According to Taiwan media reports, the destocking pace of the electronics industry is not as good as expected, coupled with the poor terminal demand after the unblocking of the mainland, the red supply chain has set off another price war, and among semiconductor components, the microcontroller (MCU) has become the hardest hit area. Not only did Chinese companies slash prices and lower inventories, but even local listed microcontroller makers shouted “I would rather not make money for two years, but also ensure performance and market share.” Facing the menacing Chinese enterprises, Walsin Lihwa Group’s Taiwanese factories such as Nuvoton, Holtek, Sonic, and Hongkang are preparing for battle.
People in the industry pointed out that microcontrollers are widely used in almost all electronic terminal products, such as kitchen appliances, household appliances, automobiles, industrial, medical, and educational applications. In recent years, Chinese companies have also gradually emerged in the field of microcontrollers, competing fiercely with Taiwanese manufacturers.
At the beginning of the mainland’s unblocking, the industry was originally optimistic that the domestic demand market would have a strong recovery momentum, so it expanded stocking, but the actual situation was not as good as expected, resulting in rising inventory levels, and mainland microcontroller manufacturers did not hesitate to sell them at bargain prices.
In addition, according to industry insiders, a listed micro-controller factory in mainland China called out “Even if it does not make money for two years, it must ensure performance and market share”, and emphasized that there are more than 100 micro-controller factories in mainland China, each market segment Faced with a lot of pressure to reduce inventory, even if the track is subdivided, there are still a bunch of companies competing, and the shuffling process will be terminated only when the gross profit is negative in the end.
Facing the price war launched by Chinese factories regardless of cost, an unnamed Taiwanese microcontroller manufacturer said frankly that the current quotations of small and medium-sized microcontroller manufacturers in mainland China are “really low”. The factory can only reluctantly sacrifice gross profit and make some price concessions in exchange for customer orders. At the same time, the cooperating distributors also have the pressure to digest inventory, and will come to ask for profit concessions, so that they have greater flexibility and can start to stimulate market buying.
In terms of the delivery period of major manufacturers, according to the research report data of Xiangcai Securities, as of 23Q1, the delivery period of mid-to-high-end MCUs continued to shorten. In terms of products, the delivery period of 8-bit/32-bit high-end MCU products is 26-52 weeks, and the delivery period of most products continues to decline. The delivery period of automotive MCUs is still higher than 40 weeks, and Infineon’s automotive-grade MCUs are still in the state of distribution, but prices have remained flat for two consecutive quarters.
In terms of price, since most MCUs are general-purpose products, facing the market and the continuous price competition of Chinese peers, the pressure to reduce prices still exists, and now it is just returning to the situation before the epidemic. However, due to the high inventory level, the pressure is even heavier, but the price will still be negotiated according to the product and customer, and will not swarm into the Red Sea market where there is nothing to lose.
In addition, according to the monthly tracking report released by China Merchants Securities on April 10, the 23Q1 domestic consumer and home appliance MCU business is still at the bottom, and some manufacturers continue to lower prices. Nuvoton’s 23Q1 revenue and gross profit margin will both decline, but 23Q2 will gradually recover, and there are currently price adjustments for some products. Holtek has lowered prices across the board since February, and the price of MCUs for distributors is expected to drop by more than 10%.
Taiwanese micro-controller manufacturers expect to sacrifice quotations in the short term, and when their inventory drops to a certain level, they will strive for lower production costs and create better gross profit space when placing orders with wafer foundries. . Even if the wafer foundry is unwilling to make concessions on the price, there will always be a day when the inventory on hand will be digested, and the product price will gradually return to the market price at that time.
From the perspective of recent operations, the revenue performance of MCU manufacturers in the second quarter will be better than that of the previous quarter, but the gross profit margin is still under downward pressure. As for the visibility of orders in the third quarter, the annual operating performance is still under year-to-year pressure. As for the operating water level in 2019, follow-up should continue to observe changes in market demand.
Post time: May-04-2023