“Probably the most shortage of equipment now is the nitrogen cabinet.” The head of a packaging and testing equipment manufacturer laughed bitterly. In the second quarter of this year, the global semiconductor market revenue reversed after eight consecutive quarters of growth and declined for the first time. Prior to this, the trend of structural differentiation has been evident, on the one hand, the consumer electronics demand sluggishness forced the channel to start clearing inventory, the previous part of the chip was bursting with speculation, the channel price began to fall; on the other hand, the supply of automotive electronics and other semiconductors is still tight, and even face pressure to increase prices.
The prosperity of the semiconductor equipment industry has continued since 2021. After IC design takes the lead out of the inflection point, how long can the prosperity of the equipment industry continue?
The prosperity of semiconductor equipment is structurally differentiated, and the packaging and testing market is at an inflection point
The packaging and testing end closest to downstream applications took the lead in showing a decline at the end of last year. Especially in recent years, the packaging and testing industry has invested heavily in expanding production. In the context of the continuous opening of new production capacity and the slowdown in upstream market demand, packaging and testing will be carried out in the first half of 2022. The industry has experienced a decline in order volume and insufficient capacity utilization, especially manufacturers that focus on driver chips and mature wire-bonding packaging businesses.
“In the second quarter, the performance of packaging plants has generally declined, and the test plants are relatively better, but they are not good now. A large number of wafers that have been prepared are stored in the test plants so that it is rumored that nitrogen cabinets are in short supply.” The above-mentioned person in charge pointed out.
The function of the nitrogen cabinet is mainly to use the nitrogen inside the cabinet to create an atmosphere of inert gas to prevent the oxidation of oxygen-loving and hydrophilic items in the air. It can be used to store precision components such as semiconductor wafers, wafers devices, moisture-proof and oxidation-proof. The popularity of nitrogen cabinets is in sharp contrast to the downturn in the packaging and testing market. “The economy has changed. Many packaging and testing plants have basically pressed the pause button for their production expansion plans. The capacity utilization rate of existing production lines is declining. Some plants have been built and will not be equipped for the time being.” The person in charge revealed, “The packaging and testing factory stopped first, and the professional testing factory has also stopped now.”
Another industry observer pointed out that, due to the lack of crop rate of the packaging and testing plant, even if the equipment into the plant at this time will not be the first time to sign off, may plant services will be delayed or acceptance cycle extended, resulting in equipment plants to confirm revenue slower.
It can be predicted that the semiconductor industry in the repeated epidemic, the global supply chain changes, the triple impact of economic weakness, the previous glory of semiconductor equipment supply also began to appear structural divergence.
Just because the semiconductor equipment delivery cycle is long, downstream customers usually pay a portion of the deposit in advance, forming a contractual liability, the change in this data can be seen as an indicator of the company’s order growth rate, which is also an indicator of future growth potential. As of the first half of this year, among A-share listed semiconductor equipment companies, OPTOTECH, Huafeng Measurement & Control and Changchuan Technology in the field of packaging and testing had the slowest growth in contract liabilities, at -21.6%, 4.1% and -13.8% respectively, with Huafeng Measurement & Control and Changchuan Technology showing a decline.
In this regard, China Peak Measurement & Control explained in the performance presentation that the order growth rate showed a downward trend year-on-year since April, which is due to the overall confidence degree of the industry on the one hand and the declining demand of the packaging and testing plants on the other.
As for the leading foreign packaging and testing equipment, the U.S. Teradyne lowered its net profit forecast for next year by 25% after July, Japanese wafer cutting machine leader DISCO lowered by 6%, and Edelman also lowered by 3%.
For the boom turning point of packaging and testing equipment, another industry insider pointed out that the supply shortage and localized production in the past year or so have driven the expansion wave, and now demand is cooling, chip supply conditions are slowing down, and the market is gradually returning to rationality. He expects that the future expansion curve may turn from “steep” to “flat”, the turning point in the first half of next year. “With the gradual delivery of orders in hand, the amount of revenue recognized by equipment manufacturers will then be greater than the number of new orders.”
Wafer foundry equipment demand is still strong, but also full of complex variables
In the packaging market is a woe, at the same time, the foundry market demand for equipment is still climbing.
The latest data from SEMI shows that in 2022, global fab equipment spending is expected to grow by about 9% year-on-year to reach a record high of $99 billion, and will continue to be healthy next year. The agency pointed out that this year, a total of 167 fabs and production lines for capacity expansion, the proportion of equipment spending capacity expansion accounted for more than 84% of the overall equipment spending, is expected to continue to enhance the capacity of 129 fabs and production lines next year, accounting for 79% of the overall equipment spending ratio.
However, compared to the beginning of the year estimated 109 billion U.S. dollars, SEMI’s latest forecast down by more than 9%, highlighting the semiconductor market into the boom correction cycle, manufacturers slowed down the pace of investment, making the increase less than expected.
Although TSMC, Intel, Micron, Samsung and other major manufacturers have recently announced a number of factory construction plans, but with the industry chain inventory pressure increases, but also affects their equipment investment plans.
For example, Intel’s 2022 equipment investment is 15% less than previously planned; Micron CFO Murphy said it may reduce investment in chip front process equipment; SK Hynix said one of the options for 2023 is to significantly reduce the amount of equipment investment. From the second quarter results, the major semiconductor equipment suppliers U.S. Applied Materials and Panlin Semiconductor’s net profit forecast for the next fiscal year after July were lowered by 10%.
Japan’s major equipment companies for fiscal year 2023 net profit is also generally lowered, compared with the end of June, the largest decline is TEL, 14%, and SCREEN for 11%; if you add Disco and Edelman is expected to four companies in the fiscal year 2023 net profit than the current fiscal year, the market is expected to reduce 6 to 9%, and forecast to bottom out in the second quarter or three quarters of 2023.
Despite the semiconductor cooling, but many equipment manufacturers still have some confidence in the second half of the year and next year, mainly because the orders on hand are still maintained at a high level, it takes some time to fully digest. For example, lithography equipment leader ASML, despite the release of the second quarter earnings when the annual revenue growth is expected to be adjusted from 20% to 10%, the company’s global senior vice president, president of China Shen Bo still stressed that the current semiconductor market is showing a trend of structural adjustment, but the impact on ASML is not obvious, the market demand, as always, exceeded its capacity level, the future will continue to expand production capacity.
The speeding up of the localization process of China’s semiconductor industry obviously still has a strong demand for semiconductor equipment. According to incomplete statistics, only SMIC, Hua Hong Group, Changjiang Storage, and Hefei Changxin four fabs will have a combined future expansion capacity of more than 1 million wafers/month. SMIC recently launched a new 12-inch wafer foundry production line in Tianjin, with a planned capacity of 100,000 wafers/month, further validating that the boom in the local semiconductor equipment industry is expected to continue.
According to the statistics of Jiwei Consulting, in August, the fabs (including the special process production line of Jita Semiconductor, Hua Hong Wuxi, Hua Hong Grace, Huali Microelectronics, Fujian Jinhua, Hangzhou Jihai Semiconductor 12-inch project, Shanghai New Li, Shanghai Lingang Compound Semiconductor 4/6-inch project, Beijing Yandong Microelectronics, Chengdu high-end power semiconductor device and component project, Xi’an Yisiwei Silicon Industrial Base, Zhuzhou CRRC Times Semiconductor, etc.) in the bidding, the total number of domestic equipment manufacturers 329 sets of equipment won the bid, accounting for 33.6% of the total number of bid-winning equipment. It can be seen that the verification/import process of domestic semiconductor equipment is accelerating.
Tuojing Technology emphasized to Jiwei.com at the recent shareholders meeting that the expansion of domestic fabs provides opportunities for equipment factories, and equipment and materials are showing an upward trend against the trend.
A key account manager of a domestic front-end equipment manufacturer told Jiwei.com that the demand for equipment from domestic fabs is still very strong, but considering the introduction of the US chip bill, the “Chip 4” alliance and other geopolitical factors, as well as the actual situation of various fabs The demand for equipment also shows differences.
“For some domestic fabs that may be on the verge of being sanctioned by the United States, their priority may be to place orders for imported equipment manufacturers as soon as possible to ensure subsequent steady expansion. For example, if their long-term monthly production capacity planning target is 110K, they may first the target of about 60K is sent to imported equipment, and there is a long-term delivery as a backup. Secondly, some domestic equipment will be gradually added, and the two aspects will be interspersed.” He revealed, “Other production lines do not have this concern, such as the fab in the Bay Area. , their attitude towards domestic equipment will be more positive.”
write at the end
Although the environment of the semiconductor “seller’s market” is changing, the demand for front and rear equipment is ushering in different degrees of prosperity.
In this case, Wang Hui, chairman of Shengmei Shanghai, bluntly said that counter-cyclical investment is very important for semiconductor equipment manufacturers. “For a long time in the past, the market saturation of TSMC, Samsung or Intel was more sensitive, and they felt more cyclical, so they dared to make some counter-cyclical investments. But mainland Chinese companies, more it is still in the stage of catching up in technology and ramping up production capacity, and the mainland has a very large chip market, and the prosperity cycle of local semiconductor companies will be longer than that of the international market when the completion of localization is not high.”
After all, driven by various new applications, the demand for semiconductors continues to grow, and after the inventory adjustment is completed, there will always be a day of “No Extreme Tailai”.
