Looking at the industry development trend from the layoffs of semiconductor manufacturers

The new crown epidemic broke out in foreign countries. Many companies have encountered business difficulties and have to cut costs through “layoffs” and “stoppages”. Even leading companies in the industry cannot withstand the impact of the epidemic.

Many semiconductor manufacturers layoffs and stop work

Recently, Japanese semiconductor giant Toshiba announced that, in addition to maintenance operations related to infrastructure such as electricity, railways, and elevators, all employees at its headquarters in Tokyo and factories across Japan will, in principle, start from the 20th of this month to May 6th. Work will be temporarily suspended as of January, involving approximately 76,000 people in total.

The work stoppage of more than 70,000 people is a situation that has never been seen in Japanese companies. The more important reason for the work stoppage is the confirmed cases of Samsung’s internal employees. Five people have been diagnosed in a factory located in the suburbs of Tokyo, so Samsung has to pay attention to it. stand up.

And the Tokyo area where Samsung is located has declared a state of emergency. Although data shows that the current concentration of people in Tokyo’s urban area has been reduced by about 60%, there is still a big gap from the target. Therefore, the scale of Japanese companies’ suspension of work may be further increased. expand.

Prior to this, ON Semiconductor said that in order to save costs, the company will lay off 475 employees.

The chip manufacturer has nearly 35,000 employees worldwide. The company said that the reduction of the target cost of layoffs is structural in nature and is not expected to affect the company’s ability to respond to a significant rise in demand.

Analysis of the upstream, middle and downstream industry chain

The global spread of the new crown epidemic has inevitably affected the semiconductor industry, which has always obtained high profits, especially the fluctuations on the semiconductor consumer side. For example, the sales of Electronic products such as mobile phones and TVs have declined, and the negative effects have been transmitted to the semiconductor industry from top to bottom. The entire chain.

Upstream startup: face life and death

Chip design is the relatively upstream part of semiconductors, and the design work types can be roughly divided into front-end code design, system verification and application, back-end layout and supply chain management.

The code design and back-end layout and wiring can work through remote office work. Although there are restrictions on employee communication and work efficiency, the impact is not significant.

System verification applications and supply chain management require communication with customers, foundries, and packaging and testing personnel. Once communication is restricted, the launch of the entire product will be delayed.

Many chip design companies have chosen to use price increases to respond to the crisis. Companies such as Howe Technology have announced a 10%-20% price increase for their CIS products.

In general, the impact of the epidemic on leading chip design companies is not fatal, but it will affect profits. But for small, medium and micro enterprises, this epidemic may be a cold winter that they cannot survive.

The sudden outbreak of the epidemic may cause downstream customers to postpone the resumption of work and production or the financing schedule, which will have a great impact on these companies. In addition, the overall economic situation is frustrated, capital markets and bank loans are tight. Once cash flow is disrupted, companies are likely to Can’t hold on.

However, a large number of start-up companies will be hit hard, which will inevitably have a chain reaction, which will affect the vitality and development potential of the entire industry. The thriving chip design industry in 2019 may enter a period of suspended development.

Midstream manufacturing: a more severe impact will emerge in the second quarter

The epidemic has no direct impact on the wafer manufacturing plants in the middle reaches of the industry, because wafer manufacturing is of great importance. No matter how turbulent the external epidemic is, the production line cannot be easily stopped.

Once shut down, it will cause tight production capacity, declining shipments, insufficient supply, etc., shake the entire industrial chain from upstream design to downstream packaging and testing, and further reduce terminal consumption, distributors and other businesses, resulting in insufficient supply in the market. Disruption in the supply chain and other adverse effects.

As the epidemic continues to spread throughout the supply chain, a more severe situation has not yet arrived, and it is expected that the impact may slowly surface in the second quarter.

Downstream packaging and testing: production capacity is tight, cut orders may come

In the entire industry chain, downstream packaging and testing plants are more severely affected by the epidemic. Packaging and testing refers to the process of processing wafers that have passed testing to obtain independent chips according to product model and functional requirements.

At present, domestic packaging and testing plants have basically resumed work, but the hidden dangers of industrial development have not been eliminated. The main threats are the closure of Malaysia and the closure of islands in the Philippines.

Most semiconductor manufacturers are afraid of zero growth in the second half of the year compared to the first half of the year, making the development trend of semiconductor order cuts continue to ferment. Because the epidemic has greatly impacted performance, a new round of obvious order adjustments is expected to appear in the second half of the second quarter , Logic Semiconductor will also enter the inventory adjustment period in the second half of the year.

Demand side: Shipment volume is a 10-year low, and it is difficult to meet reciprocal growth in the short term

In addition to the limitation on the production side, the longer-term impact of the epidemic on the semiconductor industry is on the demand side.

The demand market for semiconductor chips is relatively large, concentrated in mobile phones, PCs, servers, AI, Internet of Things, electronic cars, 5G and other fields. The relatively large market is still electronic consumer products such as mobile phones, PCs, and wearable devices.

However, under the circumstance of the overall economic downturn, the global consumer market for electronic products is sluggish, and it is difficult to usher in retaliatory growth in the short term. Weakness on the demand side has become a severe challenge for the semiconductor upstream industry.

According to the data on domestic mobile phone shipments in February 2020 released by the China Academy of Information and Communications Technology, shipments in February were 63,844,000 units, a decrease of 56% year-on-year.

The epidemic will not speed up the process of localization quickly, but it may strengthen the crisis awareness of enterprises and gradually seek supply chains in the country.

In the part of non-consumer demand, although the development of key industries such as 5G and AI has slowed down slightly due to the poor resumption rate of domestic manufacturing, the infrastructure demand related to medium and long-term industrial development has not been harmed. On the contrary, my country is currently in the stage of transition to the era of artificial intelligence. The demand for AI, 5G, industrial Internet and other aspects will continue to expand, or become an area where semiconductor companies avoid the impact of industrial headwinds.

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