Power semiconductors are in a cold state, and companies are facing operating pressure

Source: Content from " United Times ", thank you.

As the US-China trade war intensifies, the global economy is also under a cloud. The demand for integrated device manufacturers (IDMs) has cooled, and outsourcing orders have shrunk. The power semiconductor market has clearly cooled compared to last year.

Although World Advanced Semiconductor, a wafer foundry mainly engaged in power products, experienced variables such as the US-China trade war and the US dollar interest rate hike in the second half of last year, its full-year consolidated revenue was 28.928 billion yuan, a year-on-year increase of 16.13%, a record high. Its net profit after tax was 6.166 billion yuan, a year-on-year increase of 36.9%, and its after-tax earnings per share were 3.72 yuan, also a record high.

In the first half of this year, due to weak overall demand and slower than expected inventory adjustments by customers, World Advanced's first-quarter revenue was 6.907 billion yuan, a quarterly decrease of 10.4%, and its net profit after tax was 1.388 billion yuan, a quarterly decrease of 28%, the lowest in the past four quarters, with earnings per share after tax of 0.85 yuan. It is estimated that revenue in the second quarter will continue to decline, with a quarterly decrease of about 1.5% to 7.3%, and gross profit margin will decline from 36.1% in the previous quarter.

The industry pointed out that the price and volume of power management IC and MOSFET (metal oxide semiconductor field effect transistor) rose last year, but in the fourth quarter, affected by the US-China trade war, demand slowed down, and Chinese customers became more conservative in purchasing goods, which impacted the sharp drop in orders for 6-inch wafer foundries and the decline in capacity utilization. This year, it spread to internationally renowned IDM factory customers. As customer demand cooled, outsourcing orders were reduced, causing the world's advanced in the first half of this year to be weak. World Advanced estimates that this year's shipments will be about 2.317 million 8-inch wafers, which will be a slight decrease of 0.56% from last year's 2.33 million.

Legal persons said that as the US-China trade war heats up, power semiconductors are still digesting inventories, and the recovery in the second half of the year may be uncertain. World Advanced's profits this year will be less optimistic than expected. Some foreign investors downgraded World Advanced's rating to "neutral" and lowered its target price to 59 yuan.

Both Mosel and Epistar saw a turnaround in their operations last year, but the market conditions have deteriorated this year, with price slashing and order grabbing reappearing. The two companies once again incurred losses in their operations in the first quarter, and this year is expected to be another challenging year.

Further reading: China's power semiconductor market size exceeded 290 billion yuan in 2019

In its latest "In-depth Analysis Report on China's Semiconductor Industry", global market research firm TrendForce pointed out that benefiting from the massive increase in demand in terminal markets such as new energy vehicles and industrial control, a variety of products such as MOSFET and IGBT continued to be out of stock and saw price increases, driving the size of China's power semiconductor market to grow significantly by 12.76% to RMB 259.1 billion in 2018.

The power discrete device market size was RMB 187.4 billion, up 14.7% year-on-year from 2017; the power management IC market size was RMB 71.7 billion, up 8% year-on-year from 2017.

TrendForce analyst Xie Ruifeng pointed out that as a demand-driven industry, power semiconductors will continue to be prosperous in 2019. Although it is still affected by factors such as global trade instability, it is less affected than other IC products due to demand. TrendForce estimates that the scale of China's power semiconductor market will reach RMB 290.7 billion in 2019, an increase of 12.17% over 2018, maintaining double-digit growth performance.

Benefiting from the policy promotion of domestic substitution and the shortage and price increase, many Chinese local power semiconductor manufacturers achieved outstanding results and expanded their layout in 2018. Among them, BYD Microelectronics, with its terminal advantage, has rapidly risen in the automotive IGBT market, achieved a market share of more than 20% in China's automotive IGBT market, and became one of the top three IGBT suppliers in China in terms of sales; MOSFET manufacturers HuaWei Microelectronics and Yangjie Technology have greatly increased their revenue and are gradually entering the IGBT market.

In addition, the newly built and planned IGBT production lines include Silan Micro's 12-inch special process production line in Xiamen, China Resources Microelectronics' 12-inch special process production line in Chongqing, and Jetta Semiconductor's professional automotive-grade IGBT production line. At the same time, many manufacturers have also invested in the research and development of new material technologies such as SiC. Basic Semiconductor's SiC MOSFET has entered mass production and is on the market, while Sanan Optoelectronics' SiC production line, which is positioned as a foundry, has also begun to receive orders, and BYD Microelectronics has also successfully developed SiC MOSFET, with the goal of achieving a comprehensive replacement of silicon-based IGBTs with SiC MOSFETs by 2023.

Looking ahead to 2019, from the perspective of terminal demand, new energy vehicles will still be the largest source of demand for China's power semiconductor market . According to TrendForce data, China's new energy vehicle production is estimated to be 1.5 million in 2019, a 45% increase over the previous year. The demand for ADAS systems, electronic controls, and charging piles will drive the power discrete device market to approximately RMB 27 billion. At the same time, the base station equipment required for 5G construction and the rapid development of the Internet of Things and cloud computing after its popularization will generate a long-term and large demand for power semiconductors. In addition, industrial automation planning continues to advance, and the related power supplies, controls, and drive circuits will continue to boost China's power semiconductor procurement.

From the supply side, although 3-5 power production lines will enter mass production in 2019, according to TrendForce, the shortage of power discrete devices is unlikely to improve significantly in the first three quarters of 2019, and product prices of many manufacturers are expected to rise. From the perspective of manufacturers' technological development, SiC MOSFET is expected to further increase the replacement rate of silicon-based IGBT in the automotive field, while silicon-based IGBT is expected to continue to develop in the direction of lower power consumption and higher efficiency.