Chip price "avalanche"? Return to rationality after soaring!

Source: New Express

    Once upon a time, it was hard to find a core, and the price rose sharply all the way;

    Nowadays, the price of some chips is only one tenth of the highest
    The recent "avalanche" of some chip prices has stirred the chip industry to a sigh of regret.

    The two chips of ST have become the "representatives" in media reports. One chip has risen to the highest of 3500 yuan, and now it has dropped to about 600 yuan. The other chip has dropped from about 200 yuan to 20 yuan, only one tenth of the highest price.

    Suddenly, the topic of "price avalanche of multiple chips" hit the microblog hot search, attracting countless melon eaters.

    Over the past two years, reports of "core shortage" have been overwhelming, and the problem of chip shortage has almost become the biggest anxiety of all industries. The chip is seriously out of stock, and it is hard to find one chip. The price rises sharply every day.

    One of the main reasons behind the sharp drop in chips is the sharp drop in the shipment of mobile phones and PCs, as well as the high inventory caused by hoarding. Since 2022, the consumer electronics market has continued to decline, and the shipments of smart phones, PCs, tablets and other electronic products have declined all the way, which will eventually be transmitted to the chip supply chain, triggering a trend of chip cutting.

    Although the chip price has plummeted recently, it is not the traditional "price reduction", but more a rational fall after the crazy rise of the chip price.

    The "jumping machine" like market in the above report seems to be breathtaking, but in the eyes of senior chip industry people, it seems just so. Because, how crazy the rise is, how tragic the fall is.

    Although the chip price has dropped dramatically, the prices of most chips are still higher than the normal prices when the chip supply and demand crisis broke out in 2020. For the two Italian French semiconductor chips mentioned above, the price of the one that has been reduced to about 600 yuan will be lower than 10 yuan in 2020. Although the price of the other chip has dropped to 20 yuan, its normal price will only be lower. Normal price refers to a price state in which the market is stable and supply and demand are balanced.

    As we all know, the chip industry is a natural cyclical industry. Judging from the soaring market in 2021, the price of single digit rose sharply to 200 yuan in the early days, and now it has dropped to 20 yuan. The ups and downs are a reflection of the downstream demand‘s transition from prosperity to decline over a period of time, and most general-purpose chips in mature processes have also experienced a cycle from shortage to relief.

    The current decline in chip prices is also in line with the cycle law of the semiconductor industry. Generally speaking, the semiconductor industry will cycle between prosperity and development and severe recession. The general cycle is four years. A complete chip cycle generally includes seven stages: demand explosion, price rise due to shortage, investment expansion, gradual release of capacity, shrinking demand, overcapacity, and price decline.

    Since 2019, the semiconductor industry has entered a boom cycle. The last boom cycle has lasted for three years. Since the beginning of this year, the semiconductor industry has shown signs of shrinking demand.
    In June this year, a report by Jefferies Group, an investment bank, believed that, in view of the previous lack of core, repeated orders and overheated expansion of production investment in the whole industry, as well as the current slowdown in demand caused by the new coronal pneumonia epidemic and high inflation, "the semiconductor industry may experience an industry downturn in the second half of 2022 or early 2023."

    Obviously, since 2022, the chip has entered the downward cycle. Of course, it is still downward, far from the bottom. When and to what extent will the bottom appear?

    Recently, Future Horizons, a well-known analyst, issued a data that indicates that the market will probably fall to the bottom in 2023, that is, next year. Compared with 2022, the market will decline by nearly a quarter (25%). The decline of 25% is also the largest decline in the semiconductor industry since the Internet bubble in 2000.
     ■ Interview: Chen Xuedong, reporter of New Express News ■ Picture: Liao Muxing