In the dismantling and sharing of the previous two reports, China exportsemi net reviewed the development of the semiconductor industry in 2023 with you, and also briefly shared the development prospects of the semiconductor industry in 2024. In today's sharing, we will analyze in detail the first four market segments in the "semiconductor design sector", namely computing power chips, digital SoC, CMOS image sensors (CIS), and analog chips.
Review and Outlook of Semiconductor Design Sector ( Part 1 )
Computing power chips: The wave of generative AI has arrived, and domestic chips have great potential in the medium and long term
Since the beginning of 2023, the popularity of the generative AI track has drawn much attention to the investment opportunities of computing power chips in the underlying support links. Under the expectation that the demand for computing power will continue to grow in recent large model training and subsequent inference scenarios, the supply of computing power chips will exceed demand in 2023, and sales will rise rapidly. According to AMD's forecast, the AI accelerator market is expected to reach US$400 billion in 2027. While the world's leading technology companies are chasing big models, domestic companies are also working hard to develop their own products. According to statistics from CICC, the number of large models developed by mainland Chinese companies currently exceeds 100, and the financing scale of companies whose main business is large model development has exceeded 10 billion yuan this year. However, the U.S. Department of Commerce updated the export control regulations on October 17, 2023 , canceling bandwidth-related provisions and adding computing power density restrictions. According to an announcement issued by Nvidia on the same day, the company’s A800, H800, L40S, RTX4090, etc. under the latest control conditions The export of many mid-to-high-end computing power GPUs to mainland China will be restricted. Therefore, the expansion of underlying computing power required for the development of my country's large models may face certain obstacles, and the current demand for localization of computing power chips is relatively high.
Focusing on the current development of domestic chips, due to supply chain security considerations, domestic customers using computing power are actively embracing diversified ecosystems other than NVIDIA (such as the AMD MI series product ecosystem, Intel Habana processor ecosystem, and upgrade Teng processor ecology, etc.), especially from the reasoning side where the richness of operator support is relatively low, the analysis believes that domestic chips have gradually begun to gain survival space with their superior cost performance. At present, domestic computing chip companies have entered a rapid development stage. window period before growth. At the same time, whether a complete and reliable domestic computing chip supply chain can be built is also one of the core catalytic factors for the future fundamentals and stock prices of companies in the computing chip sector. CICC recommends paying attention to Shengteng industry chain and Haiguang Information, the leader in domestic computing power chips.
Figure 1: AMD recently raised its forecast for the size of the AI acceleration chip market
Figure 2 : According to the latest revision of export control regulations on October 17, 2023, the export of some high-end computing power chips to mainland China is restricted.
Figure 3 : Investment and financing of enterprises in the primary market of mainland China whose main business is large-scale model development
Digital SoC: The pressure to destock old products in the industry has been reduced. Pay attention to the iteration of leading AIoT SoC products.
Looking back on 2023: The TWS industry is leading the pace of recovery. Starting from 1Q23, Hengxuan has achieved year-on-year revenue growth, and the good performance trend has continued for three quarters. Analysts believe that the relatively early recovery of the TWS industry is due to the fact that TWS, as an industry that has emerged in recent years, still has room for growth in its overall penetration rate. The industry growth rate is greater than that of old products such as mobile phones, and at the same time, the downstream destocking pressure is relatively light. In 3Q23, platform SoC leader Rockchip's revenue increased year-on-year. In addition to the impact of the low base in 3Q22, we believe this represents signs of recovery in the AIoT industry as a whole. From the inventory side, Rockchip's inventory dropped in 3Q23 but is still at a high level. CICC speculates that it is mainly due to the stocking of new products such as 3588, and the destocking pressure on old products in the industry has eased.
Looking forward to 2024: With the continuous launch of GPT and other applications recently, many terminals have begun to upgrade their intelligent experience. CICC estimates that artificial intelligence will begin to accelerate penetration around 2023-2024, and AI SoC chips are the hardware foundation for the Internet of Everything. According to estimates, the market space for AIoT SoC is expected to grow from US$7.29 billion in 2021 to US$16.63 billion in 2025. (The calculation does not include mobile phones and edge data centers), the CAGR is 23%. Among them, the smart home, security, smart cockpit, and set-top box markets are relatively large, while the growth rate of emerging application scenarios such as smart cockpit, AR/VR, and ARM PC is relatively high. quick. It is recommended to pay attention to high-end SoC leaders Rockchip and Amlogic Technology, and low-power SoC leader Hengxuan Technology.
Figure 4 : Quarterly inventory of major SoC manufacturers ; Figure 5 : Quarterly revenue and quarter-on-quarter growth rate of major SoC manufacturers
CMOS image sensor (CIS): High-end products are expected to rise in volume and price, and mobile phone CIS has entered an era of comprehensive domestic substitution.
Looking back on 2023: In 2023, due to weak demand in industries such as smartphones, the superimposed industry continues to destock, resulting in price declines. It is reported that most CIS manufacturers' profits are under pressure and revenue growth is slowing down. After more than a year of adjustment in the industry, with the stabilization of smartphone sales and the strong destocking strategy in the early stage, the CIS industry saw an upward trend from the bottom in the third quarter. In terms of quarterly revenue, as of 3Q23, most companies have shown an upward trend from the previous quarter. The analysis believes that as the effect of the decline in foundry costs gradually appears, and industry prices are expected to recover, industry profitability is expected to rise simultaneously (of which Geke Micro's profit decline is mainly due to Factory new depreciation). The inventory value of Weir shares rose rapidly in 2022, began to decline sharply in 4Q22, and has now returned to a relatively reasonable level. Gekewei's inventory is relatively stable, mainly due to the preparation of new products and the counter-cyclical stocking strategy. Sweetway inventory reached a high in 3Q22, then declined quarter by quarter, and is expected to return to a healthy level by the end of 2023.
Figure 6 : Quarterly inventory growth rate of major CIS manufacturers ; Figure 7 : Quarterly revenue and quarter-on-quarter growth rate of major CIS manufacturers
Figure 8 : Quarterly net profit attributable to parent companies of major CIS manufacturers ; Figure 9 : Quarterly gross profit margin of major CIS manufacturers
Looking forward to 2024: We see that the overall market size of mobile phone CIS has stabilized, and the "downregulation" (reduction of rear cameras) in recent years may be coming to an end. As mobile phone terminals enter the stock market, differentiation becomes increasingly important. We believe that manufacturers still regard cameras as a key selling point to improve user experience, and mobile phone brand manufacturers support the continuous upgrade of CIS specifications.
Figure 10 : Penetration rate trends of rear-mounted multi-camera solutions for mid- to low-end models ; Figure 11 : Trends in monthly shipments of domestic mobile phones
Entering the second half of 2023, as demand improves and the share of domestic production increases, high-end CIS will encounter structural shortages on the basis of low inventory. It is expected that domestic OEM production capacity will be tight until the first half of next year, and high-end CIS is expected to Welcome the price increase. On the other hand, the new product breakthroughs of domestic manufacturers continue to exceed expectations. In the field of rear main cameras of flagship phones, domestic CIS has been mass-produced by mainstream brands. Analysts believe that this means that domestic CIS technology has achieved catch-up with overseas countries. Jin is optimistic that in 2024, domestic Android brands will gradually enter the era of full domestic production of CIS chips. Analysts believe that CIS companies are expected to benefit from the acceleration of domestic substitution and the upward trend of the industry cycle. It is recommended to pay attention to Weil, Gekewei, and Smartway.
Figure 12 : 50MP product roadmaps of each manufacturer
Analog chips: Pay attention to the recovery progress of industry structural demand and the recovery of the smartphone industry chain
Looking back at the market, in terms of analog chips, we continue to track the repair situation at both ends of volume and price:
Looking back at 2023:
Shipment: Consumption is gradually recovering, and the industry is still in the stage of destocking. From the perspective of the industry as a whole, global analog chip sales in 2023 will rise from US$6.60 billion in January to US$7.05 billion in October, with an average monthly sales of US$6.76 billion, which is still lower than the average monthly sales of US$7.42 billion in 2022. The domestic analog industry has shown structural differentiation since the third quarter, and the downstream application terminals are as follows:
- The downstream inventories of consumer electronics are becoming healthier, the recovery progress is relatively advanced, and sales have grown rapidly since the third quarter;
- Due to the high overall inventory level in the industrial sector, the destocking process is relatively slow. We believe that it will take time for demand to be transmitted to upstream manufacturers.
- The overall downstream demand for communications is weak, and the destocking progress is relatively slow;
- Automobile demand still maintains a high level of prosperity, and sales levels have gradually improved since the middle of the year.
According to WSTS forecasts, analog chip market sales are expected to reach US$84.06 billion in 2024, a year-on-year increase of 3.7%. Taking into account the recovery progress of various downstream application scenarios, it is expected that demand recovery will still show structural differentiation in 2024. Consumer products are expected to maintain a recovery trend in the first half of the year, and industry, communications and other fields will continue to destock, and overall demand is expected to pick up in the second half of the year.
Figure 13 : Global analog chip shipments and sales in a single month ; Figure 14 : Domestic analog chip sales in a single month (split by downstream applications)
Price: The pace of price cuts by overseas manufacturers is expected to slow down, while domestic manufacturers’ prices are expected to stabilize. Due to overall destocking and intensified industry competition, affected by price cuts by leading overseas manufacturers, product prices and gross profit margins of major domestic analog chip manufacturers will be under pressure in 2023. We believe price pressure is expected to decrease in 2024, mainly due to:
- Price cuts by overseas leading companies are expected to slow down, and product price pressure from related domestic companies is expected to decrease;
- As the destocking process of industry channels advances, domestic manufacturers’ inventories are expected to decline;
- The domestic consumer market is recovering rapidly. Combined with the expansion of automobile and industrial material numbers and the introduction of customers, companies with a relatively high proportion of high-growth applications are expected to achieve ASP recovery.
Looking forward to 2024: We believe that the recovery of downstream demand for analog chips will reach a turning point. At the same time, the logic of domestic substitution still holds true. We suggest paying attention to the timing of low-valuation layout of market leaders:
- In the short term, we will focus on smartphone shipments. The increase in the penetration rate of high-end models is expected to drive the growth of downstream demand for high-power charging management chips, AMOLED display driver chips and other products;
- We expect that the automotive field will maintain a high level of prosperity. The increase in the penetration rate of new energy vehicles and the continued launch of domestic car-grade products are expected to lead to an increase in the volume of car-grade analog chip products;
- Pay attention to the progress of inventory destocking and demand recovery by downstream industries and communication companies. It is expected that inventory will return to health by the middle of the year and usher in a turning point for recovery. It is recommended to pay attention to: Shengbang Co., Ltd., Seripu, and Naxin Micro.
Figure 15 : Changes in delivery time of analog chip agents
In the next issue of sharing, China exportsemi net will analyze in detail the last four market segments in the "semiconductor design sector", namely radio frequency chips, memory chips (including bulk, HBM and modules), MCU, and power devices .
Outlook for Semiconductors and Electronic Components in 2024 (1): Industry Review in 2023
Semiconductor and Electronic Components Outlook 2024 (5): Semiconductor Manufacturing Sector
Outlook for Semiconductors and Electronic Components in 2024 (7): Panel/PCB/Component Sector
