Market trend

• Macro trend: The global economy has generally recovered slightly recently, and the chip market is expected to grow by more than 20% year-on-year in 24 years.

• Industry trends: NVIDIA data center business revenue surges 409%, AI opens up space for performance growth

• Terminal market: AI large models continue to iterate and lead hardware changes, and the AI chip track will reach the trillion mark; the European automobile market will continue to decline in the short to medium term.

• Product Market: Memory sales growth may exceed 70% this year, HBM's boom is on the rise; the MCU market will remain weak in the short term

01 Macro dynamics overview

1. Economic boom tracking

The global economic boom is on the rise, China's high-end manufacturing industry continues to grow, and the United States is lower than market expectations.

In February 2024, according to JP Morgan data, the global manufacturing PMI was 50.3, rising back above the boom-bust line.

Looking at it by region:

In Asia, China's manufacturing PMI is still in the contraction range, and its performance is lower than the same period last year; however, the high-tech manufacturing PMI is 50.8, remaining in the expansion range for four consecutive months, and the industry continues to grow. Japan's manufacturing PMI continues to weaken, while South Korea's economy performs relatively strongly. Benefiting from the transfer of industrial chains in Western countries and the support of local industrial policies, the prosperity of India's manufacturing industry continues to improve.

In the Americas, the U.S. ISM manufacturing PMI was only 47.8, significantly lower than market expectations and the previous value. It weakened again after rebounding for two consecutive months. Mexico's manufacturing PMI has been above the boom-bust line for many consecutive months, and growth momentum continues.

In Europe, the Eurozone manufacturing PMI is still in the contraction range, and economic performance continues to be weak.

2. Industry demand dynamics

The global semiconductor market continues to pick up, with China's growth performance impressive and demand in Japan and Europe weak.

In January 2024, affected by the off-season cycle of the industry, global semiconductor sales declined month-on-month, but increased by 15.2% year-on-year, and market demand performed better than the same period last year. From a full-year perspective, according to the latest forecast from Techinsights, the semiconductor market is expected to grow by nearly 24% year-on-year.

Looking at it by region:

In the Asia-Pacific region, the overall market demand performed well, with a year-on-year growth rate of 16.1% and a market share of 64.2%. Among them, China’s growth rate is impressive (+26.6% year-on-year). Affected by the earthquake and economic downturn, demand growth in Japan has hit a trough (-6.4% year-on-year), accounting for 7.71% of the global market, showing a downward trend.

In the Americas, market demand continues to recover and grows rapidly (+20.3% year-on-year). This may be due to the U.S. Chip Act's support for industry development, and the Mexican market continues to attract foreign industrial investment, resulting in increased chip demand.

In Europe, sales fell slightly year-on-year, mainly due to the decline in overall economic prosperity, including the recent weak demand growth in the automotive industry.

3. Capital market dynamics

The Fed's slowdown in interest rate cuts may impact chip import and export trade

In February 2024, the interest rate on 10-year U.S. Treasury bonds continued to rise as a whole, mainly due to the recent continued issuance of U.S. Treasury bonds and the imbalance between supply and demand. On the other hand, the Fed's slowdown in interest rate cuts will keep interest rates relatively high, lift the U.S. dollar exchange rate, and continue to impact chip import and export trade.

4. Industrial policy trends

The United States has increased sanctions on SMIC, but the overall impact is limited

The United States is reportedly increasing pressure on Chinese chipmaker Semiconductor Manufacturing International Corp. to cut off its factories from the opportunity to import more products from the United States.

India approves the construction of three semiconductor factories to serve the fields of defense, automobiles and telecommunications

Recently, India has officially approved Tata Group, CG Power and other companies to build three semiconductor factory projects with a total investment of 1.26 trillion rupees (approximately US$15.2 billion) to achieve the goal of becoming an electronics power. Among them, one factory that Tata Group cooperates with Power Semiconductor Manufacturing Co., Ltd. is a wafer factory, and the other two are packaging and testing factories, which produce and package chips for industries such as national defense, automobiles, and telecommunications.

Japan will provide financial subsidies for TSMC's second factory to consolidate the semiconductor supply chain alliance linked by capital.

Japan will provide an additional 732 billion yen in subsidies to fund TSMC's second factory in Kumamoto.

TSMC has introduced Japan's Sony Group, Toyota Motor, and Denso Corporation into its subsidiaries in Japan, which shows that Japan is forming a supply chain alliance for semiconductor production and application with capital as the link.

02 Semiconductor Industry Trends

1. Short-term impact

Nvidia's data center business revenue surges, and demand for cloud computing power continues to grow

NVIDIA achieved revenue of US$22.10 billion in FY24Q4, of which data center business revenue was US$18.40 billion (+409% year-on-year, +27% month-on-month). Q4 data center growth mainly benefited from increased shipments of NVIDIA's Hopper GPU computing platform and InfiniBand end-to-end solutions.

With the rising tide of AI business, NVIDIA's valuation has reached the level of 2 trillion U.S. dollars. Its main moats are three: fast chip speed, high-performance chip network, and CUDA, the industry-standard software platform. As AI commercialization accelerates in the future, NVIDIA's performance and valuation are expected to continue to grow.

Microchip Technology cuts salary by up to 20%, MCU market demand continues to be weak

American MCU manufacturer Microchip Technology is implementing employee salary reduction measures. It plans to reduce the salary of employees unrelated to factory closures by 10% and reduce the salary of its management team by 20%.

HBM is in short supply and major storage manufacturers have sold out their production capacity

As the demand for AI chips continues to surge, HBM, as a key component of current AI chips, continues to be in short supply. Following Micron's previous announcement that all 24-year HBM production capacity has been sold out, SK Hynix has also sold out all 24-year HBM production capacity.

Storage giant Kioxia ends production cuts, optimistic about memory chip market

In view of the gradual improvement of the semiconductor market, Kioxia announced that it will review the flash memory production reduction plan from 2022 and expand production. Based on demand, capacity utilization is expected to return to around 90% by March this year.

TI plans to abolish its low-end power chip R&D team in Beijing and seek to optimize its business layout

According to reports, TI has laid off its chip design team in Beijing, which is mainly responsible for the research and development of relatively low-end power chips and has about 50 people. TI's abolished Chinese product lines will be transferred to India to seek optimization of business layout. This adjustment is mainly due to the impact of weak consumer market demand and the accelerated process of domestic substitution.

2. Mid-term impact

Samsung suspends construction of P5 factory and prioritizes completion of P4 clean room to cope with market demand

Samsung Semiconductor has adjusted the construction progress of the P4 factory in Pyeongtaek, South Korea, so as to prioritize the construction of the PH2 production line (for foundry business) and suspend the construction of new production lines at the P5 wafer fab. In addition, Samsung's P4 wafer fab will also build a PH3 production line for the production of DRAM and other memory chips.

Major wafer foundries believe that supply chain inventory adjustments are still continuing and the semiconductor industry has not yet fully recovered

TSMC believes that semiconductor inventory will return to a healthier level in 2024, and it expects full-year revenue to grow by 21%-25%. SMIC believes that the strength of demand recovery is not enough to support a strong rebound in semiconductors, and the total growth of smartphones and PCs in 2024 will be limited. UMC expects Q1 wafer shipments in 2024 to increase by 2%-3%, with a capacity utilization rate of approximately 61%-63%. Power Semiconductor Manufacturing expects Q1 capacity utilization in 2024 to rebound to 70%-75%. World Advanced believes that the automotive and industrial supply chains will continue to adjust inventory, and the capacity utilization rate in Q1 of 2024 will drop to about 50%.

3. Long-term effects

SK Hynix will build an advanced packaging factory in the United States, and Nvidia's supply chain in the United States will achieve a closed loop

SK Hynix will build an advanced packaging factory in Indiana, USA, mainly using the 3D stacking process to build HBM, which will be integrated into Nvidia's AI GPU in the future. Coupled with TSMC's chip manufacturing plant in Arizona, Nvidia's GPU chips will be able to be produced locally in the United States in the future.

The industry is optimistic about the long-term demand for MLCC, and major manufacturers such as Murata and Yageo plan to expand production

The industry believes that the mid- to long-term demand for MLCC will continue to grow. As the demand for terminals such as smartphones, automobiles, communication equipment, IoT, and AI servers increases, the demand for various types of MLCC capacitors will be boosted. Although MLCC is still in the process of destocking, major passive component manufacturers such as Murata and Yageo have recently announced MLCC production expansion plans. Izumo Murata Manufacturing Co., Ltd., a subsidiary of Murata, said that it plans to build a new factory in Shimane Prefecture, Japan, with a target of completion in 2030; Yageo will build its sixth factory in Taiwan, China, and will introduce wafer resistor and MLCC production lines in the future.

Infineon and Honda join hands to develop automotive semiconductor solutions, promising growth prospects for automotive chips

Infineon will provide Honda with technical support to help it build competitive vehicles. These technical supports will mainly focus on areas such as power semiconductors, advanced driver assistance systems (ADAS) and electronic and electrical architecture. Based on this, both parties will work together to develop new architectural concepts.

03 Terminal market dynamics

1. Artificial Intelligence

OpenAI releases Vincent video model Sora to demonstrate the possibility of AGI application

Recently, OpenAI released the Vincent video model Sora, which currently supports generating videos up to 60 seconds through text or pictures, and also supports extending videos forward or backward in time, as well as video editing. OpenAI said it is training AI to understand and simulate the physical world in motion, with the goal of training models to help people solve problems that require real-world interaction.

Sora's AI training idea is similar to Tesla's FSD V12 technology: it is not training the AI to generate videos, but training the AI to understand and generate a real scene or world. The video is just a period of time and space to observe the scene from a certain perspective. The implementation speed of the in-car world model may be accelerated in the future. This can not only improve the efficiency of cloud data simulation and testing, but also solve the interpretability problem of AI intelligent driving, paving the way to achieve L4 autonomous driving.

Meizu stops developing new projects for traditional smartphones and invests in new generation AI equipment

Meizu announced a strategic adjustment. While All in AI, it will stop the development of new traditional smartphone projects and fully invest in new generation AI devices. Meizu's first AI Device hardware product will be officially released this year, and a total of 6 hardware products will be launched in the next three years. In addition to 1 model this year, it also includes 2 models in 2025 - all-weather AI Device (XR form), AI Device iteration, and 3 models in 2026 - all-weather AI Device, AI Device iteration, and AI Device PRO. It can be seen that mobile phone manufacturers have recently accelerated their entry into the AI track and are optimistic about the future growth space of the AI market. According to Precedence Research, the global AI chip market is expected to reach US$135.2 billion in 2030.

Apple halts electric car project to focus on generative AI business

Apple has stopped its car-making project that has been in operation for nearly 10 years and instead invested in generative AI business. Employees engaged in car research and development will be transferred to the artificial intelligence department.

2. New energy

China Southern Grid Energy Storage and NIO enter into strategic cooperation in energy storage

China Southern Grid Energy Storage Technology signed an agreement with NIO Energy to carry out comprehensive cooperation in the fields of virtual power plants, battery swap station business, battery escalation and recycling, and promote the integration of aggregate resources such as charging and swap stations, energy storage stations, and adjustable loads into virtual power plants. platform.

Honeycomb Energy and Thailand's Banpu NEXT strategic cooperation deepens localization layout

Honeycomb Energy signed a strategic cooperation agreement with Banpu NEXT, a subsidiary of international energy giant Banpu Group, to further deepen the local cooperation and layout of both parties in the fields of energy storage, battery cells, and recycling, and to maintain Honeycomb Energy's Thai factory in Thailand, Southeast Asia and other countries or The region’s leading position in the lithium battery industry.

Duke Energy may stop using CATL energy storage batteries

U.S. utility company Duke Energy said that under pressure from the U.S. Congress, Duke Energy plans to stop using energy storage batteries produced by Chinese battery manufacturer CATL at Camp Lejeune, the largest Marine Corps base in the United States, and use products from other suppliers. , and will gradually discontinue the use of CATL battery products in civilian energy storage projects.

3. Cars

The European auto market continues to be weak, and auto parts suppliers are implementing layoffs one after another

German auto supplier Continental will cut 1,750 jobs in its research and development department, and Forvia, the world's eighth-largest auto supplier, plans to lay off 10,000 people in Europe. The European automotive market is expected to continue to decline in the short to medium term.

Volkswagen and Xpeng signed a technical cooperation agreement and planned to optimize the cost structure through joint procurement

Volkswagen and Xpeng Motors have signed a technical cooperation agreement for joint development of platforms and software. According to the agreement, the two parties will purchase shared vehicle and platform parts through a joint procurement plan, optimize the cost structure, and jointly develop two intelligent connected models for China's mid-size car market, the first of which is an SUV. Through joint procurement and the application of innovative technologies in the vehicle design and engineering stages, the product development cycle will be significantly shortened by more than 30%.

Hongjing Zhijia provides intelligent driving products for JAC Ruifeng RF8

Hongjing Zhijia announced that it will provide smart cameras and ADAS high-end assisted driving software systems for JAC Ruifeng RF8. The basic smart driving version of the Refeng RF8 model is equipped with a front-view camera and two millimeter-wave radars, which can achieve L2 intelligent driving assistance. Among them, the smart front-view camera has a built-in Horizon Journey 3 visual perception chip and is paired with the domestic MCU Xinchi E3420. In addition, the subsequent high-end smart driving version Refine RF8 model will use Hongjing Zhijia's self-developed smart driving domain controller products and high-end smart driving algorithms to achieve navigation-assisted driving capabilities in high-speed scenarios.

04 Key product quotes

1. Storage

Rising terminal demand is under pressure, and the trade atmosphere for some memory chips is strong

Since the holiday, the demand in the storage market has been flat, the prices of some embedded products from original manufacturers have loosened, and the demand in the server market has been relatively stable. The resources in the spot market control the price increase of goods, and the upside pressure continues to exist. The wafer trade atmosphere is strong, and the overall increase in the finished product end has converged.

Generally speaking, the current focus of original manufacturers is still on making profits from price increases and making up for losses. However, the pressure from the demand side is gradually emerging. After the holiday, the momentum of top terminals to pull goods has converged, suppressing the short-term upward momentum, and the storage price increase market has entered a new round of game stage.

From a full-year perspective, according to the latest data from Techinsights, memory sales growth may exceed 70% this year.

2. Power

The overall situation is still in the oversupply stage, and there is insufficient momentum for price increases.

Power devices are still in the oversupply stage, and prices have not yet fully risen. Taking Infineon IRF640NPBF model MOSFET as an example, the average quotation dropped by nearly 5% in February, and the inventory increased by 3%, which also verified that the price increase of some domestic small and medium-sized manufacturers last month was mainly due to cost pressure.

3. Passive

Order demand slows down, and MLCC shipments are expected to decrease by 7% in the first quarter compared with the previous quarter.

TrendForce data shows that the total MLCC shipments in Q1 of 2024 are expected to only reach 1,110.3 billion units, a decrease of 7% from the previous quarter. The market is still in a state of oversupply. TrendForce predicts that the average BB Ratio (order/shipment ratio) of MLCC suppliers may fall to 0.89 in the first quarter, a decrease of 3.3% from the previous quarter. Facing the slowdown in order demand growth, MLCC suppliers have also become more conservative in their quotation strategies and continue to control production capacity.

4. MCU

The overall market continues to be weak, and the delivery time of some general-purpose devices has been shortened

In February, the MCU market as a whole remained weak. The overall inventory of NXP brand MCUs is relatively high, and the delivery time is further shortened; the delivery time of some automotive-grade MCUs of MICROCHIP is still long.

05 Key Market Trends

1. HBM market sentiment continues to rise

The complexity of AI models is driving the development of HBM

Two major storage manufacturers, SK Hynix and Micron Technology, said that their HBM production capacity in 2024 has been sold out. In the future, as AI models become more complex, the HBM used in NVIDIA products will be upgraded to HBM3E, and the new generation of B100 products will further increase the market's capacity demand for HBM; AMD products will still use HBM3, and it is expected that the next generation MI350 will be upgraded to HBM3E; Intel products will still use HBM2E.

2. MLCC short-term order demand slows

Long-term growth is still possible

Currently, the MLCC market is still in a state of oversupply. TrendForce predicts that MLCC shipments in Q1 of 2024 will decrease by 7% month-on-month. However, major passive component manufacturers such as Murata and Yageo have recently announced MLCC production expansion plans and are optimistic about future mid- to long-term demand growth.

3. MCU market demand continues to be weak

The delivery time of some devices has been shortened

In view of the lack of momentum for rising demand in the MCU market, US MCU manufacturer Microchip has cut wages and suspended operations. Its MCU delivery time has been shortened, but the delivery time of automotive MCUs is still relatively long.

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