Which chips are on the rise in the IC market at the beginning of 2024?
At the beginning of 2024, the chip market has undergone significant changes. The momentum of continuous price increases in memory indicates that, with just signs of recovery, the original factory is intensifying efforts to save profits. However, simulating the price increase of large factory ADI seems to be out of place with the current market situation. In summary, from the price changes in various IC sub markets, we can glimpse where the opportunities lie in 2024.
Consumer related memory and CIS price increases
Starting from the third quarter of 2023, major original factories such as Samsung, SK Hynix, and Micron have successively reduced production. Transmitted to the market, the supply chain pointed out that the price of NAND flash memory has increased by 60-70% in the past two months, and DRAM has relatively eased, with a 20% increase. As an important NAND flash memory manufacturer, Western Data even announced in December last year that it would increase its flash memory quotation by a cumulative 55% in the coming quarters.
With the support of production reduction, although NAND flash memory has increased significantly, the current quotation is still far from the breakeven point of manufacturers. Reports indicate that manufacturers will further increase their quotation by about 50% in the future. TrendForce, a research firm specializing in tracking the storage market, predicts that the quarterly average price increase for mobile DRAM and NAND flash memory (eMMC/UFS) will expand to 18% -23% in the first quarter of 2024. In the absence of oligopolistic competition in the market or panicked price chasing by brand customers, it may further increase the increase.
As expected, factory price increases will not stop in the short term. The latest news is that Samsung and Micron plan to raise DRAM prices by 15% -20% in the first quarter. It is worth noting that previous reports pointed out that DRAM's growth rate is not as good as NAND flash memory, and this round of replenishment seems to be bound to synchronize the two increases. The original factory is working hard to get rid of the loss quagmire.
In the past two quarters, the shipment volume of mobile phones and PCs has continued to recover month on month. In addition, at the end of the year, mobile phone manufacturers such as Xiaomi, Huawei, and Honor have concentrated on releasing new phones, which can help drive up memory prices. The price increase brought about by the rebound in demand is not limited to this. Another key component required for mobile phones, CMOS image sensors (CIS), has also begun to rise in price. As an important manufacturer, Samsung issued a price increase notice for CIS in November last year, informing customers that the average increase in price in the first quarter of next year was as high as 25%, and some products had the highest increase of up to 30%. The price increase mainly focused on products with specifications above 32MP, which happened to be the specifications used by mainstream mobile phones.
Simulate a new round of price increases in large factories
Not long before the New Year, a price increase letter from the simulation company ADI was circulated in the market, announcing that starting from February 4, 2024, some old products will be subject to price increases. It is rumored that the range will be between 10% and 20%, and it will increase by 15% in 20 years of mass production, and by 20% in 25-20 years of mass production.
Previously, ADI had just experienced a decline in revenue in the fourth quarter and a round of layoffs with hundreds of employees, so its price increase also had factors that boosted performance. But in response to the price increase of old products, it is also guiding customers to turn to new products with higher profit margins, which mainly relies on ADI as a simulation of the confidence and strength of large factories. But currently, general materials are no longer out of stock and demand is relatively low. It is still quite difficult for ADI to reflect the price increase on the market side.
Mature process wafer foundry faces difficulties in increasing prices
For big companies like Samsung and ADI with voice, the way to save profits is to directly initiate price increases. However, in the field of mature process wafer foundry, in order to attract more wafer production, foundries have to compete by lowering prices. Due to the slow recovery of demand, the previous preferential strategy of "full reduction" for film production is no longer effective, and contract factories have had to switch to direct price reductions to attract film production.
In November last year, it was reported that the capacity utilization rate of mature process wafer foundries was feared to drop below 60%. Liandian, World Advanced, and TSMC, among others, significantly reduced their first quarter 2024 quotations by double-digit percentages, with a decrease of up to 15% -20% for special project customers. Afterwards, the leading manufacturer TSMC also offered a 2% price discount for some mature processes. However, TSMC's difference is that it does not directly lower the price, but rather settle the payment after the entire season of production, which is deducted from the mask cost of the next season's production.
In the wafer foundry industry chain, IC design factories and wafer foundries cooperate with each other, but there is also a price game. Due to the significant decline in terminal demand, IC design clients are reducing chip investment, and at this point, wafer foundries must make concessions to attract chip investment. Moreover, due to fierce price competition among major mature process products such as power ICs, touch ICs, and display driver ICs, there is still great difficulty in raising prices in the context of demand recovery.
Grasp the Recovery of Consumer Electronics and Expand New Demand
Entering 2024, the demand for basic consumer goods represented by PCs and mobile phones has indeed shown improvement, and IC manufacturers are also aiming to use this opportunity to recover performance. But the problem lies in the persistence of demand. The current macro conditions still do not support consumption upgrading. If chip manufacturers intend to boost performance through more price increases, it may be difficult to receive a response from downstream enterprises.
Traditional consumer electronics are no longer able to stimulate consumer desire, so the industry is hoping that new concept products such as AI PCs and AI phones will stimulate the demand for phone replacements. In addition, the continuous promotion of new energy will also stimulate a large demand for chips. Basically, the main tone for 2024 is to focus on the hard won recovery of consumer electronics and expand into emerging industries. For IC manufacturers, achieving a balance between leveraging the recovery of traditional demand for profits and expanding into emerging fields to gain market share is the most important thing, although it is difficult.