Review of the development of the global semiconductor market in 2019
1. Sluggish demand, falling prices, and the first decline in the Chinese market
In 2019, due to the continued weakness of smartphones, automobiles and other hot markets, 5G and data center construction fell short of expectations, the global semiconductor market fell for the first time after three consecutive years of growth, with a decline of about 12%. Memory products have fallen sharply due to sluggish demand, which has become the primary factor leading to the decline of the entire market.
In 2019, also affected by sluggish demand and falling prices of products such as memory, the scale of China's semiconductor market fell for the first time in history, with a decline of about 9% (dollar denominated).
2. The rise of domestic supply chains, the opening of the science and technology board ICs soared
3. The design industry and manufacturing industry have little impact, and the packaging and testing industry is under pressure
IC design companies themselves are not labor-intensive and do not have high requirements for logistics. However, IC design companies are mainly concentrated in first-tier cities such as Beijing, Shanghai, and Shenzhen, and are key cities for subsequent epidemic prevention and control. The low rate of resumption of work and isolated offices caused by the epidemic have reduced the R&D efficiency of IC design companies to a certain extent, and also affected communication with customers and cooperation with foundries and packaging and testing plants. In the medium and long term, the impact of the epidemic on IC design companies is limited.
IC manufacturing companies have a high degree of automation and are not labor-intensive. Although IC manufacturing companies are also generally located in domestic first-tier cities, their own continuous production operation model determines that they will not actively shrink or stagnate due to the epidemic, and generally have certain inventory resources. The epidemic is not expected to have much impact on the release of mature production capacity of mature companies. Due to logistics and personnel stationing issues, it is expected that the construction of new capacity will be delayed to a certain extent.
Compared with IC design companies and manufacturing companies, packaging and testing companies are relatively labor-intensive and have a higher demand for labor and material logistics. The domestic production capacity for packaging and testing is mainly concentrated in the Yangtze River Delta region, which is also an area where the epidemic prevention and control efforts are relatively strong, and the progress of resuming work is slow. Since the second half of 2019, the domestic packaging and testing industry has been in a state of relatively tight production capacity. The epidemic will further aggravate the shortage of packaging and testing capacity and affect the launch of IC design companies' products.
The epidemic has brought direct market demand to domestic companies that are currently directly engaged in the research and development of integrated circuit products related to medical electronic equipment such as thermometers. After the epidemic is over, the domestic construction of public health facilities will be significantly improved, and relevant enterprises will continue to benefit.
The impact of the epidemic on the key application markets of China's integrated circuits
1. 5G & mobile phone
In the fight against the epidemic, the application of 5G in video communications and medical treatment has been rapidly launched. However, the above-mentioned application scenarios are not typical 5G applications, but only have demonstration significance, and are not expected to have a significant driving effect on the 5G industry.
Wuhan is an important production base for the core components of domestic 5G communication equipment. The epidemic will have a certain impact on the supply of related products. However, these components are not unique, and the progress of the entire domestic 5G construction is not expected to be significantly delayed.
After a three-year downturn, the smartphone market was supposed to reverse the decline with new 5G phones in 2020. The epidemic has caused difficulties for domestic ODM/OEM companies to resume work, which will have a significant adverse impact on the production capacity of the domestic mobile phone industry chain, directly affecting the shipments of domestic smartphone manufacturers in the first half of the year.
Looking at the whole year, the promotion of high-end 5G mobile phones will face a certain degree of uncertainty before 5G has killer applications. In 2020, it is expected that the middle and low-end smartphone market will usher in more severe competition, and brands that fail to occupy a place in the high-end mobile phone market will face greater operating pressure.
2. Smart hardware & cars
The boom in the domestic smart hardware market in the past two years is partly due to the development of the so-called "sinking market" and the rise of a new generation of "white brand" electronic products. Correspondingly, it has also led to the prosperity and development of a number of domestic IC design companies. The short-term impact of the epidemic on the social economy will directly affect the target market of such products.
In the medium and long term, there is still a huge domestic demand for consumer upgrades, and strong domestic electronics manufacturing capabilities will continue to be maintained. Low- and medium-end products will continue to have a broad market space and sufficient supply capacity. The domestic smart hardware industry is experiencing a short period of time. After the slowdown, it will continue to develop rapidly.
Hubei, where the epidemic is severe, is one of the important domestic automobile production bases, with automobile production accounting for nearly 10% of the country. In addition, Guangdong and Zhejiang, where the epidemic is more severe, are also important areas for domestic automobile production. In addition to directly affecting the production and sales of local vehicle companies, the epidemic has also severely affected the supply capacity of parts companies. The shortage of parts companies will restrict the pace of vehicle production.
The impact of the epidemic on small and micro enterprises will have a greater impact on the consumer groups of low-end and medium-end automobiles. It is expected that domestic self-owned brands, mainly low-end and medium-end automobiles, will face more severe tests in 2020. Starting from the second half of 2019, several domestic cities have begun to relax restrictions on car purchases. It is expected that more cities will relax restrictions on car purchases in 2020.
China's integrated circuit industry development in the post-epidemic era
International and domestic leading companies reconsidered their strategic layout. In the past ten years, most of the world's electronic products have been manufactured and assembled in China. In recent years, due to issues such as rising labor costs and trade barriers, major international and domestic manufacturers have begun to partially shift their domestic manufacturing capabilities to Southeast Asia, Eastern Europe and even the United States. The supply chain security risks exposed by the epidemic will accelerate the balanced layout of leading companies in the supply chain. As a link in the electronic supply chain, the integrated circuit industry will inevitably face the same problems, especially those links that have higher requirements for physical objective conditions such as manpower or logistics.
Under the need of stable economic development, domestic cities will have different choices for supporting the development of the integrated circuit industry. The domestic integrated circuit industry is currently in the initial stage of development, the market competitiveness is still weak, self-growth and hematopoietic capacity are limited. In the past few years, many regions in the country have attached great importance to the integrated circuit industry. The domestic integrated circuit industry has developed rapidly, but it has also caused problems such as excessive dependence on government support. Integrated circuits need to continue to invest heavily and at the same time they cannot make substantial contributions to localities in the short term. The determination and intensity of the development of the integrated circuit industry in various regions may change.