Recently, there have been some negative news in the chip industry, such as layoffs, bankruptcy, and IPO termination. These problems have gradually increased in the past two years, and some people believe that the chip industry is a sunset industry.
01 Do you think chips' a sunset industry?
Of course, I do not agree with this view.
On the contrary, in the long run, I think the chip industry will continue to become more and more popular.
Many friends may not understand the charm of making chips. Making chips at the right time is like printing money. When the chip specifications are very consistent with market demand and competitors do not have similar products in the short term, such chips can dominate the market and start the money printing mode.
The long R&D cycle of chips determines that it takes one or two years for competitors to catch up from scratch. This is different from the software and Internet industries. If a software company develops a hot product, other companies can quickly imitate and launch similar products. But in the chip industry, due to the long R&D cycle, this not short leading time is a golden window for the company. During this window period, there is no worry about chip sales because there are no competitors. Just hand over the design drawings (ie GDS) to the foundry to produce the required chips.
02 Chip manufacturing process
This process is similar to designing a banknote of a certain denomination, and then handing the drawings to the printing factory, which will directly help you copy the required banknotes, and then they can enter the market without promotion. And the chip manufacturing process is also similar to printing.
Chip companies are tirelessly pursuing this sweet moment. If a small company can have one or two such hot-selling chips, even in a small field, it may quickly become a good chip company.
Of course, if the product positioning is not accurate and fails to meet expectations, the company will face the risk of going downhill.
For example, Zhuhai JL was a very famous company more than a decade ago. It once became one of the top three domestic top ten IC design companies, mainly because of the successful launch of MP3 chips. At that time, Zhuhai JL was a company sought after by fresh graduates, and its sales performance was also very good. However, it lacked hot-selling products later, and now it has become a nobody.
Another example is Nvidia, which is now popular. Its AI chips almost monopolize the market. It is difficult for competitors to catch up in the short term. It is expected that its sweet moment will last for a few years. In these few years, due to huge market demand, Nvidia's chips are hard currency, and its profit ceiling will depend on TSMC's production capacity. It can be said that this is a very profitable story.
03 How's chip companies go?
Chip companies are all pursuing this sweet moment and trying to extend the duration of this moment. If the market size is huge, then the leading chip companies will become giants, and their explosive power and endurance are difficult for traditional industries or even software companies to achieve. If there were no black swan events such as antitrust laws, Nvidia's market value would be the world's number one without any suspense.
From this perspective, the huge profits and high growth of chip companies are similar to those of Internet companies. The Internet can quickly accumulate a large number of users, and if the chip industry has accurate market positioning and a deep enough technical moat, it can also quickly find its own era. Long-term technological accumulation and rapid iteration will make this era longer.
To be honest, the United States now does not allow high-end chips to be sold to China, which is actually equivalent to letting American companies watch the huge profits at their fingertips. It is really a behavior that harms others and does not benefit oneself.
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