Global Top Semicon Manufacturers H1 Performance & Outlook

Recently, the global semiconductor sales have continued to show an upward trend. The Semiconductor Industry Association (SIA) has recently revised the growth rate of the global semiconductor market this year from 13.1% to 15.8%. However, looking at the financial reports disclosed by the leading original equipment manufacturers (OEMs) in various segments, the AI leader NVIDIA has once again set new records for revenue and profit, but growth in some areas is far from expected. What kind of market trend will emerge in the future?

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First Half Financial Results Released, Industry Trend Fluctuations Become Apparent

Looking at the growth trend in the first half of the year, the global semiconductor industry continues to rebound, but the quarterly growth shows significant fluctuations. Specifically, in Q2 of 2024, the revenue growth of the leading suppliers in the global semiconductor industry slowed down, while net profit and gross margin remained stable.

In detail, there is a noticeable recovery in demand for upstream EDA/IP, the inventory risk on the material side remains high, the demand for equipment is steadily growing, the differentiation between mature and advanced processes in the manufacturing segment continues, the orders and capacity in the packaging and testing segment have rebounded significantly, and the growth in AI, storage, and MLCC in the component design sector is strong.

From the perspective of revenue and net profit growth, AI chip manufacturers represented by NVIDIA have repeatedly set new revenue and net profit growth highs. Leading memory manufacturers such as Samsung and SK Hynix have seen significant improvements in profits. PC and data center manufacturers represented by AMD have seen a continuous recovery in revenue. High-end MLCC manufacturers represented by Murata have shown strong growth, and packaging and testing manufacturers such as Jiangsu Changjiang Electronics Technology have seen significant improvements in orders. It is worth noting that analog manufacturers represented by TI and ADI have seen sluggish growth, and automotive and industrial semiconductor manufacturers represented by Infineon and ST have experienced significant declines, with continued low demand in the automotive and industrial sectors.

Based on the average revenue and net profit growth trends of leading manufacturers, the global semiconductor revenue in Q2 of 2024 has declined, while net profits continue to rise, indicating that although the industry is experiencing fluctuations, the outlook is positive.

Looking at the inventory trend, the average inventory of manufacturers increased slightly in Q1 of 2024, but there was a significant decrease in Q2. The continuous decline in industry inventory, accompanied by some fluctuations, indicates that there are still short-term risks of industry fluctuations.

Overall, the global semiconductor industry in the first half of 2024 continues to rebound, but the continued destocking and lower-than-expected terminal demand mean that the risk of industry fluctuations and adjustments remains.

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EDA/IP: Order demand rebounds, and customer inventory improves.?

The growth of leading EDA/IP manufacturers shows a certain positive correlation with semiconductor sales. In the first half of the year, the revenue of major manufacturers fluctuated slightly, and customer order demand continued to rebound.

Looking at the financial reports of Synopsys, the leader in EDA, and the second-largest IP vendor, it is evident that their order resurgence in the first half of the year was significant, with AI-related demand growing rapidly, leading to robust increases in both revenue and net profit. The financial report of ARM, a top IP vendor, shows that revenue from AI, smartphones, and PCs is growing rapidly, while some downstream sectors such as industry, IoT, and networking have higher inventory levels and weaker demand. Xie Yuan, a leading Chinese IP vendor, stated that the company's revenue saw significant improvement in Q2 2024, with good new order signings and a high level of outstanding orders

Materials: High Customer Inventory and Persistently Weak Demand.

In 2024Q2, the demand for semiconductor materials, represented by silicon wafers, has noticeably declined compared to the same period last year, with a relatively weak market recovery. Among these, advanced process products (12-inch silicon wafers) have bottomed out and are on the rise, while mature process products have higher inventory levels.

Shin-Etsu Chemical, a global leader in silicon wafers, stated that the demand for silicon wafers in 2024Q2 has decreased year-on-year but has improved quarter-on-quarter. It is expected that the demand for 12-inch silicon wafers will be driven by AI and increase gradually with each quarter, while 8-inch (mature process position) continues to be sluggish. SUMCO (a Japanese company) believes that the demand for logic ICs and memory has bottomed out and is on the rise, but it will take time for the inventory of mature process categories to return to normal levels. GlobalWafers' financial report indicates that due to the slower-than-expected speed of inventory reduction by customers, the original target of achieving revenue this year that is equal to or slightly higher than last year may not be met.

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Equipment: Strong demand for storage-related equipment, industry expansion may last until 2025.

Based on the latest information from leading manufacturers, there is a significant increase in demand for HBM, logic foundry, and DRAM/NAND-related storage equipment, with a clear expectation of a rebound in global semiconductor equipment demand in 2024.?

Lithography leader ASML's financial report shows that the company's new orders in 2024Q2 reached 5.6 billion euros, a year-on-year increase of 56%/a quarter-on-quarter increase of 281%; of which, revenue from Mainland China was 2.33 billion euros, a year-on-year increase of 73%/a quarter-on-quarter increase of 20%, accounting for as much as 49%. Wafer processing equipment leader AMAT, driven by strong demand for storage chip equipment, topped the world with a total revenue of 13.43 billion USD in the first half of the year, surpassing ASML. KLA indicated that equipment demand in the second half of the year is better than in the first half, but the real expansion demand will come from 2025. The leading Chinese semiconductor equipment manufacturer, North Hua Chuang, showed in its financial report that the company's single-quarter profitability has reached a new high, benefiting from the improvement in process coverage and market share.

Component Design: Strong Growth in AI/Storage, Resurgence in Demand for High-End MLCCs.

Currently, the supply of AI core chips represented by GPUs/HBMs continues to be in high demand, while the order demand for consumer electronics such as CPUs/mobile SoCs is recovering weakly. Demand for MCUs, power devices, and analogs related to automobiles and industry remains sluggish, while the demand for MLCCs is growing rapidly.

Breaking it down, order growth for PC-related companies like Intel and AMD remains relatively sluggish, while Qualcomm and MediaTek maintain a low-speed expectation for growth in the smartphone market. NVIDIA and AMD see strong order growth in the GPU sector; NVIDIA's latest fiscal quarter revenue exceeded 30 billion USD, with data center business reaching 26.3 billion USD, a year-on-year increase of 154%, which far exceeded expectations. Meanwhile, AMD continues to raise its full-year revenue forecast for data center GPUs. However, it is necessary to pay attention to the potential impact on the supply chain due to possible delays in delivery of NVIDIA's latest B-series products due to technical and yield issues. Additionally, NVIDIA's Q3 revenue forecast is relatively conservative, indicating a potential slowdown risk for subsequent AI growth. The three major storage manufacturers are optimistic about the recovery of storage prices and demand, with high-end categories like HBM accelerating production expansion and experiencing a surge in orders. Niche memory product suppliers like Powertech and GigaDevice are gradually balancing supply and demand, but face intense price competition. The automotive chip leader Infineon indicated in its latest fiscal quarter that the demand for automotive and industrial sectors was lower than expected, but it remains optimistic about the Chinese automotive market demand. The analog leaders Texas Instruments (TI) and Analog Devices (ADI) showed in their latest financial reports that there is uncertainty in the demand for analog chips, and order demand in the automotive and industrial sectors continues to be sluggish. They also expressed optimism for market growth in China and noted that the competition in China's analog market is becoming increasingly fierce, with price wars likely to continue. In the passive components sector, the industry leader Murata mentioned in its latest fiscal quarter the acceleration of production expansion for high-end categories like automotive MLCCs and is optimistic about the market recovery for inductor products related to automotive and AI applications.

Foundry: Advanced processes are growing rapidly, but the recovery of end-demand may be delayed.

Advanced process and some specialty process capacities and prices are gradually recovering, while mature process prices are under significant pressure, and orders related to automotive and industrial applications have not improved.

TSMC has indicated that customer demand for AI and high-end smartphones remains strong, with a planned price increase of 8% for 3nm/5nm chips in 2025. UMC has stated that it does not see a strong market rebound, and the recovery of automotive demand may continue into 2025. SMIC's financial report shows clear price pressure, with a recovery in demand for consumer electronics orders. GlobalFoundries has mentioned that its major customers are still focused on reducing inventory. World Advanced believes that end-consumer demand is relatively conservative.

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Packaging and Testing: Order and Capacity Recovery is Obvious, and Outlook for the Second Half is Optimistic.

In the first half of the year, the packaging and testing industry saw a significant increase in orders, with a rapid recovery in capacity utilization rates, and a swift growth in demand for advanced packaging and testing for AI, high-end consumer electronics, etc.

Among them, the packaging and testing leader ASE Technology Holding Co., Ltd. stated that the second half of the year is the peak season for packaging and testing, and it expects AI demand to be even stronger in 2025 than in 2024. Amkor expects an increase in capacity utilization in Q3 2024, but the recovery in the automotive and industrial markets is slower than expected. Tongfu Microelectronics' financial report shows an increase in capacity utilization and a significant revenue increase in H1 2024.

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In summary, the global semiconductor and end-device demand is anticipated to be positive, with the Semiconductor Industry Association (SIA) recently increasing its 2024 global semiconductor sales growth forecast from 13.1% to 15.8%.

Despite this, the transition period could experience extended fluctuations that warrant close observation. R&A advises focusing on opportunities in AI interfaces, networking, and storage for the latter half of the year, while also keeping an eye on the increasing demand for consumer electronics like IoT devices and smartphones, and cautiously evaluating the potential risks in industrial and automotive demand sectors.

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