Destruction and Rebirth: A Review of the Semiconductor Industry in the Crisis of 2008

Undoubtedly, the semiconductor business cycle is undergoing subtle changes, and the chorus of “chips will always rise” has been difficult to conceal more and more “noise”. TrendForce, a research institute, predicts that, affected by economic stagnation in Europe and the United States, the DRAM market, which can be regarded as a bellwether of the semiconductor cycle, will not be prosperous in the third quarter, and the price may drop by 3-8% as a whole, which is rare in the past two years. It is estimated that the market decline of niche DRAM products will be “at least 10%”.

Although the warnings of “wolves are coming” are becoming more and more frequent, the conservative analysis by established industry institutions based on smooth and extrapolated short-term data is often just an “echo” of the industry’s existing feelings. It is used to guide enterprises to “dance with wolves” in the new cycle and grasp the drastic changes in direction and rhythm.

In view of this, look back at the last industry “great trough”, namely During the 2008 financial crisisThe drastic changes in the pattern of the semiconductor industry and technological trends in the current period undoubtedly have special reference significance at the current turning point of the cycle.

“The Return of the Glorious Years of the Semiconductor Industry”

In July 2008, semiconductor industry research expert Malcolm Penn predicted that although DRAM has been falling for a year and a half, every other product category has performed well recently. “As the fundamentals of the industry are resonating, the market will Strong growth is inevitable in the second half of the year,” Penn even optimistically expects that due to the shortage of semiconductor production capacity and rising product prices, the global semiconductor market growth rate in 2009 will reach “high double digits”, which will also mark “the semiconductor industry is looking forward to.” The glory days are back.”

However, the Lehman incident two months later,Ruthlessly shattered the inertial expectations of industry expertsIn the case of the “sudden shock” of the global economy and financial system, the semiconductor industry cannot stay out of it.

The storage semiconductor market, which has been under pressure since 2007, has undoubtedly become the hardest hit area of ​​the crisis. The foreseeable sluggish terminal consumption has prompted PC and other terminal equipment manufacturers to reduce DRAM and NAND orders, and speed up the clearance of inventory materials, while storage semiconductor manufacturers In the same way to save themselves or to meet the liquidity requirements of their lending banks, there is a strong incentive to ship cash at lower prices.Product sell-off caused a “stampede” in the DRAM spot marketthe price crashed continuously, deeply penetrated the cash cost of manufacturers, and a series of dominoes fell, creating a “perfect storm”.

The price breakdown of cash costs forced storage semiconductor manufacturers to initiate large-scale production reductions. In September of that year, Powerchip took the lead in announcing a 10-15% reduction in DRAM production. Capital expenditure plans such as line reconstruction and new construction have also been suspended. In addition to such short-term adjustments, the reorganization of storage semiconductor manufacturers has also reached a climax. Qimonda, which failed to rescue itself, officially announced to apply for bankruptcy protection in January 2009. Although East Asian manufacturers such as Delta have generally received public financial support, most manufacturers, except for Samsung Electronics, which have diversified operations, can only guarantee their operation. The rumors continue, but the huge debt on both sides makes such a restructuring almost impossible. It is foreseeable that even if the reorganization is real, it is bound to be difficult for new companies to keep up with the pace of memory semiconductor process iterations and capital expenditures led by Samsung. In the end, Elpida, which has become a zombie company, officially went bankrupt in 2012, and several major Taiwanese companies have either moved into niche product markets, or transformed foundry and even IC design.

The changes in the storage semiconductor industry can be described as tragic, but it is not a special case. Comparing the list of the top 10 major semiconductor manufacturers in 2007 before the crisis and today’s list, it is not difficult to find that the financial crisis is like a big flood, which has profoundly reshaped almost all major categories. The industrial “landscape” of the market.

On the whole, there are two relatively clear lines of industrial change in this trough period.

First, the acceleration of the Matthew effect

Taking the second quarter of 2007 before the crisis as an example, according to the statistics of FSA, the predecessor of GSA, the quarterly revenue of the top ten semiconductor companies in the world at that time was about 30 billion US dollars, accounting for about 45% of the total output value of the entire industry in the same period. The regional distribution of manufacturers is relatively balanced. , Rank changes are also more active, and even for the first time in history, a Fabless model company, Qualcomm, broke into the top ten list.

In the first quarter of this year, according to data from research institute Omdia, the quarterly revenue of the world’s top ten semiconductor companies was about US$94 billion, accounting for nearly 60% of the industry’s total output value during the same period. It can also be classified as a US-owned enterprise.

Obviously, the “dominance” of the leading manufacturers in the semiconductor industry has a clear contrast before and after the crisis. The reason is not difficult to understand. During the deep recession of the industry, the middle and rear manufacturers are like thin children, the most in the flood. Faced with the test of life and death first, the leading manufacturers with huge volume enjoy more space in financing and business adjustment. Even when other manufacturers are busy laying off employees, divesting assets, compressing investment and R&D, the leading manufacturers can buck the trend.” “Buy the bottom” to integrate mergers and acquisitions. According to statistics, during the financial crisis, only three manufacturers, Intel, Samsung, and TSMC, maintained a large capital expenditure of more than 1 billion US dollars. Interestingly, it is these three companies that are still eligible to compete for advanced manufacturing processes today.

Second, the IDM mode accelerates the exit

On October 7, 2008, AMD officially announced that it would spin off its wafer manufacturing business and transform into a Fabless model. This company, which is known for its “good man has a fab”, has set a milestone for the transformation of the semiconductor business model.

Marked by AMD’s transformation, the Fabless / Foundry business model has been more widely accepted by the industry, and is no longer exclusive to sub-sectors such as wireless communications and FPGAs. Although the cost burden of the IDM model is not a concern in the industry boom stage, its delivery capability is even It is especially advantageous when supply is tight, but in an industry downturn, the greater capital expenditure pressure of the IDM model may become the “last straw” to crush the company. For this reason, in 2009 and 2010, it also became a peak period for semiconductor companies to strip off their manufacturing capacity and stop production of fabs. Nearly 50 wafer production lines including 12 inches were closed, especially in Japan and North America. The shutdown and the halt in new capacity investment also dragged down the revenue of semiconductor equipment manufacturers. Stan Myers, then president of SEMI, commented that global semiconductor manufacturing equipment sales in 2009 had fallen to the lowest level since 1994.

Opening a new game in a changing game

As reflected by the rise of the Fabless ecosystem, a crisis often becomes the coordinates and inflection point of the industrial development path at the same time.

The 2008 financial crisis also promoted the semiconductor industry to light up different “branches” of the technology tree. Before the crisis, there was still a battle between netbooks and smartphones for the next generation of personal consumer electronics products. What followed was the main chip architecture ” The technology trend battle between processor-centric and system-on-a-chip (SoC).

The impact of the financial crisis on the traditional middle class in countries such as the United States and Japan has unexpectedly made the battle between netbooks and smart phones decisive. The explosive growth of the smart phone market has also driven the thMany original dominant manufacturers in the notebook supply chain, such as Toshiba, are gradually falling behindAlthough Intel has maintained its leading position, the gap with late-comer manufacturers such as Samsung has narrowed unprecedentedly. In recent years, its mobile strategy has also experienced many ups and downs.

In addition to architectural design, semiconductor manufacturing technology has also undergone significant evolution during this period. Traditional MOSFETs face a series of physical challenges such as short-channel effects as the feature size of transistors shrinks. It is imperative to innovate device structures and materials. The FinFET route represented by Intel and TSMC and the silicon-on-insulator (SOI) route promoted by IBM and European manufacturers. From the perspective of the time, the victory of FinFET was not without controversy from the beginning. There are industry views that the three-dimensional structure is important in heat dissipation efficiency. Not as good as SOI.

The financial crisis also played a decisive role in the evolution of manufacturing technology. Intel, which invested heavily against the trend, took the lead in launching 22nm node FinFET mass-produced chips in 2012, although STMicroelectronics also officially released 28nm FD-SOI technology soon after. platform, but has been shrouded in the momentum of the former, as Samsung and TSMC successively followed up with 1X nano-FinFET in 2014, the technical route has become clear.

Although history does not simply repeat, some of the laws revealed in it are still of mirror significance.

At present, due to the influx of capital, there is indeed a certain bubble in domestic semiconductor investment. There are many phenomena such as inflated valuations, product homogeneity, and difficulty in recruiting and retaining people. However, as mentioned above, if the industry cycle enters In the adjustment stage, the operating and financing environment of semiconductor manufacturers will be significantly tightened. Not only will capital expenditures be unsustainable, but even existing stock assets will be forced to dispose of. The industry structure is facing a reshuffle. For outstanding enterprises, it is both a crisis and a turning point. The introduction of talents and acquisition of assets will undoubtedly gain stronger bargaining power.

What needs to be mentioned in particular is that the manufacturing, packaging and testing enterprises may encounter greater pressure in the industrial downturn. For example, in the first quarter of 2009, when the financial crisis hit the hardest, the sales revenue of my country’s chip manufacturing industry was 5.611 billion yuan, a year-on-year decrease of 38.1%. The sales revenue of the industry was 9.016 billion yuan, a year-on-year decrease of 45.5%, while the IC design industry grew against the trend.

Considering that local wafer manufacturing, packaging and testing companies are currently in the stage of expanding production, and the capital demand is huge, if they rely solely on the market mechanism to adjust spontaneously, it may be difficult to avoid the phenomenon of “unfinished” projects, which is bound to damage the current situation. The good momentum of domestic substitution of integrated circuits, which provides the underlying support for wafer production capacity investment, is inseparable from the decisive action of the government’s “visible hand”.

In addition to changes in the industrial structure, the industry cycle is also expected to accelerate the evolution of technology trends. Although the current innovations in chip design and manufacturing such as chiplets and chisel have formed a certain amount of voice, from the active cultivation of some manufacturers, the ecology itself has formed enough attraction to attract the industry. “Involvement” still needs a turning point of qualitative change. The impact of the industry cycle on the traditional market structure means that the process and ecology around the original technology chain are loosened, and the obstacles to switching to the new technology track are reduced. Seizing such an opportunity will be expected to achieve accelerated development, and even “change lanes to overtake”.

Epilogue

In May of this year, Malcom Penn updated its outlook on the overall trend of the semiconductor market. In the latest forecast,The growth rate of the semiconductor market size in 2022 has been lowered to 6%and the forecast for 2023 is a 23% decline.

Penn warned that inflation in developed countries is already out of control, and central banks such as the Federal Reserve will have to raise interest rates sharply, triggering a global recession, and a “perfect storm” will hit the semiconductor industry.

Coincidentally, the top macro hedge fund Bridgewater has recently been exposed to establish short positions of tens of billions of dollars, betting on the stock price of major European listed companies to fall, and its target list is impressively the highly sought after ASML. European and American central bank interest rate hikes will trigger economic recession expectations.

In Penn’s bold prediction, shipments will be the primary signal to grasp the turning point of the industry cycle. As a global IC product circulation hub, my country’s IC production and imports have both declined recently, and the follow-up performance deserves high attention from the industry.