MCU manufacturers will see a turnaround in the third quarter of 2023: signs of recovery are emerging
Just last week, the U.S. Commerce Department said it planned to provide $162 million in government grants to Microchip Technology to strengthen the U.S. production industry of semiconductors and microcontroller units (MCUs) critical to consumers and defense. U.S. Commerce Secretary Gina Raimondo said in a statement that the award "is a meaningful step in our efforts to strengthen the traditional semiconductor supply chain in all areas." This is the second project in the US$52.7 billion Chip Act investment approved in August 2022.
With this move, the industry has once again turned its attention to the MCU market.
Once upon a time, MCUs were in the spotlight as a hot commodity in the chip industry. In 2021, due to the impact of the epidemic and rising raw material prices, the MCU market is in a state of short supply, with prices recording the largest increase in 25 years.
Facing the good market, many companies in the industry began to stock up and increase prices. Starting in 2022, due to the sluggishness of downstream consumer electronics and the signing of "irrevocable orders" by chip design factories and wafer manufacturing plants, MCU manufacturers have accumulated inventory. It is getting worse and worse. MCU, which once increased in price dozens of times, has experienced an avalanche of decline.
With such antecedents, MCU companies experienced an inventory nightmare in the first half of 2023.
Inventory status of domestic MCU manufacturers in Q1 2023
At that time, MCU manufacturers that were troubled by inventory were not only domestic companies, but also major foreign MCU manufacturers. In 2023Q1, the total inventory of overseas MCU manufacturers (including STMicroelectronics, NXP, and Renesas) increased by US$470 million month-on-month, and the inventory turnover days increased by 15.3 days month-on-month. STMicroelectronics stated at the conference at the time that the problem of excess inventory mainly occurred in the consumer sector, and there was no excess inventory in other markets. Therefore, this wave of MCU inventory problems is mainly related to the market environment.
After a long wait, MCU manufacturers seem to have found a glimmer of hope in the third quarter of 2023.
01 MCU manufacturers are seeing signs of destocking in the third quarter
Several leading domestic MCU companies showed positive signs of MCU inventory in their financial reports.
Micro Semiconductor said that the company's inventory levels continued to decline, and there was a structural shortage at the end of the third quarter. The turnover rate of some products was very fast and supply exceeded demand. Micro Semiconductor's financial report shows that its single-quarter shipments in the third quarter exceeded 470 million units, and its cumulative shipments this year are approximately 1.2 billion units, which has exceeded the entire previous year. Inventory turnover days in the third quarter were 396.53 days, a decrease from 486.75 days in the first quarter and 448.77 days in the second quarter.
Not only did the inventory level of Micro Semiconductor Company continue to decline, but there was also a structural shortage at the end of the third quarter. The turnover rate of some products was already very fast and supply exceeded demand.
National Technology's inventory fell, indicating good sales. National Technology's financial report also shows that as of September 30, inventory was 802 million yuan, a decrease of 13.1% compared with 923 million yuan at the beginning of the period (January 1 this year)
Chipsea Technology's revenue increased month-on-month, but the specific inventory situation was not mentioned. Chipsea Technology showed that the company’s revenue in the third quarter increased by 31.15% month-on-month.
Puran Semiconductor stated on the investor platform that the company's MCU inventory will be at a healthy level in November 2023. Firstly, because the company launched MCU products late, it did not accumulate a large amount of inventory; secondly, the company's MCU shipments continued to grow, so inventory levels are healthy. In the inventory of downstream channels and agents, the inventory of consumer products has basically reached a healthy level.
Things do look to be improving. This is closely related to the recovery of the consumer market. This can be confirmed from the financial report of Micro Semiconductor. China Micro Semiconductor stated that the main reason for the company's MCU product shortage is that the penetration rate of MCU in e-cigarette solutions has increased, and the proportion of e-cigarette solutions that require the use of MCU has increased. Of course, e-cigarettes are only part of the consumer market. Many MCU manufacturers said that market demand in mobile phones, small household appliances and other fields has improved. This is obviously also related to the promotional activities of major e-commerce companies at the end of the year. At present, under the trend of consumption downgrade, the demand for mid-to-low-end consumer electronics is growing faster, which has also driven the shipment of domestic MCUs.
In addition, sales of MCUs for electricity meters have also increased. Juquan Technology stated that the company has developed single-phase and three-phase metering chips that meet the functional requirements of smart IoT meters and has begun sales. In the future, the State Grid will need to analyze power consumption data. Among them, the IR46 standard smart IoT meter adopts a multi-core modular design and uses multiple chips to achieve functions such as battery replacement, power outage reporting, terminal temperature measurement, and harmonic measurement. +The value of MCU chips is increased by 3 to 5 times compared to the original chips.
Under such circumstances, at the end of 2023, the market will see a number of MCU manufacturers launching new products. On December 16, 2023, Shanghai HiSilicon launched an A² MCU solution that supports the openEuler system. HiSilicon said that A² is launched for home appliances, energy, industry, automobiles and other fields. It not only covers a series of MCUs based on RISC-V, but also includes high-performance MPUs compatible with the ARM instruction set, as well as operating systems that work closely with and optimize them.
02 Where is the next growth for the MCU?
For MCU manufacturers, too much dependence on the consumer market is still a hidden concern.
Just as China Micro Semiconductor responded to the sudden increase in demand for e-cigarettes, "This demand comes too suddenly, especially when the company's inventory is high, and the stocking is insufficient; third, the inventory of downstream dealers and customers is limited, and the demand is directly passed on to the original Factory, exacerbating the shortage. At present, the company has successively returned products through emergency coordination of production capacity, and the shortage situation is gradually easing." It can be seen from this speech that MCU manufacturers also understand that this sudden demand is only short-lived. In the "sweet period", if you want to solve market problems, you still need to find new growth drivers.
The answer points to the automotive industry.
The large-scale shortage of automotive chips that began in 2021 is no longer there, and the prices of some imported automotive chips have begun to fall. However, the supply cycle of automotive chips from some overseas manufacturers is still long. This means that there is still a gap in market demand, and this gap will still exist in the short term. This is closely related to the general trend of automobile transformation to intelligence. Infineon said that by the end of November 2023, the company still has a backlog of 29 billion euros in orders, a considerable part of which comes from the automotive field. For automotive MCUs, some Tier 1 manufacturers said that in addition to the increase in the number of chips required for new energy vehicles compared with traditional vehicles, there are deeper reasons for some of the current core shortages. As the automotive industry shifts toward intelligence and electrification, chip supply has not kept pace. The chip iteration cycle of the traditional automobile industry is slow and the verification cycle is long. It takes 2 to 3 years from design to launch. However, smart electric vehicles iterate quickly and have many functional requirements. Not all required chips can be fully supplied, and chips have become structurally out of stock.
Compared with traditional fuel vehicles and smart cars, the number of new energy smart car chips used may be 1,000 to 1,500. The increase in demand has greatly promoted the development of the domestic automotive chip industry. Against the background of the rapid development of smart electrification of Chinese automobiles, building a robust and diversified automotive chip industry chain is an inevitable choice for domestic enterprises. Therefore, we see that many domestic MCU companies are still launching automotive MCU products.
In December 2023, National Core Technology disclosed the signing of a strategic cooperation framework agreement and the announcement of the first batch of orders for airbag ignition drive dedicated chips and high-end domain control chips. The announcement pointed out that in order to leverage the advantages of the cooperating parties in airbag controller module technology and product mass production experience and in automotive electronic chips such as MCUs, airbag ignition driver chips, acceleration sensor chips, etc., to jointly promote automobile For the domestic application of airbag core chips, Suzhou Guoxin Technology Co., Ltd. (hereinafter referred to as the "Company" and "Guoxin Technology") and Zhejiang Aichuang Technology Service Co., Ltd. (hereinafter referred to as "Aichuang Technology") are based on "complementary advantages and mutual benefit" The "Strategic Cooperation Framework Agreement" was signed on the basis of the cooperation principles of "mutual benefit, risk sharing and common development".
National Core Technology stated that the signing of this strategic framework agreement aims to realize the complementary advantages and resource sharing of the cooperative parties. By leveraging their respective resources and advantages, they will jointly carry out close cooperation in the fields of automotive airbag controllers and achieve complementary advantages, Mutual benefit, risk sharing, and common development will help the company and Atron Technology leverage their advantages in airbag controller module technology and product mass production experience, as well as in automotive electronic chips such as MCUs, airbag ignition driver chips, acceleration sensor chips, etc. advantages in technology and mass production experience.
According to the "2018-2023 China Automotive Semiconductor Industry Market Prospects and Investment Strategy Research Report" released by the China Business Industry Research Institute, analysts predict that China's automotive chip market will reach 90.54 billion yuan in 2024. MCU manufacturers are still optimistic about the automotive industry. MCU products from companies such as Jiefa Technology, Chipsea Technology, and GigaDevice have entered Huawei's automotive industry chain. However, the road to domestic replacement is still long, and water from afar cannot quench the thirst for nearness. At present, the competitiveness of domestic MCU manufacturers' products and foreign products in the high-end market is still relatively poor.
On January 8, the General Office of the Ministry of Industry and Information Technology released the "Guidelines for the Construction of the National Automotive Chip Standard System" (hereinafter referred to as the "Guidelines").
The "Guide" proposes that by 2025, more than 30 key automotive chip standards will be formulated, clarifying basic requirements such as environment and reliability, electromagnetic compatibility, functional safety and information security, and formulating key standards for control, computing, storage, power and communication chips. Product and application technical specifications form a matching test method for the entire vehicle and key systems to meet the basic needs for safe and reliable application and pilot demonstration of automotive chip products.
The "Guide" points out that by 2030, more than 70 automotive chip-related standards will be formulated to further improve the general requirements for basic general, product and technology applications and matching tests, and to achieve effective support for forward-looking and integrated automotive chip technology and product research and development. , basically completing full coverage of typical application scenarios and test methods of automotive chips, meeting the needs of building a safe, open and sustainable automotive chip industry ecosystem.
From policy to market, it is not difficult to see that the automotive track will become the direction where MCU and other chip manufacturers need to exert their efforts in a period of time. To march triumphantly, the mountains and seas are not far away; to ride on the momentum, the sun and the moon are not the limit; domestic MCU manufacturers are at a singular point of development.
Review Editor: Huang Fei
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