Apple, despite maintaining its position as the best-selling smartphone brand in China in 2023, is currently resorting to drastic measures to boost sales. An unusual promotional campaign featuring significant price reductions has surfaced on the official Chinese Apple website.

Customers using specific payment methods to purchase select Apple products can enjoy discounts of up to 800 Chinese yuan. This promotion includes the latest iPhone 15 series, Macs, AirPods, and Apple Watch.

According to an announcement on Apple China’s official website on the 15th of the month, Apple China is set to launch the “Welcome the Spring Festival Limited-Time Offer” from January 18th to January 21st. Customers who meet certain payment criteria will be eligible for varying discounts.

Taking the iPhone as an example, models like the iPhone 15 Pro, iPhone 15 Pro Max, iPhone 15, iPhone 15 Plus, iPhone 14, iPhone 14 Plus, and iPhone 13 are all part of this promotion, with potential savings of up to 500 Chinese yuan.

For those interested in purchasing the 13-inch or 15-inch MacBook Air (M2), or the 13-inch MacBook Air (M1), the discounts can reach up to 800 Chinese yuan. Other products such as the iPad series, Apple Watch SE, AirPods, and Apple Pencil-related models are also covered under this special offer.

It’s worth noting that this move by Apple is quite unusual, as they rarely introduce such significant price reductions for new products in the same year. For instance, during last year’s Chinese New Year event, only the previous generation models, iPhone 13 and iPhone 13 mini, were included in the promotion.

This is seen as Apple’s effort to boost sales in response to increasing competition, particularly from Huawei, which made a comeback in 2023 with flagship smartphones dominating the high-end Chinese smartphone market.

As Huawei plans to expand its market share in the high-end flagship category this year, targeting the domestic demand in China, coupled with geopolitical factors, this could directly compete with Apple and potentially exert significant pressure on Apple’s production performance in the this year.

Recent reports from Jefferies analysts cited by Bloomberg highlight the impact of the Huawei Mate 60 Pro’s presence and the Chinese government’s ban on iPhones for officials. It is estimated that the sales volume of Apple’s latest products in China in 2024 could decline significantly by 30% compared to the previous year, potentially resulting in a double-digit decline in sales for the entire year.

(Image: Apple)

According to Commercial Times, TSMC, the leading semiconductor foundry, will hold its investor conference on the 18th. Market attention will be focused on eight key questions, including the 2024 full-year revenue forecast, advanced process development, and progress in overseas facility expansion.

Key points of interest for investors include: 1. TSMC’s 2024 full-year gross margin trends and changes in the first and second quarter gross margins. 2. Intel’s aggressive pursuit of advanced processes and how TSMC views it. 3. Chairman Mark Liu’s announcement of retirement in 2024 and whether TSMC’s overseas expansion plans will change. 4. Strategies for expanding advanced packaging production capacity. 5. Annual capital expenditures. 6. Views on the semiconductor industry’s recovery. 7. Trends in utilization rates for each process. 8. Full-year revenue outlook.

The market is closely watching TSMC’s first-quarter gross margin. Morgan Stanley semiconductor industry analyst Charlie Chan pointed out that due to the price reduction for 3-nanometer process foundry services provided to Apple, coupled with the recent appreciation of the New Taiwan Dollar against the U.S. Dollar and accelerated depreciation, TSMC’s gross margin for 2024 is under pressure.

According to industry sources, TSMC may slightly slow down the transition from 5-nanometer to 3-nanometer process equipment this quarter. The lowest point in the annual gross margin may fall in the second quarter, rather than the originally estimated first quarter, meaning that TSMC’s quarterly gross margin will not experience a cliff-like plunge.

As for TSMC’s full-year revenue outlook, after Goldman Sachs and UBS Securities expressed optimism about TSMC’s revenue growth exceeding 20% for the year, JPMorgan Securities also noted that, driven by inventory replenishment, AI demand, and the expansion of the 3-nanometer process, TSMC’s revenue is expected to grow by 20% in 2024. The acceleration from AI accelerators and system-on-chip (SoC) for smartphones will lead to better-than-expected capacity utilization rates for the 5-nanometer and 4-nanometer processes.

(Image: TSMC)

According to a report from IJIWEI, there are recent indications that Huawei’s P70 series and smartphones with smaller foldable screens are set to be launched in the first half of this year, with the Kirin 5G chip making a comprehensive return.

Citing information from a blogger, Huawei’s return to the top spot in China’s market in the first week of 2024 is attributed to the outstanding performance of the Nova 12 series. In addition to this success, the first half of this year will witness the release of new models such as the P70 series flagship for imaging and compact foldable screen devices. The Kirin 5G platform is expected to make a full comeback.

In the first half of 2024, Huawei plans to unveil the P70 series and devices with smaller foldable screens, all powered by the Kirin 5G platform. It is reported that the P70 series will feature the Kirin 9010 chip. Looking at Huawei’s recent releases, the Kirin 5G platform is set to cover a broad spectrum, including the Mate series, P series, and nova series, among other mid-to-high-end product lines.

Analyst Ming-Chi Kuo from TF International Securities revealed that Huawei’s smartphone shipments are expected to reach 60 million units in 2024, making it the fastest-growing brand in the industry. Kuo also mentioned that due to Huawei adopting the new Kirin 5G platform, Qualcomm’s System-on-Chip (SoC) shipments to Chinese smartphone brands are anticipated to decrease by 50-60 million units in 2024 compared to 2023.

(Image: Huawei)

According to a report from IJIWEI, research by Barclays analysts indicates that China’s chip manufacturing capacity is expected to more than double within the next 5 to 7 years, surpassing market expectations significantly. The analysis of 48 chip manufacturers with production facilities in China suggests that 60% of the expected additional capacity may come online within the next 3 years.

TrendForce statistics reveal that, excluding 7 dormant wafer fabs, China currently has 44 wafer fabs, with 25 of them being 12-inch facilities, 4 of them 6-inch, and 15 8-inch wafer fabs/lines. Additionally, there are 22 wafer fabs under construction, with 15 of them being 12-inch facilities and 8 being 8-inch wafer fabs.

Companies like SMIC, Nexchip, CXMT and Silan plan to construct 10 more wafer fabs, including 9 12-inch and 1 8-inch wafer fab, by the end of 2024, bringing the total to 32 large-scale wafer fabs, all focusing on mature processes.

Chinese firms have accelerated the procurement of crucial chip manufacturing equipment to support capacity expansion. According to the previous report from South China Morning Post, the import value of lithography equipment from the Netherlands, a primary exporter, surged by 1050%, reflecting substantial orders for semiconductor equipment from China in 2023.

Barclays analysts suggest that most of the new capacity will be used for producing chips using older technologies. These mature semiconductors (28nm and above) lag behind the most advanced chips by at least a decade but are widely used in household appliances and automotive systems.

While these chips could theoretically lead to a market oversupply, Barclays believes it will take several years, possibly as early as 2026, depending on quality and any new trade restrictions.

Earlier, TrendForce released statistics projecting a global ratio of mature (>28nm) to advanced (<16nm) processes around 7:3 from 2023 to 2027. With China’s mature process capacity expected to grow from 29% to 33% by 2027, driven by policies promoting local production, giants like SMIC and HuaHong Group are anticipated to lead the charge, potentially causing a flood of mature processes into the global market and triggering a price war.

TrendForce notes that as China’s mature process capacities emerge, localization trends for Driver IC, CIS/ISP, and Power Discretes will become more pronounced, leading to risks of client attrition and pricing pressures for second and third-tier foundries with similar processes.

Various countries are actively developing their semiconductor industries, with Taiwan’s semiconductor foundries, including TSMC, UMC, and PSMC, becoming prime targets for local manufacturing facilities. TSMC has established plants in the United States, Germany, and Japan, while PSMC, in addition to its facility in Miyagi-ken, Japan, has recently announced plans to assist India in building a factory.

However, for these Taiwanese semiconductor foundries, expanding overseas may not always prove to be a economical choice.

According to Taiwan’s Economic Daily News, PSMC Chairman Frank Huang revealed that 7 to 8 countries have invited the company to establish manufacturing facilities in their respective regions. However, the costs in these countries are higher than those in Taiwan.

Huang pointed out that, based on the data they have, the cost of building a fab in Japan is 1.5 times higher than in Taiwan, with construction costs being 2.5 times higher and operational costs 50% more expensive than in Taiwan. It would take 7 to 8 years for the combined construction and operation to become profitable, meaning the factory would only start making money three years after its establishment. In contrast, PSMC’s Fab P5 in Tongluo Science Park is expected to break even this year.

PSMC had already disclosed plans to assist India in technology transfer for building a fab in early 2023. Huang explained that because South Korea and the United States are unwilling to teach others how to make semiconductors, neither TSMC nor UMC are offering such assistance, leaving PSMC as the go-to option for those seeking guidance in semiconductor manufacturing.

The countries reported to have sought PSMC’s assistance in building fab include Japan, Vietnam, Thailand, India, Saudi Arabia, France, Poland, and Lithuania.
According to TrendForce research, PSMC is the third-largest semiconductor foundry in Taiwan and ranks 10th globally. It announced its investment in a 12-inch factory in Miyagi-ken, Japan, at the end of 2023.

Similarly, TSMC, the leading foundry based in Taiwan, faces similar challenges when expanding overseas. In early 2023, TSMC executives stated during an earnings conference that due to factors such as labor costs, permits, regulatory compliance, and rising living prices, the cost of setting up a plant in the United States is at least four times higher than in Taiwan.

However, beneath the economic considerations, geopolitical factors play a significant role in these decisions. The ongoing regional shift in the semiconductor industry supply chain is inevitable in the current geopolitical climate.

(Image: PSMC)