As you can see, since the second half of last year, the economic downturn transmitted to the chip sector, resulting in a sharp turnaround in demand. Combined with the impact of geopolitical and other factors, the downward spiral of the global semiconductor accelerated. On the one hand, the performance of chip companies has plummeted, fabs have also adjusted their investments; on the other hand, in order to save money, including semiconductor companies, global technology companies opened a new round of layoffs.

Thus, "live" has become the keyword of the entire semiconductor industry. Everyone is also in the combination of its trick to survive this "winter".

The chill spreads throughout the semiconductor

From almost all semiconductor companies' financial reports and their forecasts for the future, we can feel the chill.

According to the Semiconductor Industry Association (SIA), global semiconductor industry sales totaled $41.3 billion in January 2023, down 5.2% from $43.6 billion in December 2022 and down 18.5% from total sales of $50.7 billion in January 2022. In particular, sales in mainland China, the global center of electronic equipment manufacturing, fell an astounding 31.6 percent year-over-year.

WSWT statistics show that the slump that began late last year continued to spread in the first quarter of this year. As shown in the chart below, revenues for the top 15 semiconductor suppliers fell 14 percent in the fourth quarter of 2022 compared to the third quarter of 2022. The largest declines were among memory companies, down 25 percent, and non-memory companies, down 9 percent. Of the 15 companies, only four (Nvidia, AMD, STMicroelectronics and Analog Devices) saw slight revenue growth, ranging from 0.1% to 2.4%.

The outlook for the top companies is generally gloomy for the first quarter of 2023. The semiconductor industry typically weakens in the first quarter of the year, but most companies expect a weaker-than-normal first quarter in 2023. As seen by the nine non-memory companies that provided revenue guidance for the first quarter of 2023, they all expect a decline, with a weighted average drop of 10 percent. Intel is the most pessimistic, with guidance for a 22 percent decline.

As you can see, the slump on the sales side is becoming the biggest sticking point. Coming to the device side, the relevant statistics are also less than ideal. Take mainland China, for example, which has had the most purchasing power in recent years.

In the recent March, the import value of semiconductor front-end manufacturing equipment in mainland China is 3919.5 million U.S. dollars, down 28.8% compared with the same period last year. In addition to the increase in the import amount of other deposition equipment, the rest of the equipment import amount also have different proportion of reduction; specific to the heat treatment equipment, the total import amount of October to December is 337.8 million U.S. dollars, the same decline of 22.9%, a decline of 24.8%; CVD equipment imports for the same period fell 22.3% year-on-year; PVD equipment imports for the same period was 205.9 The total import amount of dry etching equipment for the same period was US$719.3 million, down 26.1% year-on-year and 34.1% quarter-on-quarter.

International Semiconductor Industry Association (SEMI) in December last year, the global semiconductor equipment market forecast data for 2022 also shows that although equipment sales in 2022 to a new high, but 2023 is estimated to shrink by 16% to $ 91.2 billion, to resume growth in 2024.

Under the influence of sluggish demand, the high level of inventory is also becoming a big problem for the industry.

South Korean media recently pointed out that in the first two months of this year, Samsung Electronics' memory chip business lost as much as $2.3 billion, which is the first loss of the South Korean giant in fifteen years, and the magnitude of this loss is also amazing. South Korean officials even said in an earlier statement that South Korea's chip inventory grew by 28% from a month ago. Recorded the largest increase since February 1996. Compared with a year ago, the inventory has increased by 39.5%.

The reason why the Korean chip will have such a miserable situation, and memory chips have a great relationship with the high dive. According to the latest data from TrendForce, the average selling price of DRAM used in cell phones and PCs plunged 34.4% last quarter, compared to the 31.4% drop in Q3 last year, which worsened rather than improved. As for NAND, which is regarded as the main product by data center and enterprise customers, its performance is only a little better than DRAM.

In addition to storage, MCU, power management chip, CIS, cell phone chip and OLED driver chip are also facing inventory troubles.

Under the attack of multiple factors, companies are making various moves.

Companies strive to "survive"

For semiconductor companies, survival has become their goal. Layoffs have become their first choice of approach. According to incomplete statistics, semiconductor companies including Intel, Micron, Qualcomm, Synopsys, Arm, Lattice and Lam research have all announced layoffs.

In addition to layoffs, chip companies are also reducing expenses in a variety of ways.

First of all, look at the foundry side, "cut prices" to pull customers to become another option to tide them over the winter. Taiwan media reports recently also pointed out that the wafer foundry mature process killing storm expansion, the industry rumors, due to the capacity utilization rate to pull up the situation is not as expected, UMC, Force Semiconductor, the world's advanced foundry offer "as long as the chip, the price can be negotiated" strategy, if customers are willing to place more orders, the price discount of up to one to two percent, more than The previous price reduction is greater.

Taiwan media further pointed out that previously, the world's second largest foundry in South Korea Samsung due to the downturn in market conditions, rumored to cut the mature process offer 10% to grab a single, now Taiwan factory to fill the capacity, the price reduction is greater, meaning that the semiconductor into the inventory adjustment period, resulting in the foundry mature process to the buyer's market trend continues and continues to deteriorate.

In addition to price cuts, cutting capital expenditure has also become another board axe of the foundry spending in response to the market downturn.

Wafer foundry giant TSMC said at the beginning of this year, the company's capital expenditure this year will decline from last year's record high of $ 36.3 billion, estimated between $ 32 billion to $ 36 billion, slightly lower than market expectations; and according to the Korea Economic Daily, the original intention to maintain high-grade capital expenditure of South Korea's technology giant Samsung Electronics, also rumored that it may cut back on foundry investment, highlighting the downturn in chip demand. Citigroup Global Markets, Inc. said bluntly that, with the decline in inventory prices, Samsung by cutting investment, the possibility of adjusting the chip supply strategy is increasing; UMC will this year's capital expenditure from $3.6 billion down to $30, a drop of 16.7%; the world advanced is estimated that the company's capital expenditure in 2023 to 10 billion NT, an annual reduction of more than 48%.

In the chip company, in addition to price cuts, to inventory has become another of their "survival" skills.

To MCU, for example, according to my understanding, now consumer electronics MCU has a very high inventory. A number of MCU practitioners revealed to me that everyone is now groveling into the game to accelerate the inventory. News from the Taiwanese media earlier was even more straightforward, with Taiwan MCU manufacturer Holtek confirming that it is targeting distributors for a comprehensive MCU price cut from February onwards. The industry believes that, with the price cut storm more than, many MCU factory will also be under pressure; as for the OLED driver chip, some insiders told me, because of inventory reasons, the price of these chips all the way down, has nearly fallen below the cost price; storage chips to inventory pressure more needless to say.

In addition to the chip company, the end customer "to inventory" has also become another factor affecting the market trend. As we all know, in the past three years, the epidemic has affected the supply chain, so that many terminal manufacturers "stock up" to deal with this uncertainty. In the case of sluggish market demand, terminal manufacturers will no longer place orders to chip companies. Analog chip maker Texas Instruments in the beginning of this year when the release of last year's fourth-quarter financial results, said that in the fourth quarter of last year, customer cancellation of orders increased. This is mainly because customers tend to cut inventory. They expect that the decline in demand this quarter is weaker than the decline in seasonal demand.

"Customers are doing what they would have done for decades and will continue to do, they're building a little bit more inventory. We'll see how long that takes to resolve." Texas Instruments CFO said in a media interview.

Although everyone is actively de-inventory, but according to Taiwan's Economic Daily News, a person familiar with the matter explained that the current de-inventorying is still slower than originally estimated, for example, the original estimated speed of inventory de-inventorying is to enter 0.5 months of goods, with the sale of 1 month of goods, you can gradually reduce 0.5 months of inventory; but now the actual situation is to enter 0.6 of goods.

This undoubtedly brings new pressure to the de-stocking of chips.

The above way to survive is for the chip company with products. But as you can see, in the past few years, the world has seen the emergence of many start-up chip companies, especially in China. For them, how to measure in this environment now is their fundamental. This is mainly from two dimensions: some already have a product chip company how to pitch a chip, ship, financing to survive in this environment? No product companies, how to control their own team size expansion? How to finance survival?

Engineers bide their time

In this wave of semiconductor downward spiral, engineers are undoubtedly another group that has been hit.

In the past few years, because of the flurry of start-up chip companies, coupled with the capital markets it seems, the entire chip business grabbing people into a frenzy. Talent solutions company Hudson (Hudson) statistics also show that the chip is the highest jump in salary increases in 2022, the average increase of more than 50% of the industry.

However, going into 2023, under the double blast of capital market wait-and-see and end market downturn, everything seems to be returning to normal. First of all, it should be stressed that the normal we are talking about does not mean that the wages of chip engineers have fallen, but that the chip talent frequently job-hopping, and even the previous kind of cross-line phenomenon, has begun to reduce.

The reason for this status quo, which first of all, of course, related to the demand for corporate talent. Foreign chip companies need not say much, the freeze on recruitment and layoffs have reported a lot of companies. Come to the domestic chip companies, according to the author was informed that a number of chip companies have frozen recruitment, some companies have even appeared only out of the regulations, its main purpose is of course to tighten the belt for the winter.

From some previous reports, we have also seen that some chip engineers with frequent job-hopping, their salaries upward, and this is not an exception. But in the current environment, these phenomena are not uncommon. Some engineers in the author's communication also confessed that in this market, keep their jobs, safe through the winter is the priority.

However, even in the current recessionary environment, HR also said that the market is difficult to find high-quality engineers, which also shows from the side, a chip engineer if there are excellent strength, at any time do not have to worry about. In addition, this status quo on the one hand also confirms the previous view that personnel jump cautiously; on the other hand, it also reflects the determination of chip companies to retain important living forces to meet the next wave of recovery.

As Malcolm Penn said in his analysis article, this year the semiconductor will inevitably decline 22%. However, we do not need to panic or despair. Because the past history shows that the semiconductor is such a cyclical industry, and each time the semiconductor "crash" is actually a favorable time to gain market share. For this reason Malcolm Penn suggests that it is time to roll up our sleeves and do whatever is necessary to survive in the short term, but he advises us not to compromise the long-term interests.

"Any action taken now needs to be done with the inevitable 2024 upturn clearly and firmly in mind. This is not a time for panic, but a time for decisive action, cool heads and first-mover advantage. It's time to prepare for the inevitable 17th industry recovery that is coming." Malcolm Penn said.