The Tech Week that was... Oct 24~28

Welcome to the latest edition of my weekly newsletter bringing you all the key semiconductor and technology news from around the world in one easy read.  

This week the latest financial data from the leading semiconductor companies gives a dismal outlook for the market in the coming quarters especially for the memory and consumer manufacturers.  Whilst most companies, except the memory manufacturers reported increased revenue for the quarter just finished, the outlook for Q4 almost across the board is down.  Many companies announced reduced capex for this year and next and also other cost cutting measures as the inflationary market and US-China restrictions dampen demand. 

Results from Foundries and OSATs

World #3 foundry, UMC said in its earning call this week that it would cut capital spending by about 17% to US$3 billion for this year, as customer demand for chips used in computers and smartphones slows amid growing macroeconomic downside risks and delays in equipment delivery.  UMC said that expansion at its Tainan and Singapore fabs would continue, as it is committed to supply customers who have signed long-term agreements.  For the 3rd quarter revenue was a record US$2.35billion, up 4.6% sequentially and up 35% yoy.  Utilization remained at 100%, shipping 2.6k wfrs (8” equiv) in the quarter.  In Q4 they are forecasting that wafer shipments will decrease approx. -10%.

Leading OSAT ASE reported record revenue in Q3 of US$3.1billion for it’s ATM group which includes ASE and SPIL, up 30% yoy.  Looking ahead the company sees a softening environment due to potential economic recession and anti-inflationary policies which are dampening overall demand and is forecasting Q4 revenue will drop around 4% to ~US$3billion, with factory utilization down to between 75~80% from 80% in Q3. The company also announced it will reduce capex this year around 10%.  At present the company does not want to forecast Q1’23, and expects customer inventory correction to stretch into the first half of next year.

Chinese OSAT JCET, reported record high revenue in Q3 of US$1.3billion, up 13% yoy.  Revenue for the year to date is also a record high at US$3.4billion, up 13% compared to first 3 quarters of 2021.  Capex for the year so far has totaled US$360million.

Results from Memory manufacturers

Samsung chip business reported Q3 revenue of US$16.2billion, down -14% yoy, due to a severe decline in the memory business. For Q4, Samsung will focus on high density and high performance memory products, and expects memory demand to be weak at least for the 1st half of 2023.  Samsung said it will use the downturn to outgrow it’s memory competitors.  On the bright side, Samsung’s foundry business achieved it’s highest ever revenue, and they expect to see double digit growth in Q4 for the foundry business as it increases production and yields at it’s leading edge nodes.  Samsung plans to invest US$34billion it’s semiconductor business this year and will not change it’s capex plans for 2023.

SK Hynix said in it’s Q3 earning call that the company is cutting its 2023 capital expenditure by more than 50%year-on-year in light of over-supply on the memory market and revealed the company is considering selling its China fabs if US-China Chip War makes its operation in China too difficult to continue, however this was stressed as only a contingency plan and hopes to be able to continue to manufacture in China.  Revenue in Q3 was around US$7.7billion, down -20% sequentially due to a slump in shipments to PC and smartphone manufacturers.  SK Hynix said it will gradually reduce production focusing on less profitable products.

Taiwanese NOR flash manufacturer Macronix said cutting its capital expenditure by up to 29% this year after posting its lowest profit in five quarters last quarter. The company plans to lower its capital spending to US$327.98 million and said that the decision would lead delays by about a year the firm’s new factory, codenamed 5B. 

Disk drive manufacturer Seagate reported fiscal Q1 revenue of US$2.0billion, down -34% year on year, and down -24% sequentially, due to global uncertainties and broad based customer inventory corrections. Seagate announced a restructuring plan which will reduce the global workforce by -8% or approx. 3000 employees. For next quarter fiscal Q2 they are forecasting revenue of US$1.85billion. 

Results from other semiconductor companies

Intel reported Q3 revenue of US$15.3billion, down -20% yoy but essentially flat sequentially.  The company plans to reduce costs by up to US$10billion over the next 3 years, of which US$3billion will be in 2023.  These cost reductions will include workforce optimization.  For Q4’22 Intel is forecasting revenue at a midpoint of US$14.5billion, and have decreased their full year 20222 revenue forecast to US$63.5billion.

Texas Instruments reported a 13% yoy increase in revenue to US$5.24billion for Q3, up 1% sequentially, due to strong demand from the auto sector. Whilst the automotive sector was strong, the company saw a decline in personal electronics.  For the 4th quarter the company is expecting all sectors except auto to decline and are forecasting a midpoint revenue of US$4.6billion, down -12% sequentially.

STMicrolectronics reported Q3 revenues of US$4.32billion, up 35% year on year, and up 13% sequentially, with all product groups reporting increases.  They are forecasting Q4 revenue of US$4.4billion, which would give full year revenue for 2022 of US$16billion, up 26% compared to 2021.

In other news

Despite the current slowdown in the memory market,  Kioxia opened it’s new US$6.8billion Flash memory Fab, Fab 7in Mie Pref, Japan this week.  Phase 1 construction was completed in April, and full production will start later this autumn once all equipment is moved in. 

US government officials have been in talks with Chinese equipment manufacturer Naura Tech in Beijing about the US latest semiconductor export restrictions last week according to sources.  The meeting came weeks after a Naura subsidiary, Beijing Naura Magnetoelectric Technology, was among 31 Chinese tech firms, research institutions and related entities added to the US Unverified List (UVL).

Worldwide silicon wafer shipments reached a new record of 3,741 million square inches in the Q3 2022, increasing 1.0% quarter-over-quarter and growing 2.5% recorded during the same quarter last year, according to SEMI. 

China’s semiconductor imports fell 12.8% to 417.1 billion units in the first nine months of the year, Chinese customs data showed.  The value of chip imports increased 1.5% to US$317billion in the first 9 months as chip prices rose.   Separately data from National Bureau of Statistics figures showed that production of locally made chips plunged 16.4% in September to 26.1 billion units.

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