Broadcom's Price Surge in Chip Market: Unraveling the Trends and Implications

Introduction:

In recent times, the chip market has been flooded with inquiries about Broadcom, yet a lament echoes among industry insiders – available stocks lack orders, and orders exist without available stocks. Participants in the semiconductor superhero distribution training camp have expressed their frustration. Some members note that chips with the model "BCM89XXX" have surged to 30-40 dollars, experiencing a fivefold increase in just one month.

Market Trends:

Following the news of order cancellations in the first half of last year for smartphones and computers, the chip spot market took a nosedive around May and June. Mainstream chip brands such as Broadcom, TI, and ADI experienced a similar trend: generic components (chips) regressed to standard prices, while specialized materials, though experiencing a drop, remained above standard prices. As we move into this year, a sudden decrease in demand has become the norm, and chip prices have plummeted.

Broadcom's Peculiar Rise:

Starting from June this year, there has been a noticeable increase in inquiries about Broadcom's BCM89 series. The surge in demand for these popular chips has seen price increases ranging from several times to more than tenfold. While other chips are decreasing in price without securing orders, Broadcom is on the rise. The question arises: why is Broadcom's BCM89 series experiencing this surge?

Key Points to Explore:

1. Who's rising, and who's falling? A revisit of Broadcom's market history.

2. Genuine demand or speculative frenzy? Understanding the reasons behind the surge in the BCM89 series.

3. How should we interpret Broadcom's price increase in the broader context of the chip market?

By delving into this article, you will gain insights into the recent market dynamics, the peculiar ascent of Broadcom's BCM89 series, and a thoughtful analysis of the implications of Broadcom's price hike.

In the months of May and June, there has been a sudden surge in inquiries for Broadcom's BCM89 series. While some managed to secure batches at around $20, they soon found that the prices had skyrocketed by more than 10 times after a short period. One chip procurement specialist, Xiao Li, shared his experience, shaking his head as he recounted, "I had already sold off the stock before this chip took off."

Following this, Xiao Li observed a significant price surge in several chips of the BCM89 series, evoking memories of the chip scarcity period from the past two years. This situation stood out prominently amid the subdued market conditions in the first half of the year.

Upon closer examination, it becomes apparent that the BCM89 series has been in high demand for over two years, and its price increase carries a certain inevitability.

The BCM89 series comprises Broadcom's automotive Ethernet products, including automotive Ethernet PHY (Physical Layer), automotive Ethernet switches, and automotive Ethernet microcontrollers. Automotive Ethernet is primarily applied in intelligent cockpits and the advanced driver-assistance systems (ADAS) sector.

In May and June, Broadcom's BCM89 series experienced a sudden surge in inquiries. While some managed to purchase a batch at around $20, they soon discovered that prices skyrocketed over 10 times within a short period. The fluctuation in the price trend of a typical BCM89 series chip reflects the overall market situation. Chips that typically cost around 30 yuan reached their peak in November 2021, soaring to 90 yuan in April 2022. Over the past half-year, influenced by a soft market, prices have dropped to the range of 30-40 yuan. By the end of June, some were quoting prices of over 100 or 300 yuan, and the current market price is around 300-400 yuan (if the channel is good). Others have quoted 800 or 900 yuan.

Overall, the scarcity of the BCM89 series can be traced through several stages:

April 2021:

Shortages in the BCM89 series can be traced back to 2021, during the most severe shortage of automotive chips. Broadcom's automotive Ethernet and PHY chips, including the BCM89 series, faced shortages, along with other chips like BCM56 and BCM81 series.

December 2021 - March 2022:

The scarcity persisted into December 2021, with the delivery time of BCM89 series chips reaching 52 weeks. By March 2022, with reduced demand and increased supply, the most critical shortage period for BCM89 had passed. This corresponds to the overall situation of the automotive chip shortage, which shifted from a general shortage in the first half of 2021 to a localized shortage after October 2021.

June 2022 - April 2023:

Following the overall market trend of Broadcom and the chip market, the acceptance of high-priced chips decreased. While the prices of conventional materials began to return to normal, BCM89 series prices remained relatively strong but did not create significant waves.

June 2023 onwards:

Starting in June, inquiries and quotations for the BCM89 series increased. Prices for chips like BCM89816, 89551, and 89530 began to soar, with more inquiries and quotations in the market. However, actual transactions remained low.

In the backdrop of a soft market, the demand for inquiries and quotations for the BCM89 series exploded, attributed to its long lead time and the difficulty of substitution as an automotive chip. Prices of some highly discussed chips in the market have increased several times to more than ten times their usual rates.

BCM89530, with a regular price of around 150 yuan, has risen to around 680 yuan.

BCM89551 has risen to around 210-280 yuan.

BCM89251 has risen to around 70 yuan.

However, not all BCM89 series part numbers are rebounding; for instance, BCM89251 is struggling to attract attention. Moreover, prices fluctuate frequently, emphasizing one word: chaos.

As mentioned by the group members at the beginning of the article, popular BCM89 series chips are scarce in the market. Those with stock are unwilling to negotiate on prices, and customers with demand are watching but not swayed by high prices, making it challenging to close deals. Inquiries come in, but the lack of stock leads to a circular situation, creating apparent excitement in the market without much actual impact.

In May and June, Broadcom's BCM89 series experienced a sudden surge in inquiries. Although some people successfully purchased a batch at around $20, they soon discovered that the prices skyrocketed more than 10 times within a short period. The BCM89 series

02

Why did it rise?

Real demand or speculative frenzy?

Observing the popular BCM89 series part numbers this time, they are mainly concentrated in two categories: automotive Ethernet PHY chips and automotive Ethernet switch chips.

For automotive Ethernet PHY chips, there are BCM89811, BCM89820, BCM89883, and for automotive Ethernet switch chips, there are BCM89551, BCM89501.

Traditional in-vehicle networks primarily use CAN with LIN as a supplement. However, the emphasis on intelligence, multiple sensors, cameras, in-cabin audiovisual interaction, and smart driving features in electric vehicles has significantly increased the demand for data transmission. As a result, domain-centric and cross-domain centralized architectures are gradually becoming mainstream, providing Ethernet with a reason to be on board.

Automotive Ethernet has advantages in data transmission, reliability, power consumption, and latency. More importantly, it can reduce connectivity costs by 80% and cable weight by 30%.

In this regard, Broadcom can be considered a pioneer.

Currently, the mainstream automotive Ethernet technology standard comes from Broadcom's Broad-Reach technology, which has been standardized by IEEE and named 100BASE-T1.

However, looking at the entire automotive Ethernet switch and physical layer, Broadcom is not the most outstanding. According to research by Zosem Auto, Marvell has the highest market share, around 50%, and a very high share in the high-end market, at least 90%. Broadcom's market share is approximately 15%, with a complete product line covering high, medium, and low-end, but it only collaborates with major manufacturers, so its main customers are BMW and General Motors.

Why did Broadcom, with a market share of 15%, turn red this time?

Based on the market information gathered by Chipworld, we summarize it into three points: limited supply, not easily replaceable, and amplified demand.

1. Long-term contracts with automakers, difficult to adjust supply, long lead times

Many of Broadcom's chips are used in BMW vehicles, and their collaboration dates back to 2010 when they jointly proposed automotive Ethernet technology. Broadcom then entered BMW's supply chain in 2012.

This year, BMW's sales have surged.

In the second quarter, BMW Group's electric vehicle deliveries reached 88,000 units, a year-on-year increase of 117.5%, with 77,948 units being pure electric vehicles under the BMW brand, accounting for 88%, a year-on-year increase of 150.7%. In the first half of the year, BMW delivered 44,864 pure electric vehicles in China alone, a staggering 283% increase compared to the previous year's annual delivery volume.

As BMW sells more, the demand naturally increases. We have also learned from the market that Broadcom has signed a long-term contract with a certain automaker. Currently, the lead time for popular part numbers is around 50 weeks, with a shortage of supply in the market, making it inevitable for prices to rise.

2. Dominant Monopoly, Difficult to Replace

Ethernet physical layer chips are highly concentrated, mainly dominated by overseas giants. According to statistics from the China Automotive Technology Research Center, the top five global in-vehicle Ethernet physical layer chip manufacturers are Marvell, Broadcom, Realtek, Texas Instruments (TI), and NXP, almost occupying the entire market share, reaching up to 99%.

Among them, Marvell and Broadcom have the most extensive and complete product lines, but Marvell's prices are the highest.

One significant characteristic of automotive standard chips is the need for long-term stable supply. The choice of chips is planned at the inception of the automotive project, and all underlying software codes revolve around these chips. Therefore, automotive manufacturers generally do not easily switch to a different chip.

From this perspective, the stickiness of automotive standard chips is relatively strong. Although Broadcom is somewhat "arrogant" and only negotiates with major manufacturers, the flourishing business of BMW, a key customer this year, has put Broadcom in a favorable position. So, it's challenging for Broadcom's demand to cool down suddenly.

3. Demand Amplified, Finding "Suitable" Goods Is Difficult

Is Broadcom's demand really that strong? This surge in popularity may have some "speculation" involved.

According to market information from Chip World, Broadcom's demand is concentrated in external transactions, and many of these transactions involve trading companies.

As mentioned earlier, Broadcom's customer base is relatively narrow, and its market share is not high. According to research by Zosi Automotive, domestic automakers such as Changan, NIO, and BYD use Marvell's Ethernet chips in their infotainment systems, and even Mercedes-Benz in foreign markets uses Marvell's chips. This is true even for NVIDIA's ADAS platform.

This may suggest that Broadcom's demand is not as significant as imagined. In the current chip spot market, available goods are scarce, and customers find it challenging to accept the inflated prices. However, due to the long delivery time and limited supply of Broadcom chips, overseas demand is quickly amplified when it enters the domestic market. Prices rise for available chips, and those without inventory become anxious.

After all, the market has been sluggish for quite some time, and any slight movement tends to stir the market's spirits.

Therefore, the demand is real, and the speculative hype is also real.

Conclusion

In the past two years, the market has transitioned from hot to cold, but the constant is the logic of price increases. Where there is demand, there is speculation, especially in times when the market is not doing well. Those who do not participate are passively lying flat, giving rise to the market for the BCM89 series.

However, upon further thought, how many potential explosive materials are still in the market? What is the transaction rate? Compared to speculative hype, people's attitudes have gradually become more calm. Many friends have already expressed their reluctance to touch these chips because the transaction rate is too low.

Clearly, the heat of the market has passed, and the false prosperity wrapped in demand seems to be struggling to sustain itself.

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