The trend of semiconductor partial order cutting may be difficult to avoid, and the consumer electronics industry chain has become a storm eye

    Guo Mingxuan, a well-known analyst at Tianfeng International, pointed out on the 22nd that the latest survey shows that due to declining consumer confidence and worsening inflation, demand in the consumer electronics market is gradually disappearing rather than delaying.

    The market demand is difficult to boost, and the supply chain has reached a "cold winter".

    Firstly, terminal mobile phone brands have successively reduced their shipment volume. Since March 31st, major domestic Android phone brand manufacturers have cut orders again, with a quantity of approximately 100 million units; At the same time, Samsung has lowered its 2022 shipping target by 10% to 275 million units.

    It is worth mentioning that Nikkei Asia also reported on the 18th that China‘s three major mobile phone brands, Xiaomi, OPPO, and vivo, have notified suppliers that they will cut orders by about 20% in the coming quarters.

    Secondly, among the 5G chips, the two leading companies, MediaTek and Qualcomm, have both reduced their 5G chip orders in the second half of the year, and the latter is also contemplating price reductions to clear inventory.

    MediaTek‘s Q4 orders for mid to low end products have been reduced by 30% -35%; Qualcomm has reduced orders for the high-end Snapdragon 8 series by approximately 10-15%. At present, the shipping estimates for Qualcomm‘s SM8475 and SM8550 remain unchanged, but after the SM8550 is shipped, the existing 8-series (SM8450, SM8475) will be reduced by 30% -40% to clear inventory.

    Guo Mingqian believes that the lead time of 5G chips is longer than that of ordinary components, so from the situation of the two leading companies cutting orders, even the demand for Q1 2023 is difficult to improve.

    In addition, the shipment volume of lenses and CMOS image sensors has also been affected. Guo Mingyi pointed out that the inventory of the top five CIS suppliers of Android phones in China has exceeded 550 million units. At the same time, it is expected that in Q3 of this year, the shipment volume of CMOS lens modules and lenses for Chinese Android brand phones will decrease by 20% -30% year-on-year.

    Overall, both 5G chips and camera related components are key components for mobile phones, while the shipment trend of these two key components for domestic Android phone brands is consistent. This year, consumer electronics may not be thriving in the "peak season". Among them, due to the decline of ASP and the increase in advanced manufacturing process prices, the impact of 5G chip order cutting will be higher than that of camera components.

    According to a report from Taiwan Economic Daily today, due to the continuous decline in quotation, panel driven IC factories have significantly reduced the wafer foundry investment volume, with a range of up to 20% -30%. Some manufacturers have privately revealed that the current environment is not good, and "what should be cut (orders) should still be cut". In order to control inventory, "do not place so many orders in the future".

    Before the epidemic, the lowest prices for IC wafer foundry and low willingness to produce in wafer foundries led to IC becoming an option to "fill the capacity gap". However, under the pandemic, the demand for laptops, televisions, and other products has increased significantly, driving ICs into an instant shortage of supply, and prices have also continued to rise. Industry insiders have pointed out that manufacturers from the first to third tier are vying to catch the price increase train, and even causing the problem of wafer foundry repeatedly placing orders.

    A related manufacturer admitted that when supply was in short supply, the order to shipment ratio (B/B value) was about 1.7-1.8, but now the demand is no longer as before, and they have been forced to cut some orders for wafer foundries. Currently, the B/B value is still around 1.15-1.2; If the order is not cut, the B/B value will be earlier than 1.

    Another driver IC manufacturer has stated that customer orders have not been cancelled, but there is indeed a delay in pulling goods, so currently no orders have been cut for wafer foundries; Another company stated that orders for wafer fabs will be adjusted according to market conditions.

    Since the beginning of the year, there have been concerns in the market that there will be an oversupply of wafer foundries next year.

    Recently, securities firm Morgan Stanley issued a warning that except for TSMC, the capacity utilization rate of all wafer foundries will begin to decline in Q3, and customers may violate long-term agreements, reduce wafer orders, and even experience chip inventory cancellation - in other words, customers may experience a "wave of order cutting".

    Analysts say that the reason why TSMC was able to avoid this crisis is because its advanced processes such as 2nm and 3nm have developed steadily, and the revenue share of automotive semiconductors and HPC has reached 45%, which is sufficient to withstand the impact of a significant decline in consumer electronics demand.