Wafer fabs are about to enter a difficult time, and eight inches will bear the brunt

Global inflation has caused a sharp freeze in demand for consumer electronics, and inventory corrections in the semiconductor production chain have begun to affect upstream wafer foundries. However, as the economy declines, the strong characteristics of the wafer foundry market have become more and more obvious. Judging from the orders on hand of various companies, TSMC's operations are expected to have a soft landing in the first quarter of next year and pick up after the second quarter. Growth momentum. As for UMC, Power Semiconductor Manufacturing Co., Ltd., and World Advanced Micro Devices, their capacity utilization rates will be significantly revised downwards and they will face a tough battle. It is only in the second quarter of next year that their operations are expected to bottom out and recover.

Semiconductor inventory corrections have begun to affect the capacity utilization of wafer foundries. Coupled with the ongoing trade war between the United States and China, the United States has issued the latest decree in an attempt to prevent China from obtaining key technologies and equipment indispensable for manufacturing advanced chips, leaving wafer foundries faced with geopolitical pressures have skyrocketed.

In order to cope with the direct impact of external environmental factors on operations, the industry currently generally believes that inventory reduction is still a priority project, and there are still opportunities to find the most suitable solution to the US-China trade dispute.

Facing this economic downturn, the wafer foundry market, which used to be prosperous in the past, will also begin to experience two things.

Due to weak demand for smartphones and laptops, TSMC is facing orders revisions from major customers such as Nvidia and Advanced Micro Devices. However, in the advanced process market, the winner takes all, not only taking back new orders from Qualcomm and Nvidia from its competitors, but also taking away new orders from Qualcomm and Nvidia. With Intel's expansion of outsourcing, Apple's order growth momentum remains solid.

The legal person expects that TSMC's fourth-quarter revenue performance will be about the same or slightly lower than the previous quarter. Although the first quarter of next year is the off-season, as usual, it will first carry out "advance production" actions for major customers to maintain the capacity utilization rate. upscale.

Due to the depreciation of the New Taiwan dollar and another price increase in 2023, TSMC's first quarter revenue quarterly decline rate can still be controlled within 10%. In the second quarter, it can gradually regain growth momentum as inventory is reduced. In this wave Changes in market conditions caused a "soft landing" for operations. As for other wafer foundries, they may directly face a tough battle.

As this wave of inventory correction first started in 8-inch fabs, both Power Semiconductor Manufacturing Co., Ltd. and Advanced Micro Devices experienced weak operating performance in the third quarter, and their capacity utilization rates dropped quarter by quarter until the first quarter of next year. Although UMC maintained a high level in the third quarter, it cannot escape the pressure of market correction in the fourth quarter, and the utilization rate will still be revised downward in the first quarter of next year.

Overall, TSMC's strategy of capacity allocation and product line conversion is working. As the 3-nanometer N3E process begins to be shipped in late second quarter of next year, next year's annual revenue will still be better than this year.

As for the production capacity of other wafer foundries, it is focused on mature process fields, with a significantly higher proportion of consumption. The capacity utilization rate has been revised rapidly and greatly. Most in the industry believe that operations will not bottom out until the second quarter of next year.

The dividends of the epidemic that have lasted for more than 2 years have obviously faded since the beginning of 2022. Coupled with the intensification of global inflationary pressure, the demand for consumer electronics such as TVs, mobile phones and NB has declined sharply. Terminal inventories have soared, and the electronics supply chain has fallen into order cuts and delayed shipments. The chaotic situation of price bargaining and cancellation of long-term contracts will have a chain effect that will break through the defense lines of semiconductor wafer foundry, packaging and testing, and IC design in mid-2022, and extend to equipment, materials, etc.

In July and August, the overall semiconductor supply and demand reversed too quickly, completely catching the supply chain off guard; in September, demand plummeted, and even though many manufacturers were bargaining with each other and trying their best to remove inventory, the water level has not dropped significantly. Many major manufacturers expect that the problem of inventory depletion will become clearer at least until the end of the year, which means that demand will be difficult to see a boost in the fourth quarter and supply chain operations will continue to weaken.

Semiconductor industry players said that although the fourth quarter of 2022 has entered the end-of-year holiday consumption season in Europe and the United States, under the pressure of high inflation and the uncertain global economic outlook, the peak season effect may be lost, and the performance of the upstream and downstream supply chains will be a low point for the whole year. Not only It is worse than the same period in 2021 and is more likely to return to pre-epidemic levels.

From terminals to IC design companies, almost all performance in the fourth quarter will not escape the decline. Moving up to the wafer foundry industry, although production capacity has been loosened and the utilization rate has declined significantly, the market is expected to support the favorable exchange rate. The overall profit decline will not be too severe. Among them, although TSMC is facing many customers canceling orders, it not only sticks to its position on foundry quotations, but has even established that the growth trend will remain unchanged in 2023.

TSMC’s consideration is that the shrinking order volume is only a short-term phenomenon in the second to third quarters, and once prices are compromised, they cannot go back. Coupled with the intensifying inflationary pressure, it will be difficult to achieve the long-term gross profit margin target of over 53%. Semiconductors expect that TSMC's fourth quarter and full-year revenue targets should be successfully achieved. However, due to the reduction in order size in 2023, there is a great opportunity to adjust the full-year capital expenditure and revenue growth targets at the January meeting.

The quotations of second-tier wafer foundries have already retreated. However, due to the previous large quarter-to-quarter increases, the overall average selling price will still be higher than that of 2021 by the end of the year. Relevant industry players said that although the capacity utilization rate dropped to 80%, the price As long as we hold on and survive the turbulence from the fourth quarter to the first half of 2023, driven by customers restarting their purchases in the second half of 2023, capacity utilization and operating performance are expected to rebound quarter by quarter.

It is worth noting that Micron recently announced that it will slow down production and reduce capital expenditures. Capital expenditures in fiscal year 2023 will be slashed by 30% to US$8 billion, and wafer fab equipment expenditures will be reduced by 50%, while wafer foundries will Although only Power Semiconductor Manufacturing Co., Ltd. has clearly announced a significant reduction in the scale of production expansion and the suspension of future plans, there are frequent reports in the market that TSMC, UMC, Advanced Micro Devices, GlobalFoundries, etc. have significantly slowed down the speed and scale of production expansion and reduced equipment purchases.

Taiwan's semiconductor equipment industry said that the semiconductor market has weakened, cooling down significantly in the third quarter, and many customers' efforts to purchase goods have slowed down in the fourth quarter, which has a considerable impact on performance. The dilemma of high inventory and low demand will continue until mid-2023. It will inevitably cause memory, wafer foundry and IDM companies to expand production scale and reduce capital expenditure. Although it can alleviate the overcapacity crisis, for equipment manufacturers, the expected prosperity has not been as expected for several years, or even Growth in 2023 will also be significantly weakened.

据国际半导体产业协会(SEMI)最新报告指出，2022年全球晶圆厂设备支出总额虽达990亿美元，续创新高，但较先前所预估的1,090亿美元则有约9%下修幅度，另对于2023年则是预期将小幅衰退2 %，约达970亿美元。以此来看，半导体相关设备业者接单高峰期恐已过，第4季后将逐步向下，若最大客户台积电未来有所修正，跌势将更为显著。