testing manufacturers, JCET, as a leader in A-share semiconductor packaging and testing, saw a substantial increase in its performance in the second quarter from the previous quarter. Huatian Technology expects a decline in its performance in the first half of the year, with a profit of 50 million to 70 million yuan, a decrease of 86.38% to 90.27% over the same period last year. However, the company lost about 100 million yuan in the first quarter, and is expected to turn losses into profits in the second quarter.
Against the background of deteriorating performance at the beginning of this year, the revenue base of packaging and testing manufacturers is low, and the current chain has gradually improved. In addition, as some downstream manufacturers will launch new products in the second quarter, the demand for packaging and testing has increased, which has gradually increased the utilization rate, and the performance of packaging and testing manufacturers in mainland China has begun to gradually recover. From the perspective of industry trends, manufacturers involved in the automotive electronics business and with advanced packaging capabilities have more advantages in recovery.
03
Segmentation sector, panel, LED inflection point has reached
Panel manufacturers’ losses increased, but Q2 improved significantly
According to BOE’s announcement, in the first half of 2023, it is expected to realize a net profit attributable to shareholders of listed companies of 700 million to 800 million yuan, a sharp drop of 88% to 89% year-on-year; the net profit after deducting non-existing expenses is a loss of 1.5 billion to 1.6 billion yuan, a sharp drop of 135% to 138% year-on-year. Among them, in the second quarter, the single-quarter net profit attributable to the parent was 450 million to 550 million yuan, an increase of 83% to 123% from the previous quarter, and the net profit not attributable to the parent was 70 million to 170 million yuan, turning losses into profits.
It is worth noting that BOE’s losses mainly come from small-size OLEDs, and the demand for Huawei, the main customer of this product, has declined. Due to competitive factors, orders from Apple were also lower than expected. BOE said that in the first half of the year, the price of panels dominated by the supply side continued to rise, and the company’s revenue and profitability improved quarter by quarter. As the third quarter enters the peak season for display panel stocking, the demand side is expected to drive both volume and price, and the company’s performance can be expected to be flexible.
Visionox also disclosed the performance forecast for the first half of 2023. The forecast shows that in the first half of 2023, Visionox achieved a cumulative revenue of 2.425 billion yuan to 2.725 billion yuan, a year-on-year decrease of 20%-29%; realized a net profit loss of 1.58 billion yuan to 1.78 billion yuan, a year-on-year loss expansion; realized a net profit loss after deducting non-existing expenses of 1.6 billion yuan-1.8 billion yuan, a year-on-year loss expansion. Among them, the second quarter is expected to achieve revenue of 1.656 billion to 1.956 billion yuan, an increase of 115% to 154% over the first quarter.
Visionox stated that the main reason for the change in operating performance in the first half of 2023 compared with the same period of the previous year is that the company adjusted its business strategy based on market conditions, focusing on the OLED display products of mid-to-high-end models of top customers.
According to data from TrendForce, since 2023Q1, the prices of TV panels, especially those of large-size panels, have been rising all the way. The average price of 32/43/55/65-inch TV panels in the first half of July increased by US$6/11/33/48 per piece compared with February, while the prices of monitor panels and notebook panels have changed little. BOE’s announcement also mentioned that the average utilization rate of the panel industry in 2023Q1 was about 74%, and the overall utilization rate of the Q2 industry remained at about 80%, indicating that panel demand has picked up.
LED rising sound frequency
In 2022, the global LED terminal demand will decline significantly, and the LED lighting, LED display and other markets will continue to slump. The chain reaction brought about by poor downstream demand has led to a decline in the LED performance of mid-upstream packaging and chip companies. For example, chip companies such as Qianzhao Optoelectronics, Azure Lithium, and Jucan Optoelectronics in the upstream; the LED-related businesses of packaging companies such as Dongshan Precision, Nation Star Optoelectronics, and Mulinsen in the midstream will all experience a decline in revenue and profits in 2022.
Recently, the market of similar categories, including LED displays, has been rising frequently, and it seems that it is also responding to the signal that the demand for the display industry is picking up.
According to the price adjustment letters released by LED manufacturers, more than 17 LED display companies, such as Dongshan Precision, Ruisheng Optoelectronics, Jingtai Optoelectronics, Zhaochi Guangyuan and other LED packaging companies, Leyard, Jinlixiang, Lehman Optoelectronics, BOE Jingxin, Haijia Cailiang, etc., have announced price increases for LED display products, with an increase of about 5%-10%. It is worth noting that some packaging and display companies have also raised the price of LED products twice, such as Mulinsen, Leyard, Jinlixiang, Dongshan Precision, etc.
From the perspective of actual market demand, entering 2023, the overall market is gradually recovering due to the release of demand in foreign markets due to the liberalization of the epidemic. Enterprises in all links of the LED industry chain have disclosed that the order situation is good, and some products are in short supply. For example, Unilumin Technology received orders of 400 million to 500 million yuan in February, and more than 900 million yuan in March. The market demand is gradually recovering. Jiangxi Crystal Display Co., Ltd.’s 600 Mini LED new-generation display product production lines are all in full production, and the current product orders have been received in September this year. Dong Guoqing, director of Jiangxi Zhaochi Semiconductor Chip Factory, also said that it is expected to achieve full production in July, and the production capacity will increase from 700,000 pieces to 1.1 million pieces per month.
Halfway through 2023, except for individual sub-sectors, the fundamentals of the semiconductor industry have been “bottomed”. From this point of view, with the recovery of the domestic economy, perhaps in the second half of 2023, semiconductors can really re-enter the upward cycle.