Fincredible MacroTalk May 26: Semiconductor Industry Outlook
Comments on the semiconductor industry from executives of TSM, INTC, MU, UMC, Samsung.
The COVID-19 pandemic generated a global shortage of semiconductors. Lockdowns, shuttering of factories, transport restrictions, order cancellations, and other factors hampered the production of semiconductors in the early stages of the pandemic. Meanwhile, demand surged as stay-at-home measures accelerated technological adoption and substantially increased the need for semiconductors.
Midway through 2021, supply-demand imbalances still persist and might continue to do so for several years. Megatrends like 5G, EV (electric vehicles), and HPC (high-performance computing) will continue to accelerate demand growth while supply lags behind.
Over the past few weeks, executives of foundry companies have talked about these and other industry topics. In this post, we’ve highlighted a number of insightful quotes to understand what’s happening with the industry.
Industry Demand
According to companies, three main factors have been responsible for the surge in demand: the acceleration in the digital transformation due to COVID, new megatrends like 5G, EV, and HPC, and the need to accumulate inventories and ensure supply security.
“The digitization of everything was markedly accelerated by COVID and has spurred innovation and new models of working, learning, interacting in care. Technology is increasingly central to every aspect of human existence, and semiconductors are the foundation. This is creating a cycle of explosive growth in semiconductors that will result in sustained growth for a decade or more.”
Intel Corp. Q1 2021 Earnings Call
"Our customers are currently facing challenges from the industry-wide semiconductor capacity shortage, which is driven by both a structural increase in long-term demand as well as short-term imbalance in the supply chain. We are witnessing a structural increase in underlying semiconductor demand as a multi-year megatrend of 5G and HPC-related applications are expected to fuel strong demand for our advanced technologies in the next several years. COVID-19 has also fundamentally accelerated the digital transformation, making semiconductors more pervasive and essential in people's life.
In addition, the need to ensure supply security is creating short-term imbalance in the supply chain, driven by supply chain disruption due to COVID-19 and uncertainties brought about by geopolitical tensions."
Taiwan Semiconductor Manufacturing Co. Q1 2021 Earnings Call
"For the full year of 2021, we now forecast the overall semiconductor market, excluding memory, to grow about 12% while foundry industry growth is forecast to be about 16%"
Taiwan Semiconductor Manufacturing Co. Q1 2021 Earnings Call
“The pandemic has driven changes in our economy that we believe will not only benefit us this year, but also serve to accelerate the digital transformation of the economy and drive new opportunities for Micron. Recovery from the pandemic and pent-up demand are expected to drive strong demand growth in markets such as enterprise, cloud, desktop PCS, mobile, auto and industrial.”
Micron Q2 2021 Earnings Call
"So I think that there's a few megatrends in this space driving the demand, from 5G smartphones, the automotive, EV adoption as well as the work from home space"
United Microelectronics Corp Q1 2021 Earnings Call
Industry Supply
Semiconductor supply is very inelastic. It takes several years and USD billions in investments to increase supply in a meaningful way, so most foundries have experienced very tight capacity as demand rises. Most companies anticipate supply will continue to be constrained throughout the year.
“The unprecedented demand for semiconductors has stressed supply chains across the industry. We've doubled our internal wafer capacity in the last few years. But the industry is now challenged by a shortage of foundry capacity, substrates and components. We expect it will take a couple of years for the ecosystem to make the significant investments to address these shortages.”
Intel Corp. Q1 2021 Earnings Call
"Looking ahead to the second half of the year, we expect our capacity to remain tight throughout the year supported by strong demand for our industry-leading advanced and special technology."
Taiwan Semiconductor Manufacturing Co. Q1 2021 Earnings Call
“Amidst the lingering macro and supply uncertainties, we expect our customers and the supply chain to gradually prepare higher levels of inventory throughout the year as compared to the historical seasonal level. We expect this to persist for a period of time given the industry's continued need to ensure supply security.”
Taiwan Semiconductor Manufacturing Co. Q1 2021 Earnings Call
"In both DRAM and NAND, we expect our calendar 2021 bit supply growth to be below the industry demand growth and we have used our inventory to add to our bit shipment growth this year"
Micron Q2 2021 Earnings Call
“While demand is strong across both the DRAM and NAND markets, our supply is now constrained as our inventories are very lean, particularly in DRAM. This restricts our ability to serve potential upside to demand.”
Micron Q2 2021 Earnings Call
"Looking into the second quarter, market demand will continue to outpace supply, which will lift wafer shipment and blended ASP in U.S. dollars"
United Microelectronics Corp Q1 2021 Earnings Call
Foundry Investments
To meet increasing demand, most foundries have decided to invest significant amounts of money to increase their supply over the next couple of years.
“It's clear the industry and Intel will need more capacity to meet strong future demand, which is why we are dramatically expanding our foundry capability with Intel foundry services, starting with a $20 billion investment for our first large-scale foundry operations in Arizona.”
Intel Corp. Q1 2021 Earnings Call
"In order to meet the increasing demand for our advanced and specialty technologies in the next several years, we have decided to raise our full year 2021 CapEx to be around USD 30 billion."
Taiwan Semiconductor Manufacturing Co. Q1 2021 Earnings Call
"We are targeting fiscal 2021 CapEx to be approximately $9 billion to support our long-term goal of maintaining a stable share of industry bit supply”
Micron Q2 2021 Earnings Call
Automotive Market
The global shortage of semi-conductors has been affecting the auto industry significantly. Chip shortages have paralyzed production at several auto plants throughout the world, and due to the nature of the auto industry, there seems to be no short-term solution.
“The automotive market has been soft since 2018. Entering 2020, COVID-19 further impact the automotive market. The automotive supply chain was affected throughout the year, and our customers continued to reduce their demand throughout the third quarter of 2020. We only began to see sudden recovery in the fourth quarter of 2020.
However, the automotive supply chain is long and complex with its own inventory management practices. From chip production to car production, it takes at least 6 months with several tiers of suppliers in between.”
Taiwan Semiconductor Manufacturing Co. Q1 2021 Earnings Call
“In auto, we delivered a second consecutive record revenue quarter as auto manufacturing recovers around the globe and as memory and storage content per vehicle continues to grow. We have more demand than we can supply, and we are working diligently with our customers to address their memory and storage needs.”
Micron Q2 2021 Earnings Call
PC Market
The PC market has seen a resurgence due to the pandemic and is expected to register one of the best years in the history of the industry.
“The PC ecosystem, in particular, is experiencing a resurgence. This remote work and learning dynamics of COVID led to more PC shipments in 2020 than at any point since 2012. And that's continuing. 2021 is shaping up to be the largest PC market ever. In fact, we shipped more notebook CPUs in Q1 than in any other quarter in our history. Total platform unit volumes were up well over 30% in the first quarter. In many markets, 1 PC in every home is no longer enough. The number of PCs per household, what we call PC density, is increasing. We are seeing strong growth in education, where on a global basis, the number of PCs per 100 students and teachers still remains in the single digits. Every student needs a laptop, and we have a long way to go. In addition, there are over 400 million PCs running Windows 10 that are over 4 years old today, which is an enormous PC refresh opportunity.”
Intel Corp. Q1 2021 Earnings Call
“In PC, we continue to benefit from the remote work and learning trends that drove healthy notebook and Chromebook demand in fiscal Q2. Micron delivered record PC DRAM bit shipments despite pockets of NAND memory component shortages experienced in the PC OEM supply chain.”
Micron Q2 2021 Earnings Call
Memory Market
The memory market (DRAM and NAND) has seen broad strength, with companies expecting high demand through 2021.
“In the second quarter, we expect earnings to grow in the semiconductor business mainly due to improving memory market conditions, but to decline in the IM Division as the new product effects weaken. For memory, strong server demand should lead to improved earnings.
For memory, we expect the business environment to remain favorable, including positives such as solid demand for server and mobile products.”
Ben Suh - EVP
Samsung Electronics Q1 2021 Earnings Call
“Calendar 2021 is shaping up to be a solid year and our overall outlook across DRAM and NAND has improved since our last earnings call, with broad strength across nearly all end markets.”
Micron Q2 2021 Earnings Call
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