SIA President and CEO John Neuffer said: "Although sales growth has slowed in recent months, sales in major semiconductor product categories and regional markets remain strong, with China and the Americas having the highest annual growth rates. According to SIA's report data, chip sales in the Chinese market increased by 27.3% year-on-year in August, while the Americas market grew by 15% year-on-year.
In July 2018, the three-month average of global semiconductor sales reached $39.5 billion, an increase of 17.4% from the same period in July 2017. The annual growth rate continued to be steady, with a record of more than 20% annual growth for 15 consecutive months in July. However, according to data from the World Semiconductor Trade Statistics (WSTS) quoted by the SIA, the three-month average of global semiconductor chip sales in July this year only increased by 0.4%.
Three-month average of global semiconductor sales in July 2018 (Source: SIA, WSTS)
The recession is coming
It can be seen that Morgan Stanley and Goldman Sachs warned the semiconductor industry last month that the supply and pricing issues in the chip industry could deteriorate further before entering 2019, and lowered chip makers such as Micron Technology and Western Digital. The target price of chip equipment vendors such as Lin Research.
The chip industry has a cyclical feature of “prosperity-recession”, that is, the overall profit of the industry rises over a period of time (usually a few years), but it will become unprofitable for a while. There are three important factors that trigger the cyclical nature of the chip industry: changes in capital expenditures, chip size shrinkage failures, and slowing demand. Among them, capital expenditure plays a more important role in affecting the cyclical changes of chips. When chip manufacturers make profits, they will invest in new capacity, and new capacity will reach the highest level in about two years, resulting in oversupply, further affecting prices. . Conversely, when the profit disappears, the manufacturer will cut capital expenditures, causing a shortage of market supply, thus forming a cycle.
From the current situation, the chip industry seems to be welcoming a recession. Gary Dickerson, chief executive of Applied Materials, a chip maker's capital expenditures, said at the earnings analyst meeting on August 17th: "We do see recent adjustments in customer spending. ."
In mid-July, TSMC cut its expected spending by 13%. Samsung has not officially changed its spending plan this year, but some analysts reported that the company delayed equipment orders when adjusting production. According to KeyBanc, the total capital expenditure of Samsung and TSMC in 2017 accounted for about 46% of the total capital expenditure of the chip industry.
AI, 5G chips are the driving force for future growth
Although Goldman Sachs and Morgan Stanley issued warnings to the semiconductor industry, these institutions also believe that the semiconductor industry's recession is better than the previous semiconductor cycle downturn. There are two main reasons: First, the integration within the industry has greatly reduced the number of suppliers in the market, giving the remaining suppliers a higher pricing power. Second, the weak demand for smartphones has suppressed some chip demand, but AI chips, automotive chips, cloud computing, 5G technology and the Internet of Things will become long-term growth drivers.
Su Renhong, founder of Hushan Capital, said earlier: "Semiconductor macro environmental investment is more difficult than before. Mobile internet and mobile phones are entering a mature stage. AI and new energy have not yet assumed the responsibility of semiconductor driving force, but will become an important part in the future. ."
According to a report issued by Allied Market Research, the global machine learning chip market is about 2.4 billion US dollars in 2017. It is expected that the market size will reach about 37.8 billion US dollars by 2025, with a compound annual growth rate (CAGR) of 40.8%. The report also pointed out that media and advertising, banking and financial services and insurance, IT and telecommunications, retail, healthcare, automotive and transportation are all important drivers for the development of AI chips.
At present, the provider of important chip GPUs that promote the development of AI has also benefited a lot. On September 10, AMD's share price on Nasdaq rose by 2.51 US dollars to 29.89 US dollars, an increase of 9.17%, which is close to 30 US dollars. The new stock price since 2006. In addition, Evercore ISI analyst CJ Muse also raised NVIDIA's target price from $300 to $400 last Friday. You know, as of last Thursday, NVIDIA's share price has risen by 38% this year, while the S&P 500 has risen by 9%.
The future chip market will continue to grow under the impetus of new technologies and applications, but there will be differences between regions. According to SIA statistics, compared with the same period last year, China's chip sales increased by 29.4%, the Americas market increased by 20.7%, Europe increased by 11.7%, Japan increased by 11.5%, and the Asia-Pacific region increased by 5.7%. In June, China’s chip sales increased by 1.7%, the Americas increased by 0.4%, sales in the Asia Pacific region remained flat, and sales in Europe and Japan declined.