YKX Market Report(2023.03.31)

02Automotive semiconductors go down, foundry/silicon wafers may become the next storm circle

According to Taiwan media "Economic Daily", when the world is facing high inflation and the semiconductor industry is still in the process of destocking, the industry originally expected the automotive field to be a safe haven in the low tide of the consumer electronics market. 

Continuing the previous prosperity, facing the pressure of order cuts and sharp price cuts, the industry judges that foundry and silicon wafers may become the next storm circle, affecting the operations of Taiwanese factories such as TSMC, UMC, Universal Chip, and Altec.

According to industry analysts, automotive electronics certification takes a long time, and in the past they were stable and long-term orders. Nowadays, automotive chip manufacturers are also under pressure to cut orders and cut prices. demand. In particular, silicon fabs have recently faced long-term customer requests to delay repeated contracts, reflecting the sluggish market. If the automotive semiconductor industry weakens accordingly, it will undoubtedly make the related industry worse.

The legal person pointed out that the demand for consumer electronics is weak at this stage. Although TSMC still has a relatively competitive advantage in high-end manufacturing processes, in terms of mature manufacturing processes, automotive chips are still an important support for wafer duo to fill production capacity and stabilize operations. Weakening consumer demand is not a good thing for TSMC and UMC.

Since the beginning of this year, due to the weak demand in the terminal market, the supply chain has continued to adjust inventory, and the production capacity has been significantly loosened. The world's advanced production capacity utilization rate in the first quarter may drop by 10 percentage points compared with the fourth quarter of last year, and PSMC will drop to 60%. Multi-level, UMC's capacity utilization rate in the first quarter will also drop to 70%.

03 Micron: In 2023, Q2 revenue will decrease by more than 50% annually, and the inventory problem will improve

According to Taiwan media "Science and Technology News", the US memory chip manufacturer Micron Technology announced the financial report for the second quarter of the 2023 fiscal year (as of March 2, 2023) after the US stock market closed on Tuesday (March 28): 53% (down 10% quarterly) to $3.69 billion; non-GAAP diluted loss per share of $1.91, far worse than the diluted loss per share of $0.04 in the first quarter of fiscal 2023 and fiscal year 2022 Diluted EPS of $2.14 in the second quarter.

Micron CEO Sanjay Mehrotra said in a financial press release on Tuesday that customer inventory conditions are getting better and better. Micron expects industry supply and demand will gradually restore balance. 

Micron is still optimistic about long-term demand and is prudently investing to maintain competitiveness in technology and product portfolio. Micron announced on Tuesday that it had eliminated $1.43 billion in inventory in the second quarter of the 2023 fiscal year. Mehrotra said on Tuesday's earnings call that Micron currently believes customer inventories have been reduced in several end markets;Excluding the impact of inventory elimination, Micron believes that the balance sheet inventory turnover days (DIO) has peaked in the second quarter of the 2023 fiscal year, and is approaching the transition to the stage of quarterly revenue growth. Mehrotra also pointed out that Micron has further reduced capital expenditures in fiscal year 2023, and currently expects to invest approximately US$7 billion (originally expected to be US$7-7.5 billion), a reduction of more than 40% from 2022;

In 2023, fab equipment (WFE) capital expenditures are expected to decrease by more than 50% annually, and in 2024, the forecast will be further reduced. Mehrotra also announced that in addition to salary cuts for senior executives and a complete suspension of bonuses for the 2023 fiscal year, it is currently expected that the overall manpower reduction ratio will approach 15% (the original estimate was 10%). Any vacancies will not be filled before the end of December.