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After reading the latest financial reports of IC manufacturers, only IDM has no worries about its performance

It’s the financial report season again, and companies from all walks of life, including IC manufacturers, are concentrating on reporting their performance for the past three months.

 

In the third quarter, several major “black swans” such as lower demand, exchange rate changes, and Russia-Ukraine conflicts hovered. The impact on the chip industry cannot be ignored. The performance of major manufacturers in the third quarter will determine the expectations for the fourth quarter and next year. The importance of the layout is self-evident.

IDM: performance depends on strong demand for automotive/industrial control

Texas Instruments (TI)

Revenue in the third quarter was US$5.241 billion, a year-on-year increase of 13%; net profit was US$2.295 billion, an increase of 18% year-on-year. Among them, the simulation business revenue was US$3.993 billion, a year-on-year increase of 13%; operating profit was US$2.185 billion, a year-on-year increase of 17%. Embedded processing business was US$821 million, an increase of 11% year-on-year; operating profit was US$321 million, an increase of 14% year-on-year. Other business revenue was US$427 million, and operating profit was US$172 million, a double-digit increase year-on-year.

Recent developments: More than 60% of TI’s revenue comes from automotive and industrial machinery manufacturing. TI said that the demand in the industrial and consumer sectors has declined, but the demand in the automotive sector is strong. In early October this year, TI put into production a new 12-inch fab. At present, 80% of the products of Texas Instruments are self-produced.

 

STMicroelectronics (ST)

In the third quarter, it was US$4.321 billion, a year-on-year increase of 35.2%; net profit was US$1.099 billion, a year-on-year increase of 131.8%. The revenue of the Automotive and Discrete Devices Division (ADG) was US$1.563 billion, a year-on-year increase of 55.5%; the revenue of the Analog, MEMS and Sensors Division (AMS) was US$1.380 billion, a year-on-year increase of 9.7%; the revenue of the Microcontroller and Digital IC Division (MDG) Revenue was US$1.374 billion, a year-on-year increase of 47.7%.

Recent developments: will invest 730 million euros in a new 6-inch SiC substrate production line in Catania, Italy; maintain this year’s capital expenditure plan of 3.4-3.6 billion US dollars; continue to expand the capacity of the new 12-inch fab in Agrate, Italy .

 

ON Semiconductor (ON)

Revenue in the third quarter was US$2.193 billion, a year-on-year increase of 26%, a quarterly record high; net profit was US$312 million, a year-on-year increase of 0.71%. Among them, the power solution department (PSG) revenue was 1.161 billion US dollars, a year-on-year increase of 25%; the advanced solution department (ASG) revenue was 734 million US dollars, a year-on-year increase of 20%; the intelligent perception department (ISG) revenue was 342 million US dollars, a year-on-year increase of 45% %.

Recent developments: performance growth has benefited from automotive electronics, industrial automation and other fields; sold an 8-inch wafer fab in Pocatello, Idaho, USA; sold a factory in Niigata Prefecture, Japan; will continue to increase silicon carbide put in.

 

NXP (NXP)

In the third quarter, revenue was US$3.45 billion, a year-on-year increase of 20%; operating profit was US$1.001 billion, a year-on-year increase of 41%. Among them, the automotive business revenue was US$1.804 billion, a year-on-year increase of 24%; the industrial and Internet of Things business revenue was US$713 million, a year-on-year increase of 17%; the mobile business revenue was US$410 million, a year-on-year increase of 19%.

Recent developments: It is stated that the demand for consumer electronics such as PCs and game consoles has decreased, but the demand for automobiles and industrial products is still resilient.

 

Infineon

In the fourth fiscal quarter of fiscal year 2022 (as of September 30), revenue was 4.143 billion euros, a year-on-year increase of 38% and a month-on-month increase of 15%; net profit was 735 million euros, a year-on-year increase of 58% and a month-on-month increase of 42%. The revenue for the full fiscal year was 14.218 billion euros, an increase of 29% over the previous year; the net profit was 2.179 billion euros, compared with 1.169 billion euros in the previous fiscal year.

Recent developments: Investing 5 billion euros to build a new 12-inch wafer fab in Dresden, Germany; next year will focus on expanding the compound semiconductor production capacity of the Kulim plant in Malaysia.

 

Microchip

Revenue for the second fiscal quarter ended September 30 was US$2.073 billion, a year-on-year increase of 25.7%; gross profit margin was 67.4%; net profit was US$546 million, a year-on-year increase of 125.7%.

Recent developments: will invest 3 billion US dollars to expand production in Oregon, USA.

 

Renesas

Revenue in the third quarter was 387.1 billion yen, a year-on-year increase of 50%; operating profit was 117.9 billion yen, a year-on-year increase of 119.1%. Renesas’ revenue in the first nine months of this year was 185.1 billion yen, 2.5 times that of the same period last year.

Recent developments: The expansion of demand for applications such as automobiles and data centers drives the growth of Renesas’ performance; in October, the “Supply Guarantee Plan” for materials other than automotive chips was launched to ensure that a certain number of MCU orders will have a 12-week delivery guarantee; Renesas expects The shortage of automotive chips will ease in mid-2023.

 

Intel (Intel)

Revenue in the third quarter was US$15.338 billion, down 20% year-on-year; net profit was US$1.019 billion, down 8% year-on-year. The revenue of the platform computing department, which produces PC processors, was US$8.12 billion, a year-on-year decrease of 17%; the data center and AI business revenue was US$4.209 billion, a year-on-year decrease of 27%. Network and edge computing business revenue was US$2.266 billion, a year-on-year increase of 14%.

Recent developments: Thousands of layoffs have been initiated; capital expenditures will be reduced by US$2 billion to US$25 billion this year, and cost reductions of US$3 billion will be achieved in 2023, with a cumulative reduction of US$10 billion in capital expenditures by 2025; Eight major customers including Qualcomm and Broadcom.

 

Summary: The decline in the consumer market has resulted in a sharp drop in demand for general materials. However, with the strong demand in the automotive and industrial sectors, IDM’s performance growth has continued and it has not stopped expanding its production. However, Intel, as a processor manufacturer, is different from other IDMs. It has been greatly affected by the recession in the consumer market and has already begun to lay off employees to “overwinter”.

Memory: The price plunge makes the original factory “lay flat”

SK Hynix

Revenue in the third quarter was 10.98 trillion won, down 7% year-on-year and 20% quarter-on-quarter; operating profit was 1.66 trillion won, down 60% year-on-year and 61% quarter-on-quarter.

Recent developments: Cut next year’s capital expenditure by half; it is rumored that more than 70% of orders have been cut to equipment manufacturers.

 

Samsung Electronics

Revenue in the third quarter was 76.78 trillion won, a year-on-year increase of 3.8%; net profit was 9.39 trillion won, a year-on-year decrease of 23.6%. Among them, the semiconductor department (DS) revenue was 23.02 trillion won, a year-on-year decrease of 14%; operating profit was 5.12 trillion won, a year-on-year decrease of 49%. Display Panel Division (DS) revenue was 9.39 trillion won, a year-on-year increase of 6%; operating profit was 1.98 trillion won, a year-on-year increase of 33%. The device experience department (DX) revenue in the third quarter was 47.26 trillion won, a year-on-year increase of 10%; operating profit was 3.53 trillion won, a year-on-year decrease of 15%.

Recent developments: Samsung has no plan to reduce spending in the storage field; it will expand OLED driver IC outsourcing.

 

Micron

Revenue in the fourth fiscal quarter of fiscal year 2022 (as of September 1) was US$6.64 billion, a year-on-year decrease of 19.7% and a month-on-month decrease of 23.1%; net profit was US$1.492 billion, a year-on-year decrease of 45.1% and a month-on-month decrease of 43.2%. Full fiscal year revenue of US$30.758 billion, an increase of 11.02% over the previous year; net profit of US$8.687 billion, an increase of 48.22% over the previous year

Recent developments: All customers are reducing orders; capital expenditure will be cut by 30% to US$8 billion in fiscal year 2023; 1β process DRAM samples have been shipped, and EUV lithography has not been introduced.

 

Summary: NAND flash memory and DRAM as a whole have fallen by more than 20% this year, approaching the production cost of the original factory. SK Hynix and Micron have reduced production to support prices, but Samsung, as a comprehensive company, has not made adjustments to memory. The interests of the group as a whole are considered.

Wafer Foundry: Reducing Expenditures and Sticking to Prices

TSMC

In the third quarter, revenue of US$20.2 billion increased by 35.9% year-on-year and 11.4% quarter-on-quarter; net profit attributable to the parent was US$9.236 billion, an increase of 64.7% year-on-year and 14.7% quarter-on-quarter.

Recent developments: This year’s capital expenditure has been lowered for the second time by 10% to US$36 billion; it is rumored that MediaTek, AMD, ST and other customers’ orders have been revised more than expected; it is reported that orders for upstream regenerated wafers and equipment materials will be cut by up to 40-50% .

 

UMC

Revenue in the third quarter was NT$75.39 billion, a year-on-year increase of 34.9%; net profit was NT$27 billion, a year-on-year increase of 54.6%.

Recent developments: It is expected that wafer shipments in the fourth quarter will decrease by about 10% month-on-month, and the capacity utilization rate will be 90%; this year, capital expenditure will be revised down from US$600 million to US$3 billion; the expansion of production in Tainan and Singapore is still on schedule.

 

PSMC

Revenue in the third quarter was NT$19.184 billion, a decrease of 12.1% month-on-month and an increase of 10.9% year-on-year; the cumulative revenue in the first three quarters was NT$61.724 billion, an increase of 35% year-on-year.

Recent developments: It is expected that the revenue in the fourth quarter will be lower due to the decrease in orders for CIS, panel driver IC and DRAM; this year’s capital expenditure will be revised down by 43% to US$850 million.

 

SMIC

Revenue in the third quarter was US$1.907 billion, a year-on-year increase of 34.7% and a quarter-on-quarter increase of 0.2%; after-tax profit for the current period was US$574 million, a year-on-year increase of 54.1% and a quarter-on-quarter decrease of 8.7%. The wafers shipped in the third quarter amounted to approximately 1,797,700 8-inch wafers, an increase of 4.5% year-on-year and a decrease of 4.7% quarter-on-quarter; the capacity utilization rate was 92.1%, compared with 97.1% in the previous quarter and 100.3% in the same period last year.

Recent developments: This year’s capital expenditure has been raised from US$5 billion to US$6.6 billion; there will be a total of about 340,000 12-inch new production line construction projects in the next 5-7 years.

 

Summary: As strong as TSMC, it cannot withstand demand headwinds. Second-tier foundries such as UMC and PSMC will find it even more difficult to face the negative effects brought about by the reduction of customer orders. It is imperative to suspend production expansion. However, at present, wafer foundries still have a strong control over prices, and have successfully resisted a new round of price negotiation from IC design customers. Next, for car customers, it will also be able to rise as much as possible. However, SMIC serves the needs of the local industrial chain, and its expansion will not stop, nor will it be shaken by short-term demand fluctuations.

IC design: under pressure on both sides

MediaTek

Revenue in the third quarter was NT$142.161 billion, a decrease of 8.7% from the previous quarter and an increase of 8.4% year-on-year; net profit was NT$31.085 billion, an increase of 9.6% year-on-year.

Recent developments: Many customers have lowered their orders for components in the fourth quarter; as the foundry TSMC does not relax prices, it will continue to maintain the bottom line of prices, and it is not ruled out to follow TSMC to increase prices.

 

Realtek

Revenue in the third quarter was NT$29.772 billion, down 2.4% month-on-month, a six-quarter low; net profit was NT$4.207 billion, down 10.1% quarter-on-quarter and 13.9% year-on-year, the lowest since the second quarter of 2021.

Recent developments: It means that the demand for Ethernet chips, switches, audio chips, TV chips and other product lines continues to decline, and the PC inventory level will return to normal in the middle of next year.

 

Summary: The two major Taiwan-based IC design factories are the epitome of the industry as a whole. Downstream customers have lowered orders, which has made the inventory problem very difficult. On the other hand, wafer foundries are not helping to alleviate the cost pressure. It can be said that they are sandwiching “core” biscuits. situation.

epilogue

 

Among the enterprises in all links of the industrial chain, only IDM continues to make large profits by relying on the demand for automotive and industrial control, and manufacturers in other fields have begun to shrink their defenses. It is a foregone conclusion that this year’s consumer electronics “peak season is not busy”, and the performance of major manufacturers in the fourth quarter will not change much.

 

At least until the first half of next year, the industry consensus is also in the destocking stage. At present, the entire industry chain is focusing on the automotive industry, and the same is true for the distribution field. Before consumer demand picks up, automotive and industrial control applications will support the overall growth momentum of the IC industry.

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