Global inflation has caused a sharp freeze in demand for consumer electronics, and the inventory correction in the semiconductor production chain is beginning to have an impact on upstream foundries. However, in the downturn of the economy, the strongest foundry market is becoming more and more obvious. As for the UMC, the force of the accumulation of electricity, the world advanced capacity utilization rate will be significantly downward correction, and face a hard battle, the second quarter of next year, the operation can be expected to bottom out and reheat.
Semiconductor inventory correction has begun to affect the capacity utilization rate of foundries, coupled with the United States and China trade war continues to heat up, the United States issued the latest decree, trying to prevent China from obtaining the key technologies and equipment indispensable to the manufacture of advanced chips, so that the geopolitical pressure faced by foundries rose sharply.
In order to cope with the direct impact of external environmental factors on operations, the industry is now generally of the view that inventory de-stocking remains a priority and that there is still an opportunity to find the most appropriate solution to the US-China trade strife.
In the face of this downturn, the foundry market, which used to be a booming one, will also begin to look different.
Due to weak demand for smartphones and notebooks, TSMC is facing order revisions from major customers such as Nvidia and Supermicro, but the winner takes all in the advanced process market, not only has it secured new orders from competitors such as Qualcomm and Nvidia, but it has also secured expanded outsourcing from Intel, and Apple's order growth remains solid.
The company expects TSMC's revenue performance in the fourth quarter to be flat or slightly down on the previous quarter. Although the first quarter of next year is a low season, it will first carry out "early delivery" for major customers in accordance with the usual practice to maintain capacity utilization at a high level.
Due to the depreciation of the NTD and another price hike in 2023, TSMC's revenue decline in the first quarter can still be kept within 10%, and in the second quarter it will gradually regain growth momentum as inventories are depressed, giving a "soft landing" to operations during this wave of market changes. As for other foundries, they may face a direct battle.
As this wave of inventory correction is first triggered by the 8-inch fabs, TSMC and World Advanced's third-quarter operations are weak, with capacity utilization falling quarter by quarter until the first quarter of next year. Although UMC maintained a high level in the third quarter, it is difficult to escape the pressure of market correction in the fourth quarter, and the utilization rate will still be revised downwards in the first quarter of next year.
Overall, TSMC's strategy of capacity deployment and product line conversion is working, and with the 3nm N3E process starting to produce in the second half of next year, annual revenue next year will still be better than this year.
As for the capacity of other foundries, the bias in the field of mature processes, consumer accounted for a significantly higher proportion, capacity utilization rate correction is fast and large, most of the industry believes that until the second quarter of next year, the bottom will rebound.
High inventories burned wafer foundry
The epidemic dividend of more than 2 years will recede significantly from the beginning of 2022, coupled with the intensification of global inflationary pressure, TV, mobile phones and NB and other consumer electronics demand has declined significantly, the terminal inventory has soared, the electronics supply chain is in a chaotic situation of cutting orders, delaying pulling goods, killing prices and cancelling long term contracts, the chain effect will break through the semiconductor foundry, packaging and IC design defense line in mid-2022, and expand to equipment, materials, etc. Materials, etc.
The overall supply and demand reversal in July and August was so fast that the supply chain was caught off guard; in September, demand fell straight down, and even though the factories cut prices in tears and made every effort to de-stocking, the level still did not drop significantly. A number of large factories are expected, the problem of inventory depletion at least until the end of the year will be more clear, that is, the 4th quarter demand is difficult to see a boost, the supply chain operations will continue to weaken.
Semiconductor industry, said the fourth quarter of 2022, although the end of the year into Europe and the United States to celebrate the consumer season, but in the high inflation pressure, the global economic outlook is unclear, the peak season effect will probably fall short, the upstream and downstream supply chain performance will be a full year low, not only worse than the same period in 2021, more likely to return to the level before the epidemic.
From the terminal to the IC design industry, the 4th quarter results will almost all inevitably fall, and then up to the foundry industry, although production capacity has seen a loosening, crop rate fell significantly, but the market is expected in the favorable exchange rate to support the overall profit decline will not be too heavy. Among them, TSMC despite facing many customers cut orders, but in the foundry offer not only adhere to the position, and even has established 2023 up trend unchanged.
TSMC's consideration is that the shrinkage of orders is only a short-term phenomenon of 2 to 3 quarters, and once the price concessions can not return, coupled with increased inflationary pressure, will make the long-term gross margin of more than 53% target difficult to achieve. Semiconductor is expected, TSMC 4 quarter and full-year revenue target should be smoothly reached, however, due to 2023 order size shrinkage, in January the law will have a great opportunity to adjust the annual capital expenditure and revenue growth target.
The second-line wafer foundry offer has been backed off, but because of the previous quarter-by-quarter surge is very large, so the overall average selling price to the end of the year is still higher than 2021, the relevant industry said that although capacity utilization rate fell to 80%, but the price as long as hold, through the 4th quarter to the first half of 2023 chaos, the second half of 2023 customers restarted to pull the drive, capacity utilization and operating performance is expected to rise quarter by quarter.
It is worth noting that recently Micron announced that it will slow down its production speed and cut capital expenditures, with capital expenditures for the fiscal year 2023 slashed by 30% to US$8 billion and fab equipment expenditures reduced by 50%. GlobalFoundries, etc. have significantly slowed down the speed and scale of expansion and reduced equipment procurement.
Taiwan's semiconductor equipment industry said, semiconductor market conditions weakened, the 3rd quarter obviously cooled, the 4th quarter many customers pulling power slowed down, for the performance of the impact is not small, high inventory, low demand dilemma will continue until mid-2023, will inevitably make memory, foundry and IDM industry expansion scale and capital expenditure reduction, although it can slow down the overcapacity crisis, but for the equipment factory, the expected prosperity has Not as long as expected for several years, and even 2023 growth will also be significantly weakened.
According to the latest report of the International Semiconductor Industry Association (SEMI), although the total global wafer fab equipment spending in 2022 reached US$99 billion, a record high, but the previous estimate of US$109 billion is about 9% downward revision, and for 2023 is expected to decline slightly by 2 %, about US$97 billion. From this point of view, the peak period for semiconductor-related equipment manufacturers to receive orders may have passed and will gradually go down after the 4th quarter, and if TSMC, the largest customer, makes a correction in the future, the decline will be even more significant.
