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Semiconductors Usher in a Cyclical Upturn and Resonate with Innovative Growth

Update Time: Jan 22, 2024    Readership: 82

Semiconductors Usher in a Cyclical Upturn and Resonate with Innovative Growth

The year of innovation under the weak recovery of the cycle has begun, and we are optimistic about the full-year performance of the hard technology sector. In the past week, the Shanghai Composite fell 1.72%, electronics fell 2.30%, other electronics fell 5.33% in sub-sectors, and semiconductors fell 1.06%. During the same period, Hang Seng Technology fell by 9.82%, while Philadelphia Semiconductor and Taiwan Information Technology rose by 7.98% and 4.32% respectively. With the "emergence" of AI applications, on the one hand, the market promotion process will be accelerated by optimizing the human-computer interaction experience of various AIoT products such as smart cars, smart robots, smart homes, and space computing terminals; on the other hand, it will also force corresponding The computing power infrastructure and terminal hardware architecture have been adaptively upgraded for this purpose. This round of AI applications represented by OpenAI ChatGPT, Windows Copilot, personal large models, etc. have taken the lead in making huge changes at the system and software levels. Follow-up upgrades in hardware technology are expected to start a new round of innovation cycle and economic recovery in the electronics industry in 2024. cycle.

 

The first batch of Vision Pro has been sold out, and the era of spatial computing is coming. At 9:00 U.S. time on January 19, Apple Vision Pro started pre-sale. This time Apple offers three memory versions, 256G, 512G and 1TB corresponding to US$3499, US$3699 and US$3899 respectively. At the same time, Apple released a promotional video of the specific production process, showing highly automated production lines such as glass cover molding and headband weaving. According to Wall Street Insights, physical stores were sold out within half an hour, and online channels were also sold out within minutes. We are optimistic about Apple's ability to define innovative products. Different from desktop computing and mobile computing, the launch of Vision Pro will officially open the era of spatial computing, break through the limitations of the current physical screen, and truly realize information interaction and human-computer interaction in the environment. It is recommended that Pay attention to the related leaders of "Fruit Chain".

 

TSMC's 4Q23 revenue slightly exceeded the guidance upper limit, and the semiconductor industry is expected to grow by more than 10% in 2024. TSMC’s 4Q23 revenue was US$19.62 billion (YoY -1.5%, QoQ +13.6%), slightly exceeding the upper limit of guidance (US$18.8-19.6 billion); gross profit margin was 53.0% (YoY -9.2pcts, QoQ -1.3pcts), close to guidance ( 51.5%-53.5%) upper limit; the company expects revenue in 1Q24 to be US$18-18.8 billion, with a gross profit margin of 52%-54%. TSMC predicts that the output value of the semiconductor industry (excluding storage) will grow by more than 10% in 24 years, and the wafer foundry industry will grow by 20%; due to the continued strong demand for advanced packaging of AI chips, the CAGR of advanced packaging is expected to exceed 50% in the next few years. We believe that with the completion of destocking and the rise of AI innovation, semiconductors are expected to usher in an upward cycle and resonate with innovative growth. We continue to recommend SMIC, Changdian Technology, Tongfu Microelectronics, Shengbang Technology, Weijie Chuangxin, etc.

 

Strong demand for AI drives the development of advanced packaging, focusing on opportunities in the packaging and testing industry chain. Last week, TSMC predicted that advanced packaging technologies such as CoWoS, 3D-IC, and SoIC will have a CAGR of more than 50% in the next few years, mainly due to the strong demand for computing chips brought by generative AI. TSMC plans to invest approximately US$2.8-3.2 billion in capital expenditures in the advanced packaging field in 2024. In addition to continuing to expand CoWoS production capacity, it will also expand SoIC production capacity to meet future demand for higher-end chips. In the post-Moore era, advanced packaging plays a more important role in improving chip integration, electrical connections, and performance optimization. All links in the industry chain benefit from this round of technological innovation. It is recommended to pay attention to Tongfu Microelectronics, Changdian Technology, SMIC, Xinqi Microelectronics, Tuojing Technology, Yak Technology, etc.

 

Some mid- and low-voltage device manufacturers have issued price increase notices, and the bottoming out of the industry has benefited the leading manufacturers in increasing their share.

 

Recently, many domestic power semiconductor manufacturers such as Jiejie Microelectronics, Sanliansheng, Lancai Electronics, Yangzhou Jingxin, and Shenzhen Microelectronics have successively issued price increase notices, mainly involving medium and low-voltage power devices. The current industry has bottomed out after many quarters of adjustments. Some companies have suffered long-term losses and are facing pressure from business contraction. It is difficult to maintain the original low product prices, so they have made price adjustments. However, the orders from major customers of leading manufacturers are relatively stable. Through the industry Gradually clearing the market share will further increase. In addition, the global 6-inch production capacity increase is limited and ON Semiconductor is gradually withdrawing from the medium and low-voltage market. Superimposed on the optimization of foundry costs, the gross profit margin of domestic leading manufacturers is expected to be steadily restored. Recommended industry chain related companies Yangjie Technology, Xinjie Energy, and Jiejie Microelectronics , China Resources Micro, Silan Micro, etc.

 

Mobile phone panel prices rose steadily in January, and flexible OLED domestic production capacity was tight. According to Qunzhi Consulting, smartphone panel prices remained stable and rising in January. Among them: demand for a-Si LCD slowed down in the first quarter, and individual module production capacity was tight. Some price increase agreements reached in the fourth quarter will be canceled in the first quarter. Realization; LTPS LCD With the decline in demand for LTPS from mobile phones and the release of new production capacity, prices will remain stable for some time in the future; terminal demand for flexible OLED is still positive, domestic production capacity is relatively tight, and flexible OLED will seek a new round of price adjustments in the first quarter . We believe that after a long period of large-scale expansion of mainland-based manufacturers and several changes in the focus of the global industry, the high-generation evolution trend of the LCD industry has stagnated and the competitive landscape has been fully reshuffled. We recommend BOE A, TCL Technology, etc. At the same time, the rise of the LCD industry has enhanced the overseas competitiveness of domestic TV brands and ODM manufacturers. We recommend Zhaochi Technology, Kangguan Technology, Transsion Holdings, etc.

 

Focus Portfolio

Consumer Electronics: Transsion Holdings, Dianlian Technology, Furong Technology, Fii Industrial, Wingtech Technology, Shanghai Electronics Co., Ltd., Guanghong Technology, Yongxin Optical, Jingwang Electronics, Hikvision, TCL Technology, BOE A, Kang Guan Technology, Sichuan Jiuzhou, CVTE, Dongshan Precision, Skyworth Digital, Pengding Holdings, Goertek, Fuliwang, USI, Shihua Technology, Sanlipu, Yi Delong Semiconductor: Sai Microelectronics, SMIC, Tongfu Microelectronics, Lixin Micro, Guoxin Technology, Changdian Technology, Jingchen Technology, Shengbang Technology, Xinpeng Micro, Jiehuat, Fengya Technology, Longsys, Diao Micro, Yutai Micro-U, Star Semiconductor, Beijing Ingenic, Hengxuan Technology, VeriSilicon, Dongwei Semiconductor, Unisoc Micro, Jingfeng Mingyuan, Yangjie Technology, New Clean Energy, Huahong Semiconductor, Ninestar , Macro Micro Technology, Silan Micro, China Resources Micro, Tianyue Advanced, Times Electric, GigaDevice, Weill Technology, Montage Technology, Awinic Electronics, Serip, Zhuosheng Micro, Nanocore Micro

 

Equipment and materials

China Micro, Yingjie Electric, Dinglong Co., Ltd., Xinqi Micro Equipment, Yake Technology, Northern Huachuang, Tuojing Technology, Anji Technology, Fuchuang Precision, Guangli Micro, Wanye Enterprise, Leon Micro , Shanghai Silicon Industry, Zhongjing Technology

 

Passive components

Sunlord Electronics, Jiemei Technology, Jianghai Co., Ltd., Sanhuan Group, Fenghua Hi-tech Risk warning: downstream demand is less than expected; industrial development is less than expected; industry competition intensifies.