Chip design company warns: It’s really difficult!

After TSMC released a conservative outlook on the market outlook at the press conference last week, the performance trend of the IC design industry in the second half of the year is not optimistic, and bulk application items including mobile phones, consumer electronics, etc. cannot escape the impact. Many IC design companies privately admitted that currently customers are more conservative in purchasing goods and are more vocal in demanding price cuts. In the second half of the year, they can no longer expect the traditional peak season effect, and it is almost a foregone conclusion that the peak season will not be prosperous.

In addition, due to factors such as the Russia-Ukraine war and high inflation that have not yet disappeared, some IC design factories are not only not looking forward to the second half of this year, but are also not optimistic about the off-season in the first half of next year. They have pessimistically put their hopes for a rebound. In the third quarter next year, it is estimated that there will be nearly a year of hard times to go through.

There are many IC design companies in Taiwan. The leading manufacturers include MediaTek, Novatek, Realtek, Ruiding, Duntai, etc., with products covering all types of electronic products. Among them, MediaTek will hold a press conference this Friday (28th). The company's products cover diverse fields such as mobile phones, TVs, and power management, and its prospects are impressive.

An unnamed major IC design manufacturer admitted that TSMC has a relatively conservative view of the second half of the year. It has revised its annual outlook downwards for the second time, which shows how sluggish the semiconductor business is. The source of TSMC's orders is IC design factories. "TSMC is conservative. It is really difficult to have good IC design!"

Affected by inventory adjustments, IC design factory operations were generally slow in the first half of this year. The performance of many manufacturers in the first half of the year dropped sharply by 20 to 40% compared with the same period last year. There are very few companies that are better than the same period last year. Originally, the IC design industry hoped that a rebound in business in the second half of the year would help turn the tide on this year's performance. However, as the market enters the third quarter, the market temperature has not yet significantly heated up, and hopes are becoming increasingly slim.

IC design industry insiders pointed out that after a period of inventory digestion, by the end of the second quarter, the absolute amount of inventory had dropped significantly, although it could not be said that it had returned to healthy and normal levels. It’s just that the scale of revenue has also become smaller, so the inventory turnover days may not necessarily be significantly reduced.

More importantly, the recovery rate of terminal demand is slower than expected. Everyone is cautious about the current situation. The market lacks consumer confidence, and downstream customers are not stocking up on goods. Customers demand price cuts, otherwise they are reluctant to buy goods, but they cannot place large orders. . IC design factories try not to sacrifice gross profit or even sell at a loss. Otherwise, not only will their revenue be bad, but their profit performance may also be bad. Therefore, there is a bit of a stalemate between the two parties regarding orders, making the situation in the third quarter unclear.

Some IC design factories estimate that the operating performance in the third quarter may not be much different from that in the second quarter, and the peak season effect has completely failed.

Because of this and the fact that customers are not in a hurry to place long-term orders and usually place short-term orders, the IC design industry admits that order visibility is actually very low now. The demand for orders cannot rise, and the amount of wafer production will not be large. There are even rumors in the IC design industry that the leading IC design factories in China have slashed the amount of wafer production for the wafer foundry in the second quarter, revealing the future. A conservatively pessimistic view for half a year.

IC design industry insiders revealed that except for TSMC, which still adheres to prices, other wafer foundries have reduced prices to varying degrees and forms. Since the inventory correction wave in the second half of last year, wafer foundry prices have dropped by about 15% to 20%. Industry insiders estimate that at this stage, the utilization rate of mature process capacity in wafer foundries is still low, and more price cuts may be necessary in the future to fill production capacity.

IC design factories said that when there was a major shortage of ICs in the past, compared with other wafer foundries' quotations, TSMC did not increase prices significantly. However, after the IC market turned downward, other wafer foundries' quotations were revised, and TSMC's The quotation remained unchanged.

After wafer foundries began to be willing to compromise on quotations, IC design industry pointed out that lower-cost wafers will be gradually produced in the first half of the year. However, the production volume in the first quarter was quite small and the contribution was limited. The relative output in the second quarter was Low-price output has just begun to increase, and the third quarter will continue to have the output brought about by the second quarter.

IC design houses admit frankly that in addition to wafer production before the end of the year, they have recently begun to discuss next year's wafer volume with wafer foundries. However, the current general environment is not optimistic and market visibility is low, so they dare not give too much information. Optimistic order forecasts will prevent you from being saddled with a pile of troublesome inventory once the market develops unexpectedly.

Affected by customers' cautious orders, the operating performance of wafer foundries in the second half of the year is likely to be sluggish during the peak season. Excluding the memory part, the decline in revenue of the wafer foundry industry this year will be greater than the overall level of the semiconductor industry.

The legal person briefings of wafer foundries TSMC and Power Semiconductor were held last week. UMC will take over and hold a legal briefing on July 26. World Advanced is expected to hold a legal briefing on August 1.

TSMC and Power Semiconductor both hold conservative views on their operating outlook for the second half of the year. Although TSMC is optimistic about the increase in demand for artificial intelligence (AI) and the strong growth of 3nm in the third quarter, its third-quarter performance is expected to stop falling and rebound, but its quarterly operating results Revenue will be approximately US$16.7 billion to US$17.5 billion, based on a midpoint of US$17.1 billion, a quarterly increase of approximately 9.1%, which is milder than traditional seasonal levels.

TSMC's fourth-quarter performance is expected to rebound further, but its US dollar revenue in the second half of the year will only increase by about 10% compared with the first half, which is quite a gap from the 20% previously expected by the outside world. As a result, TSMC has once again lowered its full-year operating targets, and the decline in U.S. dollar revenue may expand to 10%.

Power Semiconductor Manufacturing Co., Ltd. also feels that the market demand is not strong during the peak season, pointing out that there is currently a lack of long-term demand signals, and there are no long-term orders for more than one quarter. The operating outlook for the third quarter is conservative, and revenue is expected to fluctuate slightly. The operating conditions in the second half of the year will be similar to those in the second half. Quarterly.

联电曾多次表示，手机市况低迷，先前状况较佳的车用及工业市场，在库存建置完备后，需求出现停滞情况，第3季整体需求未见到强劲复甦情况。

世界先进也指出，通膨、升息会影响终端市场购买力和消费意愿，下半年将温和复甦，回温力道较几个月前多一点变量。市场预期，联电和世界先进对于未来景气恐难有乐观期待。

Affected by cautious orders from wafer foundry customers, TSMC estimates that the revenue of the wafer foundry industry this year may decrease by a mid-teens percentage (approximately 14% to 16%), which will be higher than that of the semiconductor industry excluding memory. Number percentage (about 4% to 6%) level.

Huang Renzhao, deputy general manager and chief financial officer of TSMC, explained that although the personal computer and TV market conditions have recovered, customers have not placed more orders and are still selling inventory, which is the main reason for the lower than expected operating performance of the wafer foundry.

因客户下单谨慎，存货消化时间较预期久，第3季库存水位可望降至健康水位，第4季将更加健康，未来复甦力道可望更强劲。

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