Weekly News

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1. Chip manufacturer NXP will invest $1 billion in India to boost research and development.

2. SEMI forecasts that semiconductor equipment deliveries in Mainland China will exceed $40 billion this year.

3. Taiwan memory manufacturers are seeing varying paces of recovery, with some companies facing increased operational challenges due to force majeure events.

4. Optimism is growing in the Q4 electronic components market.

5. NAND Flash shipments are expected to slow in Q2 2024, while AI SSDs are projected to drive a 14% quarterly revenue increase.

1.?Chip manufacturer NXP will invest $1 billion in India to boost research and development.

NXP Semiconductors will invest up to $1 billion in the Indian market to double its R&D capabilities. It will join a growing base of global chip manufacturers betting on India to establish design and capability centers. "NXP has committed to doubling its R&D efforts in the country over the next few years, which will far exceed $1 billion," said Kurt Sievers, CEO of NXP Semiconductors, at the 2024 India Semiconductor Exhibition. He mentioned that the company is in talks with the automotive industry and other sectors in India, where NXP already operates four semiconductor design centers with about 3,000 employees.

NXP follows in the footsteps of major chip manufacturers that, despite avoiding investment in India's manufacturing ecosystem, have opened research and design centers in the country. This includes companies like AMD, which opened its most extensive global design center in Bengaluru last year, and Qualcomm, which set up a facility in Chennai. India is home to a large pool of chip design engineers and has long served as the backend for global chip companies. The country is estimated to have 300,000 design engineers, accounting for roughly 20% of the worldwide workforce in this sector.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

Comment:?As companies worldwide seek to diversify from regions like China and Taiwan, India is ambitiously positioning itself to become a major chip hub after the U.S., Taiwan, and South Korea and has been actively attracting foreign companies to operate in the country. So far, it has approved five chip units, four of which are in Gujarat and one in Assam. These include manufacturing plants set up by the Tata Group and Taiwan's Powerchip, as well as four assembly and testing plants established by U.S.-based Micron Technology, Tata, Murugappa Group in collaboration with Japan’s Renesas Electronics, CG Power, and Kaynes Semiconductor.

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2. SEMI forecasts that semiconductor equipment deliveries in Mainland China will exceed $40 billion this year.

According to SEMI's statistics, global investments in semiconductor facilities and equipment have continuously increased since 2020. Even though the semiconductor industry entered a downturn in 2023, investments in semiconductor plants and equipment have continued to grow. Over 100 new semiconductor manufacturing plants are projected to become operational between 2022 and 2026, indicating significant growth potential for semiconductor equipment investment in the next two years.

Amidst this global surge in semiconductor manufacturing investments, Mainland China has contributed the highest to semiconductor equipment sales. In 2023, semiconductor equipment sales in Mainland China reached $36 billion, marking a 28.3% year-over-year increase, securing the top position in the global market. SEMI's President, Ajit Manocha, revealed that by the first half of 2024, semiconductor equipment deliveries in Mainland China had already reached $23 billion, with the full-year total expected to surpass $40 billion, maintaining its global leadership since 2020.

Additionally, SEMI's market share data for major global semiconductor equipment companies indicates that in 2024, the revenue contribution from the Chinese market has increased for Japan's Tokyo Electron and the Netherlands' ASML while declining for U.S. company Applied Materials.

Comment:?Three key drivers will shape the future of the semiconductor market: Artificial Intelligence (AI), electric vehicles (EVs), and advanced packaging. In AI, global IT industry investments in computing infrastructure are expected to grow annually, with a projected compound annual growth rate (CAGR) of 31% for AI semiconductor equipment by 2027. In the EV sector, the automotive semiconductor market is expected to expand, reaching $99 billion by 2026. Although leading overseas companies are ramping up production in the advanced packaging sector, the complexity and long lead times (typically 2 to 3 years for new plants to reach mass production) mean that short-term advanced packaging capacity shortages will persist, resulting in ongoing supply-demand imbalances.

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3.??Taiwan memory manufacturers are seeing varying paces of recovery, with some companies facing increased operational challenges due to force majeure events.

Recently, Nanya Technology, Macronix, and Winbond released their August revenue figures. According to the performance data from these three major Taiwanese memory manufacturers,?Macronix and Nanya Technology achieved year-over-year (YoY) and month-over-month (MoM) revenue growth in August. While Winbond saw a slight MoM decline, it still recorded positive YoY growth. Regarding cumulative revenue, both Nanya Technology and Winbond posted YoY growth.

Nanya Technology and Winbond have seen notable YoY growth in monthly and cumulative revenues for the past eight months. Nanya Technology, having experienced a performance slump last year, has achieved a cumulative revenue increase of over 30% in the first eight months of this year, thanks to a low base. Similarly, Winbond has been working to bring its cumulative revenue back to 2022 levels. On the other hand, Macronix has seen 22 consecutive months of YoY revenue declines since August 2022, only returning to positive growth this June. Despite narrowing losses, Macronix’s cumulative revenue has remained in negative territory for two years, and as of August, it has yet to reverse this trend.

Among the three companies, Winbond was the only one that achieved profitability in the first half of this year. Macronix has been in the red for four consecutive quarters, while Nanya Technology has endured seven straight quarters of losses. Both companies came close to breaking even in the second quarter but were set back by losses from earthquake damage. In mid-August, Nanya Technology reported that a lightning strike caused a power outage, leading to wafer damage, equipment repairs, and production halts, with an estimated loss of NT$300-500 million, casting a shadow over its next quarter's performance.

Looking ahead, Macronix stated that its focus will be on increasing shipment volumes, with revenue expected to follow a 40:60 split between the first and second half of the year. Winbond noted that its DDR4 production began in July, with volume production expected in Q3. Coupled with stable NOR prices, the company believes it can return to the operational peak in mid-2022. Nanya Technology also expressed optimism that favorable factors will drive better performance in Q3 compared to Q2.

Comment:?Since the beginning of this year, as the memory market has steadily recovered, many Taiwanese memory manufacturers have shown positive growth in their revenues, gradually returning to a growth trajectory.

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4.?Optimism is growing in the Q4 electronic components market.

Despite stakeholders in the supply chain lowering their growth expectations for this year, optimism around component sales remains strong heading into Q4. The Electronic Components Sales Trend (ECST) index, measured by the Electronic Components Industry Association (ECIA), exceeded the 100.0 baseline in August, reaching 108.4, with a forecast of 107.9 for September. (This index mainly reflects the North American market.) ECIA noted that concerns about market health arose in June when the index dipped below 100. Although ECST forecasts tend to be more optimistic than actual outcomes, ECIA Chief Analyst Dale Ford stated that this positive outlook suggests strong performance for Q4. In a press release, he said, "Any sustained upward improvement in the market is an important indicator of continued positive momentum." According to the Q3 ECST survey, this upward trend is expected to continue into Q4 and the end of the year.

The IPC's economic survey in August echoed similar findings, showing a slight rebound in the electronics industry’s health, although still below its peak in April 2024. Improvements were driven by increased demand and lower costs. Specifically, IPC's demand index rose by 3.3% in August. While demand remains in contraction, factors such as reduced backlog orders, increased capacity utilization, and rising order sentiment drive the index upward.

In August, the ECIA’s semiconductor sales trend improved by 5.5 points to 111.8, while electromechanical equipment sales improved by 2.8 points?to 108.6. Passive components saw a 6.5-point increase to 104.7.

While slightly lower than August, September's semiconductor market outlook maintained an optimistic forecast of 103.0. For both August and September, all product subcategories scored 100 or above.

The ECST Q4 outlook revealed that 35% of respondents expect growth in Q3, with 10% forecasting growth between 3% and 5%. According to ECIA, component manufacturers have become the most conservative group regarding sales optimism, with overall scores below 100 in August and September, a shift from their traditionally more optimistic stance in past surveys. On the other hand, distributors expressed strong optimism about sales in their forecasts for July, August, and September.

Recent earnings reports indicate that component manufacturers still face high inventory levels, while distributors have made progress in reducing excess stock.

Except for two end markets, all other segments are expected to show positive sales sentiment in September. Only the computing and consumer electronics segments had a sales sentiment index below 100.

Comment:?The latest quarterly survey results indicate that expectations for the second half of 2024 remain optimistic, with performance in H2 anticipated to drive growth for the entire year. Encouragingly, optimistic sales forecasts continued through the Q3 survey conducted in August.

However, in August, the reported stability of delivery times declined, with the average proportion of stable delivery times dropping from 89% to 81%. Notably, a significant increase was reported in the number of respondents, indicating shorter delivery times for semiconductors and passive components.

In addition, IPC reported a sharp 5-point rise in capacity utilization in August, reaching 104. Cost pressures eased slightly, with the labor and material cost indices dropping by 1 point. Despite this decline, both indices remain in the expansion zone, indicating that most companies face cost challenges. IPC also surveyed respondents about their concerns.

More than 40% of electronics manufacturers are “very” or “extremely” concerned about geopolitical risks (42%) and the impact of trade policies and tariffs on their operations (44%).

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5.?NAND Flash shipments are expected to slow in Q2 2024, while AI SSDs are projected to drive a 14% quarterly revenue increase.

Due to the nearing completion of inventory adjustments in the server terminal market and AI driving demand for high-capacity storage products, NAND Flash prices continued to rise in Q2 2024. However, the high inventory levels of PC and smartphone manufacturers led to a 1% quarter-on-quarter decrease in NAND Flash bit shipments, while the average selling price increased by 15%. Total revenue reached $16.796 billion, a 14.2% increase compared to the previous quarter.

From the second quarter, all NAND Flash suppliers returned to profitability and planned to expand production in the third quarter to meet strong demand from AI and servers. However, due to the poor market performance of PCs and smartphones in the first half of this year, it is unlikely to boost NAND Flash shipments. TrendForce forecasts that the average selling price of NAND Flash across all product lines will increase by 5% to 10% in the third quarter, with bit shipments expected to decline by at least 5% due to a weaker-than-expected peak season. Industry revenue is projected to remain flat compared to the previous quarter.

2024 Q2 Global NAND Flash Brand Manufacturers Revenue Ranking??Unit: Million USD

Comment:?The recovery of the NAND Flash market is not comprehensive, and future market performance will largely depend on the continued expansion of AI technology applications, particularly the ongoing demand for storage from data centers, cloud computing, and smart devices. Whether the PC and smartphone industries can rebound in the year's second half will be another key factor affecting the overall storage market performance. If consumer demand recovery remains weak, it may limit future price increases, and manufacturers' expansion strategies could face certain risks.? ??