From December 2023 to January this year, media reports revealed that five Chinese domestic power semiconductor manufacturers, including JJMicroelectronics, Sanlian Sheng, Sicilian Blue Color Electronics, Genesis Microelectronics, and Shenwei Semiconductor, have successively issued price adjustment notices to raise prices for their products.

The current significant reduction in power semiconductor inventory, coupled with signs of a gradual recovery in end-user demand, raises the question of whether the power semiconductor industry has hit rock bottom and is now rebounding.

Within a month, five Chinese power semiconductor companies consecutively issued price increase notices.

On January 14th, JJMicroelectronics sent a “Price Adjustment Notice” to customers, announcing a 5%-10% increase in unit prices for its Trench MOS product line starting from January 15, 2024. The reason for the price hike was stated as ” Due to prolonged losses, the existing prices have become insufficient to meet regular supply demands. In order to ensure the continuous delivery of products with stable and reliable quality, as well as high-quality services, prices are increased.”

On January 9th, Shenwei Semiconductor issued a notice stating that the past three years have been a challenging period for the entire semiconductor industry. Lackluster market demand led to malicious competition, continuous decline in product prices, and industry-wide competition causing frequent quality incidents. The company announced adjustments to packaging series prices for new orders, with increases ranging from 10% to 25%.

Sanlian Sheng Power Half Guide also recently released a price adjustment notice, citing significant increases in raw material and labor costs as reasons for a substantial cost increase beyond the company’s tolerance. After careful consideration, the company decided to increase the unit prices of its entire product line by 10%-20% starting from January 1, 2024.

On December 29, 2023, Sicilian Blue Color Electronics announced a product price adjustment notice, attributing the decision to continuous increases in upstream raw material prices and labor costs. The company’s existing prices were deemed insufficient to meet supply demands, leading to a careful decision to raise the unit prices of its entire product line by 10%-18% starting from January 1, 2024.

Genesis Microelectronics was the earliest to release a price increase notice. Industry rumors about Genesis Microelectronics price adjustment letter circulated on December 15, 2023, indicating a 10%-15% increase in prices for chips starting from January 1, 2024.

Some industry experts commented on the price increase notices, stating that with the current depletion of inventory and long-term losses incurred by companies, price adjustments are understandable.

What is the reason behind this round of price hikes, and is there sufficient momentum for future developments?

Over the past two years, sluggish market demand has led to malicious competition, especially in the discrete device segment, where severe competition has resulted in companies experiencing increased revenue but not increased profits.

Regarding this round of price hikes, several listed power semiconductor companies have stated that the overall prices of their power products are stable, and there have been no significant changes in downstream market trends recently.

Industry analysts believe that the recent wave of price increases in the power semiconductor market is a self-rescue measure for some companies that have no other choice.

Large and medium-sized power semiconductor companies can maintain price stability by binding with high-quality industry-leading customers to secure order volumes. In contrast, smaller factories appear more passive, forced to compete in the market with low profit margins to secure orders, making them vulnerable to inflationary pressures.

Looking at the development of the power semiconductor market in 2024, many industry professionals and institutions currently do not have high expectations. According to TrendForce statistics, major power semiconductor manufacturers and IDM, including Infineon, STMicroelectronics, ON Semiconductor, Wolfspeed, and Renesas, have experienced a continuous decline in revenue in the third quarter of 2023, with inventory levels still relatively high. Additionally, the relevant components in the automotive sector are still in the destocking phase. Due to the late start of destocking for automotive semiconductors, this downward cycle is expected to persist for some time.

Industry experts state that the main demand for power semiconductors is currently in the consumer/industrial sector, but the visibility in this area is still unclear. Overall, the short-term outlook for the power semiconductor industry may not see a reversal in prosperity.

(Image: JJMicroelectronics)

According to a report by TechNews, Taiwan has introduced its largest-ever investment deduction incentives under the “Statute for Industrial Innovation,” often referred to as the “Taiwanese Chip Act.” Articles 10-2 and 72 of the statute came into effect, and the Ministry of Economic Affairs announced that it would accept company applications from February 1 to May 31 this year.

The Ministry of Economic Affairs stated that applications for deductions would be accepted starting February this year. The provided tax incentives include a 25% deduction for research and development expenses and a 5% deduction for expenditures on acquiring new eqipment for advanced processes, all of which can be deducted from the current year’s corporate income tax.

Eligibility criteria include companies with research and development expenses of at least NT$6 billion, a research and development density of 6%, and expenditures of NT$10 billion for the purchase of equipment for advanced processes, with no restrictions on industry category.

The Ministry of Economic Affairs emphasized that as the parent law already specifies an effective tax rate of 12% for the fiscal year 112 and a threshold of 15% from the fiscal year 113 onwards, this measure aims to encourage businesses that do not meet these tax rate qualifications to strive for them and become eligible for tax incentives.

A review panel will be formed to assess whether applying companies meet the criteria for a critical position in the international supply chain and other qualification requirements.

The Ministry of Economic Affairs shared that the application period for Article 10-2 of the Statute for Industrial Innovation is from February 1 to May 31 this year. Companies are required to provide explanatory documents and supporting evidence, including data on products, international market share, rankings, import-export trade, and other statistics, serving as indicators for the assessment of technological innovation and critical positions.

According to the financial reports of publicly listed companies in 2022, including TSMC, MediaTek, Realtek, Novatek, Delta Electronics, Nanya Technology, Phison and Winbond, their research and development expenses and research and development density all meet the application thresholds.

(Image: TSMC)

In response to the recovery in the memory market and the increasing demand for High Bandwidth Memory (HBM) driven by AI chips, South Korean memory giant SK Hynix is reportedly planning to upgrade part of its DRAM production equipment at its Wuxi plant to the fourth-generation of 10-nanometer process this year.

According to a report by Seoul Economic Daily, the Wuxi plant is a core production base for SK Hynix, contributing approximately 40% of its total DRAM production. Currently, the Wuxi facility is producing second and third-generation DRAM, which falls under the category of older products in the late 10-nanometer class.

As the semiconductor market enters a recovery phase, the expansion of SK Hynix’s high-performance chip capacity has become urgent. To maintain its market share in the High Bandwidth Memory (HBM) market, SK Hynix needs advanced products such as the fourth-generation of 10-nanometer DRAM or higher versions.

According to a previous TrendForce press release, in terms of competitive positioning, SK Hynix’s HBM3 products are leading other manufacturers and serve as the primary supplier for NVIDIA Server GPUs. Samsung, on the other hand, focuses on meeting orders from other cloud service providers.

SK hynix’s fifth-generation HBM (HBM3E), which began mass production in the first half of this year, has a maximum capacity of 36GB (288Gb) in its next-stage product. It achieves this through stacking 12 chips of 24Gb DRAM. In 2022, SK hynix first adopted the fourth-generation DRAM process to realize 24Gb DRAM. HBM3E requires the use of the fourth generation or higher versions of the DRAM manufacturing process to meet customer demands.

SK Hynix, in response to increasing HBM3E orders from key customers like NVIDIA, must find ways to convert the Wuxi DRAM process in addition to utilizing the capacity of its Icheon headquarters factory.

SK Hynix has been using Extreme Ultraviolet (EUV) lithography since the production of the fourth-generation of 10-nanometer DRAM. However, due to the inability to introduce EUV exposure equipment to Wuxi, the production of this DRAM becomes challenging. Notably, constrained by U.S. restrictions on the export of EUV exposure eqipment to China, transitioning the Wuxi plant to the fourth-generation of 10-nanometer DRAM and beyond will pose a significant challenge.

The report indicates that SK Hynix plans to complete part of the fourth-generation DRAM process on the Wuxi production line, then transport the chips to the Icheon plant for EUV application, and finally return them to Wuxi to complete the entire process. SK Hynix has experience with a similar approach during the Wuxi plant fire in 2013, overcoming disruptions in DRAM production.

Regarding the rumors about the Wuxi plant upgrade, SK Hynix stated that it cannot confirm the specific operational plans for the factory.

(Image: SK Hynix)

According to recent reports, Huawei is expected to unveil its flagship P70 series later this year, alongside the introduction of the new Kirin 9010 chipset. However, there are indications that the older Kirin 9000S might be utilized in a specific model.

Wccftech suggests that the P70 series will include the P70, P70 Pro, and P70 Art, followed by the Mate 70 series. Notably, not all P70 models will feature the new Kirin 9010.

As per insights from the Weibo account Smart Pikachu, the P70 series will boast a custom curved display that is easy on the eyes and power-efficient but lacks a 2K resolution, and the standard version of the P70 is tested with the Kirin 9000S. This may potentially impact the motivation for users who have already purchased the Mate 60 and might not find sufficient reasons to upgrade to the P70.

Wccftech suggests that the adoption of the 9000S in some models could be attributed to the limited supply of the Kirin 9010. The Kirin 9000S, produced by SMIC using a 7nm process, faces production challenges due to the use of older-generation DUV equipment, resulting in a time-consuming and costly manufacturing process with lower yields.

Despite this, there is a glimmer of hope for Huawei’s pricing competitiveness, as the production cost of the Kirin 9000S is expected to be lower than that of the Kirin 9010. This cost advantage could potentially contribute to Huawei’s goal of reaching an estimated shipment volume of 100 million smartphones in 2024, especially considering the company’s historical strength in offering competitive pricing for its base models.

(Image: Huawei)

According to a report by China’s financial media outlet Yicai, in 2023, China’s import quantity and value of integrated circuits experienced a significant decline, influenced by factors such as the overall downturn in the global chip market and the U.S. ban on the sale of chips to China.

The latest data from the Chinese Customs Administration indicates that in 2023, China imported a total of 479.5 billion integrated circuits, a 10.8% decrease compared to 2022, with an import value of $349.4 billion, marking a 15.4% year-on-year decline.

Industry experts suggest that the soft importation of integrated circuits and semiconductor equipment in China reflects the global economic headwinds in 2023, especially the impact of sluggish sales of Chinese smartphones and laptops. Simultaneously, Chinese companies are striving to increase domestic chip production to reduce dependence on imported chips.

Despite the time required for China to achieve mass production in the field of artificial intelligence chips, the push by the Chinese government to establish a more resilient chip supply chain has motivated local manufacturers to actively increase production capacity in mature nodes. These chips are used in devices such as automobiles and home appliances, unaffected by the current U.S. restrictions.

Public information reveals that SMIC, Hua Hong Group, and Nexchip are among the most active in expanding production, focusing on specialty processes such as driver ICs, CIS/ISP, and power semiconductor ICs.

With China’s significant investment in mature nodes, it is positioned at a time when the global chip industry is poised for recovery. According to a recent TrendForce’s data, China currently has 44 operational semiconductor wafer fabs, with an additional 22 under construction. By the end of 2024, 32 Chinese wafer fabs will expand their capacity for 28-nanometer and older mature chips.

TrendForce predicts that by 2027, China’s share of mature process capacity in the global market will increase from 31% in 2023 to 39%, with further growth potential if equipment procurement progresses smoothly.

(Image: SMIC)