Shulou(Shulou.com)06/03 Report--

The appearance of novel coronavirus always reminds people of the battle of SARS 17 years ago. Similarly, the mobilization of the whole people, the storm all over the city, the fear of the virus, and even the worry about the economic situation for the whole year, are weighing heavily on everyone's mind.

For capital markets, their performance is indeed very similar.

During the outbreak of SARS in 2003, many assets declined and consumer desire decreased. In addition to pharmaceutical stocks, there were also Banlangen and honeysuckle which were robbed of goods. Compared with them, the beginning of spring in other industries is "a mixture of ice and fire".

The semiconductor industry, however, got away with it.

According to statistics from the Semiconductor Industry Association (SIA), despite the adverse effects of SARS, global chip sales in the second quarter increased by 3.2% over the first quarter to US $37.6 billion, and the full-year growth target was met as scheduled.

Behind this omni-directional recovery, there is a lack of response from some leading enterprises in the supply chain, and the probability of chain-breaking crisis is also greatly increased. Just recently, many semiconductor manufacturers have issued statements one after another to avoid a "chain break" in supply after the epidemic.

Are the growth expectations under the epidemic reasonable? how much is the impact of "chain breakage" on the global semiconductor industry?

With proper growth, why do semiconductor expectations tend to be optimistic?

Judging from the current situation, the recovery of the semiconductor industry should be more optimistic than expected.

Of course, this is not a slogan of "China must win". Let us look at it from two aspects:

The first is the reduction caused by the epidemic.

To be sure, SARS has a longer epidemic prevention cycle, a global range of radiation, a grim situation and a higher fatality rate, which can be said to limit capacity recovery to a greater extent.

For example, during the epidemic outbreak in 2003, TSMC adopted epidemic prevention and quarantine measures ahead of time, including 14 days of self-isolation when returning from the epidemic area. Internal regular meetings are also divided into two teams, do not talk to each other, communicate only by telephone, and supervisors and agents at different levels are not allowed to meet and talk. Of course, such stringent epidemic prevention measures have also directly affected the recovery of production capacity after resumption of work.

On the other hand, novel coronavirus, TSMC, which has long had experience in fighting the epidemic, has also publicly stated that "at present, it has not yet achieved the same (epidemic prevention) level as at the peak of SARS," and "will not affect production."

Obviously, the potential miswork of semiconductors caused by this round of epidemic is still under the control of manufacturers.

Let's talk about the demand growth after the end.

As mentioned earlier, after the control of the SARS epidemic in 2003, the consumption of computer products in the second quarter reached the highest growth rate since the beginning of 2002. This achievement is mainly driven by the accelerated growth of consumer electronics and communications, as well as the computer market.

Sales of computers and mobile phones in China were weak in the first quarter of 2003 under the influence of SARS, and overall growth was restrained. Nevertheless, equipment revenue increased slightly in the second quarter. According to SIA, the upgrading of PC led to 8.2% growth in microprocessors. Revenue from semiconductor equipment also increased by 3.1% in 2003. The increase in demand has also led to a rapid recovery in the utilization of semiconductor production equipment, and the utilization rate of some process-leading production equipment is even close to 96%.

(year-on-year growth of 20 semiconductor suppliers in the first quarter of 2003)

At the node of this epidemic, on the one hand, the global semiconductor industrial structure has changed, and production and original procurement have been constantly transferred to China. Chinese mainland and Taiwan accounted for 50 per cent of global contract revenue in 2004 and 58 per cent in 2007. The recovery in semiconductor sales growth after SARS is led by the Asia-Pacific region, especially China. At present, China's industrial chain occupies a more important position in the global market pattern, and it is not only limited to contract manufacturing, but also a complete three-dimensional upstream and downstream system such as research and development, production, packaging and application, which to a certain extent determines the acceleration of the recovery of China's semiconductor industry.

In addition, as early as 2019, various related industries have completed the upgrading of 5G mobile devices, AIoT and other infrastructure work, including policy standards, network base stations, industrial chain linkage, market education and other omni-directional groundwork, while 60% of semiconductor production capacity consumption depends on consumer electronics products, so the 2020 demand for 5G replacement will also strongly promote the recovery of the semiconductor chip industry.

Of course, in the overall optimism at the same time, the possible "chain break" problem is also emerging.

The danger of "chain breakage" behind growth opportunities

The recovery may be gratifying, but the danger is also brewing in opportunity. For example, the production supply can not keep up with the industrial demand in time, and the lack of production capacity leads to chain breakage. in view of the clamping position of China (including Taiwan) in the global semiconductor chain, once the chain is broken, the impact is very significant.

In fact, such concerns had already emerged as early as the time of SARS. Craig Barrett, then chief executive of Intel, expressed the concerns caused by SARS on semiconductors, PC, and even the entire electronics supply chain. Why is it possible to "break the chain" at the critical moment of industrial recovery?

1. There are many industrial strongholds in the mainland

Since the beginning of the 21st century, the Asia-Pacific region, especially China and India, can be said to be leading the development of the world semiconductor industry. Electronic semiconductor component manufacturers set up factories or outsource production in China, while original equipment manufacturers purchase most of the materials in China, which is also a routine operation.

For example, TSMC has a 12-inch plant in Nanjing and an 8-inch plant in Songjiang, Shanghai, both of which responded to the local government to delay the start time. Coupled with the strict control of the scale of post-holiday passenger flow across the country, it is possible to have an impact on the shipping plan.

two。 The lag of industrial expansion

If the epidemic is a "black swan" that may lead to "chain breakage", then the industrial characteristics of semiconductors themselves are the innate constitution that exacerbates this danger.

As we all know, semiconductor production lines often require huge bets on equipment, so they have the characteristics of high risk and fragile ability to withstand storms. In general, it is a more common practice to invest money to increase production capacity after the average selling price ASP rises to a certain extent and the company's profits increase significantly. Affected by the lag of investment, it undoubtedly adds uncertainty to the production capacity after resuming work.

The data show that shipments from most semiconductor suppliers increased significantly during the SARS period. Strategic markefing estimates that 80 per cent of new production lines in 2003 came from contract factories in the fields of DRAM, flash memory and microprocessors. At present, the planned mass production of 14nm and trial production of 12 and 7nm products by 2020 by Chinese industry leaders such as SMIC may also be lower than expected because the production line cannot be expanded rapidly.

3. Scale explosion of demand for smart components

If the recovery depends solely on the performance of the consumer electronics market, it may not put great pressure on production capacity. However, from the practical experience of fighting the epidemic, both city managers and the general public have realized that intelligent and digital equipment is essential, whether it is the degree of information in the process of travel control or disease control.

For example, in the donation list of many semiconductor manufacturers to Hubei Province and Wuhan, in addition to funds and medical products, servers, workstations, storage and other computing equipment, as well as intelligent software such as video capture and analysis are among them. In the publicity of donated goods in Hangzhou, transparent and efficient intelligent government has also played a huge synergistic role.

It is conceivable that this battle will directly promote the digital and intelligent transformation of the whole society from the demand. It directly drives the substantial growth of integrated circuit components, especially medium-grade industrial servers suitable for large-scale industrial deployment and reasonable cost, as well as automotive semiconductors, 5G mobile communications and so on. This is an opportunity for China's semiconductor industry.

4. When the localization substitution is in progress

In addition to the semiconductor growth driven by 5G/ intelligence, we also need to see that domestic alternatives have been enabled for mobile phone chips, large computing devices, public cloud services, and so on. Chinese mainland semiconductor suppliers, followed by Taiwan, have become the preferred choice for domestic system manufacturers, mobile phone manufacturers and integrated service providers. This has a positive help to the domestic semiconductor growth, and may also face the chain-breaking crisis of "waiting for rice to be put into the pot". It is just to prepare in advance.

What experience has SARS accumulated to prevent "chain breakage"?

History will not repeat itself, but it will have the same rhyme. So, is the experience of preventing "chain breaking" during SARS useful for reference?

Let's first sort out some of the measures taken by semiconductor manufacturers at that time.

1. Strengthen epidemic prevention during the restoration of production capacity

During the period of SARS in 2003, semiconductor manufacturers represented by TSMC mainly took some measures in internal control. For example, quarantine in the epidemic area requires self-isolation for 14 days to return to work from the epidemic area; to strengthen protection, employees wear masks to work and monitor their body temperature regularly; district production, factory area and production department are divided into different areas, air conditioning and entrances are independent, reducing the risk to a minimum unit.

At present, in order to avoid affecting the production cycle as much as possible, most enterprises have set the return to work date around the 15th day of the first month, which is still some time before the zero growth of the number of patients with the epidemic, so strengthening epidemic prevention is a top priority. Not long ago, TSMC adopted a similar strict control approach in its response statement.

two。 Properly plan the capacity expansion of high-level processes

In retrospect, people may immediately think of the panic and economic shock during SARS, but few people know that 17 new semiconductor production lines began to be set up in 2003. Of these, 12 are 300nm processing equipment with a total investment of US $21 billion, and Powerchip also built such a wafer production line in Taiwan at that time. These developments will undoubtedly contribute to the full recovery of the industry after the epidemic. In 2004, the global demand for semiconductors was heating up and the high-level production capacity was insufficient. At one time, the demand was active and the inventory could not keep up.

Today, it is obvious that there are not enough advanced process 10nm/7nm production lines deployed in Chinese mainland, and mainland enterprises still do not have the capacity to undertake the highest-end chip products. Coupled with the doomed outbreak of digital technologies such as cloud games, intelligent electric cars, 5G edge computing, TWS true wireless headphones, off-screen fingerprints and so on, manufacturers with advanced technology will undoubtedly be able to better cope with the crisis and enjoy the dividends of the times. Bets on advanced technology are not to be missed at this time.

3. Actively explore killer applications

Tracing back to the rise of semiconductors after SARS, the Globalpress 2003 Electronic Summit, as a "prelude to the recovery of the electronics industry", has to be mentioned. In February 2003, the summit was held in Silicon Valley of the United States, and nearly 30 leading global semiconductor manufacturers agreed that the whole industry was on the eve of explosive growth of high-tech products. Subsequently, smartphone innovation began to drive market demand continuously.

While worrying about the epidemic, the continued search for product innovation and "killer applications" that drive the consumer market may be the same boost.

Of course, it is worth noting that the epidemic will psychologically affect the consumption expectations of enterprises and individual users, thus affecting the growth of semiconductors in China in the short term. Therefore, after the end of the campaign, reshape public consumer confidence, give a certain policy tilt, and solve the worries of consumers and enterprises, then China's semiconductor gold mine will have the possibility to be excavated as soon as possible.

Every epidemic prevention war is an indelible memory, and the glory of mankind is as high as the depth of suffering. Come on, everybody!

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.