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The Tech week that was February 10-14 2020

The Tech week that was February 10-14 2020
by Mark Dyson on 02-16-2020 at 10:00 am

Semiconductor Weekly Summary 1

The new coronavirus outbreak or COVID-19 outbreak, as it is now officially called, continues to dominate the news again this week as currently there is no end forecast to the outbreak, and infection numbers continue to rise. This will have an impact on semiconductor supplies in the coming months and into Q2 as the necessary restrictions to try to contain the disease cause Chinese companies struggle to be allowed to reopen after the extended Chinese new year holiday and to also get workers allowed back from other parts of China, especially for the smaller companies. This will have a knock on impact not just on semiconductor supplies from China in the coming months but also on supplies of materials and consumables to non Chinese semiconductor manufacturing companies. Let’s hope the COVID-19 outbreak comes under control soon and all my colleagues and acquaintances and families stay safe and healthy throughout this difficult period.

Chinese leading wafer foundry SMIC said on Friday that it will double its capital spending in 2020 and expects revenue to grow 10% despite the COVID-19 outbreak, but SMIC did also warn that the worst may yet be to come from the COVID-19 outbreak as implications ripple through the supply chain.

The impact of the COVID-19 outbreak is also being felt worldwide as the organizers of Mobile World Congress 2020 have cancelled this years event. Although the event is being held in Barcelona, most companies have travel restrictions in place and too many companies pulled out of the event.

US lighting companies are expecting delayed product supply due to the COVID-19, with US companies Cooper Lighting Solution and Satco both posting notices to their customers on possible interruption of supplies.

A survey by LEDinside magazine on the impact of COVID-19 on the Chinese LED industry showed that only 28% of companies think they will still make a profit despite the COVID-19 outbreak, whilst 38% think they will make a loss. If companies are allowed to resume production on Feb 17th 44% of companies expect the work resume rate to 50~70%, whilst 27% of companies expect the work resume rate to be below 50%.

In other news…

Whilst last year was a challenging year for most semiconductor companies, TSMC managed to buck the trend especially in the 2nd half. In recognition of last year’s record revenue, TSMC ‘s board has approved to pay TSMC’s 45,000 employees an average annual bonuses of US$33,000. The bonus will be paid in July. The total bonus amount to be paid out is 1.7% lower than 2018 as it reflects the 1.7% lower profit margin last year. TSMC’s board also approved a US6.7billion budget for advanced process and capacity expansion this year.

Taiwanese foundries and backend subcons published their monthly revenue figures last week. TSMC continued the trend from 2nd half last year.  TSMC posted monthly revenue of US$3.45billion (NT$103.7billion) up 0.4% on sequentially and up almost 33% yoy. This is the 6 straight month that TSMC has posted revenue of over NT$100billion.

Number 2 Taiwanese foundry UMC also had a good month recording revenue of US$4.67million for January up 19.5% yoy, and up 5% sequentially. UMC has also announced it will invest US$500million to expand capacity in its Chinese Xiamen 12inch Fab to boost capacity to 250k/month by mid 2021.

Specialist foundry Vanguard (VIS) was down though with the revenue dropping 8.9% sequentially to US$79million, and down 7.2% yoy. This was due to lower shipments over the Chinese New Year period.

Assembly and Test subcon ASE Technology holdings which includes both ASE and SPIL subcon groups reported monthly revenue for it’s ATM business of US$730million, which was down 5% sequentially but up 20.7% yoy.

Applied Materials, the market leader semiconductor equipment manufacturer gave an optimistic outlook for the semiconductor industry indicating companies are planning to spend more on capex in 2020. Applied Materials reported quarterly revenue for fiscal Q1, which ended Jan 26th, of US$4.16billion, up 11% yoy, the first increase in 5 quarters. They are forecasting US$4.34billion for fiscal Q2, which is up 22.6% yoy. They forecast minimal overall financial impact of COVID-19 virus for fiscal 2020, but do expect some changes in timings of revenues due to travel and logistics restrictions. Applied also said they were making good progress on regulatory approval for their acquisition of Kokusai Electric.

Austrian Sensor manufacturer AMS is pushing ahead with it’s plans to acquire Osram, and are pushing ahead to get what is known in Germany as a domination agreement to give AMS more control of Osram and to facilitate integrations efforts. AMS is asking Osram shareholders to approve the domination agreement which will require 75% approval at an EGM, the date of which is yet to be set.

ICInsights has published it’s latest report on worldwide Fab capacity, reporting that the top 5 semiconductor companies now supply 53% of global wafer capacity. The top 5 foundries are placed in the top 12, provide 24% of the worldwide capacity. Samsung with it’s large memory business holds the largest share with 15% of worldwide capacity, with TSMC 2nd with 12.8% and Micron 3rd with 9.4%. SK Hynix and Kioxia (formerly Toshiba Memory) making up the top 5 spots. It is interesting to note that 10years ago the top 5 companies only held 36% of the worldwide capacity showing how the industry is consolidating.

Qualcomm’s appeal against FTC’s antitrust victory against it was being heard in court last week in San Francisco. The judge stated that “Anticompetitive behaviour is prohibited under the Sherman Act. Hyper-competitive behaviour is not. This case asks us to draw the line between the two”

This week Samsung launched it’s next generation flagship phone which will be called Galaxy S20 and will have a 5G option and up to 4 cameras. They are hoping that 5G will revive demand for smartphones. Samsung also launch it’s next generation foldable phone the Galaxy Z Flip.

Photonics is one of the biggest growth areas in the IC market with a CAGR of over 20%. In 2013 the photonics IC market was 190million, this grew to 539million by 2017 and is expected to be between 1.3billion and 1.8billion by 2022, so the photonics market outlook is very bright.

Finally some sobering news and food for thought…

It is forecast that by 2030 there will be 20million manufacturing job layoffs due to robots powered by AI, big data and VR as Industry4.0 changes the way we live. In such an environment continued education and learning becomes essential. For the time being engineers are needed to create all these technologies, and the areas where most engineers will be needed will be AI & automation, Big Data, Generative Design and Digital Twins, Green Technology, VR/AR, robotics and 3D printing.

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