It has been reported in the semiconductor industry that the inventory of non-Apple consumers has been higher than expected recently. In addition, Apple has accelerated destocking this season to squeeze out non-Apple applications. Under the influence of a series of intertwined effects, the IC design industry may be rare in the third quarter of this year. The industry’s expectation that the second half of the year will be significantly better than the first half of the year may fail, so we cannot be too optimistic.
According to industry analysts, in the past, the electronics industry was said to be “five poor and six poor”, which means that May and June are relatively traditional off-seasons, but the outlook for the global economy this year is not optimistic. Unsatisfactory transformation, the traditional peak season of the semiconductor industry in the third quarter of this year may face a slowdown, and we must even be careful to prevent the past “five poor and six extremes” from turning into “five poors and six extremes” in advance.
The related effects may make MediaTek, Novatek, Realtek and other first-line IC designs on the island bear the brunt. MediaTek is expected to hold a law seminar this Friday (28th), which will be the focus of the market. The legal person pointed out that it may be difficult for the IC design industry to reverse its disadvantages in the near future. It can be seen from the revision of TSMC’s full-year outlook, from the originally expected small growth to recession, and the forecast that the client inventory adjustment will be more drastic than expected. It must be treated with caution.
TSMC has warned at the law conference a few days ago that due to the overall economic recession and weak end market demand, IC design inventory will continue to increase in the fourth quarter of 2022, and the inventory level will remain far higher than expected until the end of 2022. In addition, the recovery of terminal demand after the outbreak of the epidemic in the mainland is also slower than expected.
Due to weak market demand and high inventory depletion at the same time, TSMC judged that IC design and semiconductor inventory adjustments will take longer than expected, and may not be rebalanced to a healthier level until the third quarter.
As for which customers’ inventory depletion is not as expected, TSMC has never commented on a single customer message, and has not disclosed details. According to industry sources, the worrisome economic outlook has caused non-Apple IC design factories to turn cautious again in March. In order to continue to digest inventory, IC design factories have tried their best to stimulate shipments or control new inventory. The peak season of the third season is “both looking forward to and afraid of being hurt”, worrying that the peak season will not be busy.
The supply chain admitted frankly that it is almost a foregone conclusion that the peak season of IC design will not be prosperous in the third quarter, especially manufacturers that are closely related to mobile phone consumer applications and account for more than 60% of revenue. However, some manufacturers have destocked early last year. In the first half of this year, the volume of shipments rebounded gradually, such as large and small panel driver ICs, etc., but whether the recovery will continue in the second half of the year is still variable.
According to industry analysis, the IC design industry is currently facing a greater than expected economic headwind test. What TSMC did not say is: “If the inventory adjustment of the IC design industry continues until the third quarter, it will mean that this year’s traditional peak season may not be expected.”
From TSMC’s point of view, the growth in the second half of this year depends on major customers such as Apple, but for Taiwan’s IC design manufacturers, they will also face high inventory of non-Apple mobile phone consumers, price wars by mainland manufacturers, and Apple in the third quarter. The multiple tests and pressures of new products crowding out the terminal sales space.
Affected by the slower-than-expected pace of IC design inventory adjustment, the foundry group was almost “bloodbathed” in the global stock market last Friday. Not only TSMC’s ADR fell sharply last Friday, UMC’s ADR also fell by more than 2.4%, and GlobalFoundries fell by about 1.3%. SMIC’s Shanghai and Hong Kong stocks fell 5.54% and 9.18% respectively.
People in the industry do not deny that in the second half of the year, especially in the third quarter, except for the support of Apple’s basic demand, other non-Apple applications do not look good, which also reduces the visibility of fab orders and most of them can only undertake short-term orders.
Netcom chip maker Realtek said bluntly in a law conference last week that it has recently observed some orders being pulled ahead of schedule and urgent orders. It is estimated that the demand in the second half of the year will be stronger than that in the first half. However, “purchase and urgent orders cannot be interpreted as a full recovery of the market.” We must still pay close attention to challenges from various aspects. Market visibility is still very limited, and the pace of specification upgrades has also slowed down.
IC design industry privately pointed out that the overall outlook for this year is still conservative, and it is impossible to determine whether it will perform better than last year.
Post time: Apr-27-2023