On July 16, 1968, the two co-founders of Fairchild Semiconductor, Robert Noyce and Gordon Moore, resigned and co-founded Intel in the name of integrated circuits. Since then, Intel has been in the leading position of global semiconductors, but in 2020, the year when the "black swan" event is flying all over the sky, the semiconductor industry is undercurrent.
On July 24, Intel announced that the 7-nanometer process was delayed, or it would commission a third-party foundry. As soon as the news came out, Intel's stock price plunged 16.2% the next day, and the share price of TSMC, which was rumored to be its foundry party, rose sharply. TSMC has topped the list of global semiconductor companies with a market value of US$306.3 billion on July 16. As soon as the news came out, its market value continued to soar by US$42 billion. The share price of Intel's competitor AMD also rose by 16.5%.
Is the global semiconductor landscape going to change?
Vertical integration tends to vertical division of labor, the US and China are the largest supply and demand markets
The semiconductor industry belongs to the electronic information industry and belongs to the hardware industry. It is an industry developed based on semiconductors. In the past 70 years, as a highly capital and technology-intensive industry, the biggest development trend of the semiconductor industry is that the vertical division of labor in the industry chain has become more mature and the industry chain has become more refined.
In the 1960s, semiconductor companies such as Intel and Samsung were IDM operating models (vertical integration), which covered the entire chip production process such as design, manufacturing, packaging and testing, and had the three characteristics of large scale, comprehensive technology, and deep accumulation. .
When the times change, technological upgrading requirements continue to accelerate, and industrial production efficiency continues to increase, the semiconductor industry trend began to undergo major changes in the 1980s, and gradually developed to a vertical division of labor mode that separates design, manufacturing, packaging, and testing: first, it will be relatively light. The separation of asset design and heavy asset manufacturing and packaging and testing is conducive to centralizing R&D investment in all aspects, accelerating technological upgrading and reform, and giving new players an entry point into the industry, such as packaging and testing with low technical level, and Fabless with outstanding design. Single design) mode, etc.; second, with the increasing cost of technological upgrading and increasing requirements for the production efficiency of the integrated circuit (IC) industry, the vertical division of labor mode has greatly improved the operational efficiency of the entire industry.
Looking at the changes in the top ten semiconductor companies, the industry development trend is at a glance. In the 1990s, most of the global semiconductor companies were Japanese companies, 50% of the top ten companies were IDM companies; in 2016, design companies such as Qualcomm and Broadcom appeared in the top ten semiconductor companies, indicating foundry +The development model of the design company has achieved great success in the field of digital logic integrated circuits. Benefiting from the hot demand for memory chips brought by data center servers, Samsung Electronics surpassed Intel in 2017 and 2018 and maintained the global semiconductor sales champion.
From a national perspective, American semiconductor companies account for half of the global share, and China is the largest semiconductor demand market in the world and the United States. Driven by the "high profit + high R&D investment" business model, the United States has a market share of 47% in the global semiconductor industry in 2019, and is in a leading position in the industrial chain of EDA software, IP, semiconductor equipment, and chips. According to data from the American Semiconductor Industry Association (SIA) and the World Semiconductor Trade Statistics Association (WSTS), China accounted for 35% of global semiconductor sales in 2019, while US semiconductor companies’ market share in China reached 48%. In 2019, Qualcomm and Microchip US semiconductor companies such as Micron, Micron and Qorvo account for more than 50% of their revenue in China. Semiconductor demand in the Chinese market is an important source of revenue for US semiconductor companies.
Intel is still the leader, but perilous
From the perspective of revenue and net profit, Intel is still a strong leader among semiconductor companies. In 2019, revenue was as high as 72 billion US dollars and net profit was 21 billion US dollars, surpassing Samsung Electronics, which had previously held the top spot, and returned to the top of the world. In the short term, on the one hand, Intel relied on its long-term technology accumulation and adopted the Tick-Tock strategy to form a dominant monopoly in the central processing unit (CPU) field; on the other hand, through its ultra-high gross profit and net profit level, it has repeatedly acquired FPGA, With the diversified product layout of companies such as AI, it is difficult for chasers such as AMD and Nvidia to surpass from the total level in the short term.
However, although Intel is still in the leading position, the challenges it faces are increasing. There are two main reasons for this:
First, Intel, which is mainly engaged in the personal computer business, has made strategic mistakes in the development trend of smart phones. Smart phones are one of the most important terminals in the mobile Internet era in the past decade and the next decade, and they are also one of the products with the highest silicon content after computers. Intel obviously did not firmly make strategic adjustments ahead of time. Around 2010, the popularity of smart phones accelerated worldwide, and was impacted by smart phones. After 2012, Intel’s desktop CPU shipments also began to decline, and revenue growth was significantly reduced.
Second, Intel has always adhered to the IDM model and is unwilling to adapt to changes in the times to do OEM business. For decades, the combination of Microsoft Windows and Intel CPU has achieved great success in the X86 architecture PC era. Intel’s IDM model has a much higher profit margin than AMD’s Fabless model and TSMC’s Foundry (single manufacturing) model. Therefore, Intel does not Willing to change the high-margin income model.
At the same time, as the traditional chaser of Intel on the microprocessor race track, AMD continued to make efforts in CPU technology in 2016, grabbing Intel’s market share, and outsourcing foundry manufacturing. Under the leadership of the new CEO Su Zifeng, AMD launched the RyzenCPU series for the first time, and began to compete head-on with Intel CoreCPU. In 2018, AMD's 7-nanometer process processor was successfully developed, sales volume increased significantly, and market share increased year by year. In the same year, AMD handed over 7-nanometer wafers to TSMC's exclusive foundry. According to data from the data research company MercuryResearch, AMD's PCCPU market share reached 18.3% in the fourth quarter of fiscal year 2019.
This trend is reflected in market share and capital markets. AMD's global share was less than 10% in 2016, especially in the server market where performance is more emphasized. At its peak, Intel's global market share was as high as 99%, and AMD was less than 1%. In the capital market, AMD's stock price began to fall in 2006 and reached a low of less than $1.6 in September 2015. On July 28, 2020, AMD’s second quarter 2020 financial report showed that AMD’s revenue was US$1.932 billion, an increase of 26% over the same period last year and an increase of 8% over the previous quarter; net profit was US$157 million, compared with last year An increase of 349% over the same period. AMD's stock price has risen from approximately $1.6 at the bottom in July 2015 to $74.6 on July 28, 2020, an increase of more than 40 times.
Under the artificial intelligence boom, the new challenger NVIDIA is also coming fiercely. Nvidia is the only company that has achieved rapid growth in the server chip market dominated by Intel in recent years. Although Intel's data center business has annual revenue of more than 20 billion US dollars, Nvidia has grasped the explosion of demand for video data processing in the era of big data, especially It is the proliferation of short video on the consumer side that has made the graphics processing unit (GPU) a rising position in the data center, and may become a strong competitor of Intel. On July 8, 2020, Nvidia’s stock price closed at US$408.64, with a total market value of US$251.314 billion, surpassing Intel for the first time.
Short-sightedness and greed made Intel continue to indulge in high profit margins, and missed the dividend period of smart phone development. Although in hindsight, Intel began to "turn the ship" in 2013, appointing Brian Kelzanich to reverse the trend, on the one hand, to promote Atom SOC to occupy the smartphone and tablet market; on the other hand, Use the monopoly position to continuously increase the CPU unit price to maintain revenue growth and high profit margins. However, born of worry and dying of happiness, the high-tech industry needs to advance technological progress endlessly. Once the spirit of innovation slackens, Nokia’s Rout will be inevitable.
Foundry: TSMC's market value tops the world, supporting industry change
As the world's largest foundry and Apple's main supplier, TSMC occupies half of the global chip foundry market and is the industry leader. Samsung ranks second with a 20% market share.
Due to higher yields and more stable production cycles, TSMC has almost exclusively enjoyed all orders in the 7-nanometer process field, and the pricing power is extremely high. In this context, TSMC’s net profit soared 81% in the second quarter of 2020, setting a record for the largest profit in six years, while accounting for 51.9% of the global foundry market share in the second quarter. The 7-nanometer and 16-nanometer processes are still the main source of TSMC’s revenue. The 7-nanometer process accounts for 36% of TSMC’s wafer sales in the quarter. Its advanced 3-nanometer process will also be mass-produced in the second half of 2021. 2022 In mass production in the second half of the year, the 3nm process will bring a 70% increase in density and a 20%~25% power increase compared to the 5nm process.
Intel announced that the 7-nanometer process technology will be delayed for 6 months, which will result in Intel’s future release of several graphics chips and computer processing chips. Intel’s poor progress in 7nm will enhance TSMC’s leading capabilities in wafer manufacturing. In addition, Intel CEO said that Intel may outsource its own chip manufacturing business in the future, and TSMC, as the leader in the foundry field, is expected to win orders from Intel, which may make TSMC's capital expenditures continue to expand in the future. As the vane of the semiconductor industry chain, TSMC’s expansion will transmit its own prosperity to the downstream semiconductor packaging and testing market, thereby further stimulating the demand for semiconductor packaging equipment.
In this context, TSMC’s stock price has risen by more than 70% from its low in March for the year. On July 16, TSMC topped the list of global semiconductor companies with a total market value of 306.3 billion U.S. dollars, followed by Samsung, followed by Nvidia, Intel, and Broadcom. To fifth place.
In short, the semiconductor market is like a rapidly changing battlefield, and the strategic mistakes of the giants may cause subversion of the situation. Intel, whose competitive advantage lies in the manufacturing process, has made continuous mistakes in the choice of technical direction and execution. The rapid development of TSMC has become the fulcrum that can support AMD and Nvidia to overtake Intel. On the one hand, AMD and Nvidia can take advantage of the Fabless model, continue to strengthen their in-depth binding and cooperation with TSMC, and use the most advanced technology and advanced packaging technologies such as Fanout to accelerate the improvement of product cost-effectiveness; on the other hand, both are aimed at subdivided areas To achieve differentiated competition with Intel in the field of general computing. AMD and Nvidia have specifically strengthened the layout of dedicated chips for machine learning, cryptocurrency mining, smart cars, etc., in order to challenge Intel on new tracks in the future. Upheaval in the global semiconductor industry is gestating.