Semiconductor manufacturers that buck the trend

Latest update time：2019-08-10

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Unlike the hot weather in recent days, the semiconductor industry is cooling down. According to the latest data from the Semiconductor Industry Association (SIA), global semiconductor sales in the second quarter of 2019 were US$98.2 billion, a decrease of 16.8% from the same period last year; in the first half of 2019, global sales fell by 14.5% year-on-year. Some industry insiders pointed out that the semiconductor market will fall into the worst downturn in a decade in 2019, and this conclusion is likely to come true.

In such a depressed environment, international giants such as Samsung and Intel have been affected to varying degrees. According to Samsung's Q2 financial report, the operating profit of its semiconductor business was 3.4 trillion won, a 71% drop from the profit of 11.61 trillion won in the same period last year; it fell 17% from the profit of 4.12 trillion won in the first quarter. Intel's Q2 revenue fell 3% from $17 billion in the same period last year; net profit fell 17% from $5 billion in the same period last year. In the data center field, Intel's revenue has declined significantly. This year's Q2 revenue was $5 billion, compared with $5.5 billion in the same period last year, a decrease of 10%. The data of major manufacturers have plummeted, and they lamented that 2019 was not going to be easy.

Logically speaking, the big manufacturers are having a hard time, and a number of manufacturers should also follow the trend and fall a little. But these two manufacturers did not move at all. How did they do it?

MediaTek

The first player to be mentioned is MediaTek, which is quite unexpected. According to the financial report, MediaTek's consolidated revenue in the second quarter was NT$61.567 billion, a month-on-month increase of 16.8% and a year-on-year increase of 1.8%. The gross profit margin reached 41.9%, a month-on-month increase of 1.2 percentage points and a year-on-year increase of 3.7 percentage points.

Some media pointed out that the reason behind MediaTek's good revenue is the recovery of seasonal demand for various consumer electronics, which has increased compared with the same period last year, mainly reflected in consumer electronics products such as the Internet of Things, customized chips and power management chips.

Indeed, further analysis shows that today's MediaTek is different from the one that makes low-end mobile phone chips. It now focuses on three directions, namely mobile phones, TVs, and AIOT devices such as automotive business. Thanks to the recovery of consumer electronics demand in Q2, MediaTek has achieved good results in all three directions. According to reports, TV ranks first, mobile phones second, and IoT products third.

Observing the specific data, we can find that the cumulative shipments of MediaTek TV chips have reached 2 billion sets, ranking first in the global market share with a market share of over 50%. This achievement is mainly due to the marriage between MediaTek and MStar Semiconductor. Recently, MediaTek also released the S900 chip for flagship smart TVs, which integrates CPU, GPU, AI, supports 8K, greatly optimizes the user experience, and takes an important step in promoting the innovation of smart TVs.

In the smart speaker market, MediaTek's solutions also account for 60-70% of the market share. Currently, several major domestic smart speaker products use MediaTek chip solutions, such as the MT8516 chip, which is used by Tmall, Huawei, JD.com and other manufacturers. In the fast charging market, MediaTek's Pump Express also performs well.

Recently, MediaTek also launched its first mobile phone chip, the Helio G90 series, and the chip-level game optimization engine technology MediaTek HyperEngine. This new Helio G90 series chip will focus on the pain points that mobile phone manufacturers cannot solve, such as network delays, insufficient operation fluency, and low operation quality. The largest customer of the Helio G90 series chips is Redmi. It is understood that Redmi's subsequent products may turn to MediaTek. MediaTek's move seems to be a prelude to returning to the market.

It can be found that MediaTek's current product line is relatively broad, basically covering most areas of chips. Precisely because of the development of multiple lines, no matter which line is in short supply, other products can quickly make up for it and develop steadily.

Hua Hong Semiconductor

The other is a pure wafer foundry company - Hua Hong Semiconductor, which focuses on differentiated process platforms such as embedded non-volatile memory, power devices, analog and power management, and logic and RF. According to Hua Hong Semiconductor's recent financial report, sales revenue in the second quarter of this year was US$230 million, flat year-on-year and up 4.2% month-on-month; gross profit margin was 31.0%, down 2.6 percentage points year-on-year and down 1.2 percentage points month-on-month; net profit for the period was US$49.9 million, up 8.7% year-on-year and up 7.0% month-on-month. In the context of the continued slowdown in the global semiconductor market and the decline of many international manufacturers, the flat performance is also a relatively eye-catching existence.

Commenting on the second quarter results, Mr. Tang Junjun, President and Executive Director of Hua Hong, said: "Despite the continued slowdown in the global semiconductor market, Hua Hong Semiconductor continues to forge ahead and is committed to becoming a stronger and better company."

According to Mr. Tang Junjun's remarks, the main reason why its performance can remain the same is that the discrete device platform continues to show great advantages, and the demand for various products is increasing, especially super junction, IGBT and general MOSFET. It is expected that the demand for discrete devices will continue to grow in the future. In the first quarter, Huahong reaped the dividends of discrete devices, leading the market through the characteristic process strategy, accelerating the expansion and upgrading of 200mm wafer fab capacity, to ensure that it can meet the capacity demand as soon as the market recovers.

In addition, thanks to the strong performance of the markets in China, North America and other Asian countries, sales revenue from China was US$127.3 million, accounting for 55.4% of total sales revenue, a year-on-year decrease of 5.3%, mainly due to the decrease in demand for smart card chips, partially offset by the increase in demand for super junction products. Sales revenue from the United States was US$42 million, a year-on-year increase of 5.6%, mainly due to the increase in demand for general MOSFET products. Sales revenue from Asia was US$28 million, a year-on-year decrease of 3.4%, mainly due to the decrease in demand for MCU and logic products, partially offset by the increase in demand for super junction and general MOSFET products. Hua Hong remains very optimistic about the semiconductor market.

Despite facing many challenges from the market, technology, customers and the new 12-inch wafer fab that will be put into use, Hua Hong's overall capacity utilization rate has rebounded to more than 90%. The 300mm wafer project is progressing smoothly as planned, and the plant and clean room have been completed. At the same time, most of the machinery and equipment required for the first batch of 10,000 pieces of production capacity have been moved in and are currently in the installation and testing stage. According to asset data, property, plant and equipment property, plant and equipment increased from US$773.2 million to US$1.0377 billion, which is partly due to the construction of the Hua Hong Wuxi project. The project has currently moved in the first batch of equipment and is in the equipment entry stage. It is expected to be put into production in the fourth quarter of 2019. The overall planned capacity of the first phase is 40,000 pieces, which is equivalent to 90,000 pieces of 8-inch equivalent wafer capacity. Compared with the company's current monthly capacity of 175,000 pieces, the commissioning of this project will open up more than 50% of the company's capacity expansion space.

In general, Hua Hong's current discrete device revenue increased by 21.7% year-on-year to US$924.9 billion, which has become the largest revenue share and is basically the only driving force for revenue growth in the second quarter. This part includes three types of products: Trench HV MOSFET, SJNFET, and IGBT. Among them, the IGBT segment benefits from the expansion of demand for new energy vehicles, wind power and other applications. The industry growth rate is expected to reach about 15%, which can continue to provide certain support for the company's performance.

It is not difficult to see. Both MediaTek and Hua Hong Semiconductor can only remain invincible by complying with the rising market demand for consumer electronics or discrete devices in the second quarter. Industry experts have pointed out that the global semiconductor industry is undergoing an inventory adjustment period, with less demand and oversupply, so prices are also being pushed down. Japan's export controls on key raw materials to South Korea have led to South Korea facing difficulties in semiconductor development, further bringing new uncertainties to the global semiconductor industry. Although the global semiconductor market situation is not optimistic, it is fortunate that sales in the second quarter were slightly higher than in the first quarter.

*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.

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