Semiconductor: production capacity continues to be tight the price of chip Q4 rises again

The shortage of production capacity continues, and the price of chip manufacturer Q4 rises again. On September 27th, STMicroelectronics issued a notice, taking into account the continuing impact of shortages in the semiconductor supply chain, no signs of recovery in the short term, and the increased costs of some key supplies (contract manufacturing, raw materials, logistics, etc.), as well as the company's heavy investment, the company will start the third round of price increases this year in 2021Q4 (the first two rounds are in January and June), including all products in existing inventory. In addition, according to ittbank statistics, Cylins, Molex, on Senmei, Broadcom and others have also announced the price increase of Q4 one after another. In Taiwan, MediaTek, Ruiyu, Xiangshuo, Xinhua and Lianyong have confirmed that 2021Q4 or 2022Q1 will start to raise prices. Among them, the price of MediaTek's WiFi chip has increased since November (more than 30% for specific materials), Ruiyu's price has increased by 15% since October, Xiangshuo's whole product price has increased by 20% in January next year, Xinhua Q4 has increased by 10%, Lianyong's SoC price has increased by 10% in October, and IC has been driven by 5% and 10% in November. In mainland China, Ziguang Zhanrui has announced an across-the-board price increase of 25% for its wearable product line Q4. Prior to this, wafer foundry TSMC and UMC have successively raised wafer prices, and there is the possibility of further price increases. Higher wafer costs and demand shortages may stimulate downstream chip manufacturers to further increase prices.

The supply of PMIC for mobile phones is still tight, and domestic manufacturers are expected to benefit. DIGITIMESResearch predicts that global shipments of PMIC for smartphones will reach 9.41 billion in 2021, an increase of 26.7% over the same period last year, and is expected to maintain strong growth from 2022 to 2023, with growth rates of 29.9% and 26.0%, respectively. Demand side: 5G mobile phones continue to infiltrate, while mobile phones are compatible with 2G, 3G, 4G and 5G (Sub-6G and millimeter wave) bands, the number of RF front-end chips and modules has increased, and the demand for stand-alone PMIC has increased significantly. In addition, the demand for large size, high resolution and high refresh rate increases the demand for display-driven IC, the limited battery capacity and the accelerated power consumption of the whole machine increases the demand for fast-charging chips, and the upgrade of front and rear camera lens specifications increases the demand for camera PMIC. Supply side: on the one hand, the smartphone PMIC mostly uses the BCD process of 0.11 inch 0.18 micron, the production capacity is concentrated in 8 inches, and the 8-inch BCD production capacity is currently in shortage, while the production capacity from 8 inches to 12 inches is difficult to open in a short time, so production capacity will continue to be tight. On the other hand, PMIC, which is bundled with Qualcomm and MediaTek's two major application processor platforms, faces the risk of being out of stock, so it is reducing the proportion of bundling sales and releasing some material numbers, providing alternative opportunities for international big companies such as ST and Meisin, as well as domestic manufacturers such as Shengbang, Ai Wei Electronics, and Nanxin.

Although there is a certain structural differentiation in the demand for semiconductors, the overall situation is still in a state of high demeanor and tight supply and demand, and there are no signs of easing or loosening of production capacity this year. The demand of the original stock market is stable, the upgrading of applications such as 5G, new energy, photovoltaic and "new infrastructure" brings incremental demand, and the semiconductor content of a single terminal product increases. At the same time, localization has been vigorously promoted, and foundry and IDM have continued to expand production to meet incremental demand, so the upstream and downstream of the local semiconductor industry chain has fully benefited and has a strong and long-term growth momentum. Consumer electronics:

IPhone13 buying power is strong, optical manufacturers layout new application Daliguang held a 21Q3 meeting on October 7th, Q3 revenue increased 18% month-on-month, down 19% from the same period last year, after-tax EPS fell 23% Q3 gross profit margin 59.3%, falling below 60% for the first time in five years. Lin Enping, CEO of Da Liguang, said that at present, the demand in September, October and November is similar, the problem of long and short materials in the customer supply chain still exists, and the product portfolio in the fourth quarter is expected to be similar to that in the third quarter, while the introduction of high-end lenses may have to wait until next year. In recent years, due to the slightly weak optical upgrade of mobile phones, major optical manufacturers have laid out new applications such as vehicles and VRAR to preempt the next wave of new momentum. The iPhone13 series has been on sale for two weeks, and sales momentum is still strong. In addition to some versions of iPhone13 mini and iPhone13 available in China, orders for the Pro series have been scheduled for November. Due to the tight supply chain and other reasons, the production volume in the third quarter was lower than expected, making the iPhone13 series likely to become the product with the longest waiting time for users in recent years. Apple has not lowered its full-year inventory guidelines, reflecting confidence in the recovery of its supply chain in the fourth quarter. We are optimistic about the stock and sales momentum of Apple's new products, as well as the long-term growth trend of Apple's industrial chain.

Passive components:

The shortage is expected to be alleviated, and it is suggested to focus on the supply side of industry, new energy, servers and other areas: the Malaysian government is vigorously promoting universal vaccination, and Q4 is expected to restore productivity, superimposed by mainland Chinese manufacturers to expand production and release capacity. the shortage of passive components will be alleviated. Demand side: mobile phones, wearable and other consumer electronics ushered in the traditional peak season, the demand is high. At the same time, the promotion of 5G base station construction, the improvement of the permeability of new energy vehicles, the growth of industrial demand, driving the growth of demand for passive components, it is suggested that attention should be paid to industry, new energy, servers and other fields. At present, passive components are still in the upstream channel, domestic passive component enterprises release new production capacity and expand market share, which will continue to benefit. Investment advice:

Consumer electronics: Lixun Precision, Gale shares, Changying Precision;

Semiconductors: Silipu, Shengbang, Xinpenwei, Lanci Technology, Jingchen Co., Ltd., Shilan Micro, Zhaoyi Innovation; equipment: medium and Micro, Core Source Micro, to Pure Technology;

Materials: Chinachem Technology, Shanghai Silicon Industry;

Passive components: Sanhuan Group, Shunluo Electronics, Fenghua Hi-Tech.

Risk Tips:

The risk of escalation of Sino-US trade / technology friction; 5G application is not as expected; lack of components causes terminal shipments to fall short of expectations; risk of rising raw material costs.