Source: Semiconductor Industry Watch. At yesterday's Conputex conference, Dr. Lisa Su released the latest roadmap. Afterwards, foreign media morethanmoore released the content of Lisa Su's post-conference interview, which we have translated and summarized as follows: Q: How does AI help you personally in your work? A: AI affects everyone's life. Personally, I am a loyal user of GPT and Co-Pilot. I am very interested in the AI used internally by AMD. We often talk about customer AI, but we also prioritize AI because it can make our company better. For example, making better and faster chips, we hope to integrate AI into the development process, as well as marketing, sales, human resources and all other fields. AI will be ubiquitous. Q: NVIDIA has explicitly stated to investors that it plans to shorten the development cycle to once a year, and now AMD also plans to do so. How and why do you do this? A: This is what we see in the market. AI is our company's top priority. We fully utilize the development capabilities of the entire company and increase investment. There are new changes every year, as the market needs updated products and more features. The product portfolio can solve various workloads. Not all customers will use all products, but there will be a new trend every year, and it will be the most competitive. This involves investment, ensuring that hardware/software systems are part of it, and we are committed to making it (AI) our biggest strategic opportunity. Q: The number of TOPs in PC World - Strix Point (Ryzen AI 300) has increased significantly. TOPs cost money. How do you compare TOPs to CPU/GPU? A: Nothing is free! Especially in designs where power and cost are limited. What we see is that AI will be ubiquitous. Currently, CoPilot+ PC and Strix have more than 50 TOPs and will start at the top of the stack. But it (AI) will run through our entire product stack. At the high-end, we will expand TOPs because we believe that the more local TOPs, the stronger the AIPC function, and putting it on the chip will increase its value and help unload part of the computing from the cloud. Q: Last week, you said that AMD will produce 3nm chips using GAA. Samsung foundry is the only one that produces 3nm GAA. Will AMD choose Samsung foundry for this? A: Refer to last week's keynote address at imec. What we talked about is that AMD will always use the most advanced technology. We will use 3nm. We will use 2nm. We did not mention the supplier of 3nm or GAA. Our cooperation with TSMC is currently very strong-we talked about the 3nm products we are currently developing. Q: Regarding sustainability issues. AI means more power consumption. As a chip supplier, is it possible to optimize the power consumption of devices that use AI? A: For everything we do, especially for AI, energy efficiency is as important as performance. We are studying how to improve energy efficiency in every generation of products in the future-we have said that we will improve energy efficiency by 30 times between 2020 and 2025, and we are expected to exceed this goal. Our current goal is to increase energy efficiency by 100 times in the next 4-5 years. So yes, we can focus on energy efficiency, and we must focus on energy efficiency because it will become a limiting factor for future computing. Q: We had CPUs before, then GPUs, now we have NPUs. First, how do you see the scalability of NPUs? Second, what is the next big chip? Neuromorphic chip? A: You need the right engine for each workload. CPUs are very suitable for traditional workloads. GPUs are very suitable for gaming and graphics tasks. NPUs help achieve AI-specific acceleration. As we move forward and research specific new acceleration technologies, we will see some of these technologies evolve-but ultimately it is driven by applications. Q: You initially broke Intel's status quo by increasing the number of cores. But the number of cores of your generations of products (in the consumer aspect) has reached its peak. Is this enough for consumers and the gaming market? Or should we expect an increase in the number of cores in the future? A: I think our strategy is to continuously improve performance. Especially for games, game software developers do not always use all cores. We have no reason not to adopt more than 16 cores. The key is that our development speed allows software developers to and can actually utilize these cores. Q: Regarding desktops, do you think more efficient NPU accelerators are needed? A: We see that NPUs have an impact on desktops. We have been evaluating product segments that can use this function. You will see desktop products with NPUs in the future to expand our product portfolio.

If there is one sentence to comment on this year's semiconductor market, it might be "It's hardest to take a breather when the warmth is just starting to arrive".

Some semiconductor manufacturers have emerged from the cold winter last year and are taking big steps forward, while some manufacturers, due to severe freezing, can only take small steps forward. Some manufacturers have even fallen into a 'false spring' situation, a sign also reflected in their financial reports.

Let's also take a look at the financial reports of these manufacturers, who is the first to step into spring?

Equipment giant, reporting joy or reporting worry?

• ASML

Equipment leader ASML Holding (ASML.US) Undoubtedly, the company that expresses worries, the continuously falling stock price is the best proof.

In October of this year, ASML prematurely disclosed its third-quarter performance and provided outlook for 2025. According to the financial report, in the third quarter of 2024, ASML's revenue exceeded expectations, reaching 7.5 billion euros, benefiting from strong DUV equipment sales and higher-than-expected 1.54 billion euros of installation management revenue. Although the net bookings reached 2.6 billion euros, it was significantly lower than the expected 5.6 billion euros, including 1.4 billion euros from EUV systems, indicating significant market pressure.

For the fourth quarter, ASML expects sales to increase significantly to between 8.8 billion and 9.2 billion euros, mainly due to expected upgrades in EUV performance and productivity, which will increase installation management revenue to 1.9 billion euros. The company expects its 2024 revenue to be around 28 billion euros, maintaining consistency with previous guidance and slightly lower overall compared to 2023. However, ASML's updated 2025 sales forecast is currently between 30 billion and 35 billion euros, at the lower end of ASML's previous expectations, when the company anticipated revenue between 35 billion and 40 billion euros.

There are many reasons why ASML has lowered its revenue forecast, but the two main reasons are obvious: stricter regulations on equipment that can be shipped to China, and Intel's scaling back of expansion plans, particularly delaying its Fab 29 in Germany to 2029-2030. In addition, the delay of Samsung's foundry at the U.S. chip plant also had a certain impact. Changes in Intel's plans may cause greater harm to ASML. Limited increase in 3D NAND DRAM capacity is also one of the reasons.

In recent quarters, the domestic construction and equipment of dozens of new wafer fabs have accelerated, leading to a need for hundreds of new lithography tools domestically - which ASML has received these orders. Consequently, China accounts for about half of its revenue in recent quarters. But as China slows down the pace of purchasing old equipment, and the U.S. and its allies prepare for stricter regulations on exporting semiconductor tools to China, ASML predicts that by 2025, its business with Chinese entities will comprise only 20% of its total revenue.

ASML Chief Financial Officer Roger Dassen stated that this shift is a return to more historically normal levels. 'I think we all read the newspapers, right?' Dassen said. 'We all see speculation about export controls. Therefore, this prompts us to take a more cautious view on sales to China. Therefore, considering these factors, we believe that next year's sales to China will reach 20% of our expected sales next year.'

ASML also mentioned some wafer fab expansions. ASML CEO Christophe Fouquet stated, 'In terms of logic chips, the competitive dynamics of foundries have led to a slowdown in new node growth for some customers, resulting in several factories being shut down and causing changes in lithography demand timing, especially with EUV.' 'In memory, we see limited capacity increases, with the focus still on supporting the technological transition to HBM and DDR5 AI-related demands.'

When asked whether the decline in sales is due to some of ASML's clients encountering difficulties in process technology, and being unable to attract new customers to prove the rationale of building new wafer fabs, Fouquet confirmed that this is a common issue, but once again did not specifically mention Intel.

简而言之，由于市场复苏速度慢于预期、地缘政治不确定性以及向中国出口设备可能受到额外监管，ASML下调了 2025 年的预期。这也导致了它的市值在几天内下跌了近 75.7 billion美元。

• BESI

同样位于荷兰的设备厂商BESI虽然在财报上表现并不算太差，但在未来预期方面也好不到哪里去。

BESI此前公布了截至 2024 年 9 月 30 日的第三季度和九个月的业绩。其在2024 年第三季度收入为 0.1566 billion欧元，较 2024 年第二季度增长 3.6%，较 2023 年第三季度增长 27.0%，原因是计算终端用户市场对混合键合、光子学和其他人工智能应用的需求增加，但汽车和中国终端用户市场持续疲软部分抵消了这一影响。

订单总额为 0.1518 billion欧元，较 23 年第三季度增长 19.2%，主要由于混合粘合订单增加。较 24 年第二季度下降 18.0%，主要由于客户混合粘合订单模式波动；毛利率为 64.7%，较 2024 年第二季度下降 0.3 个百分点，但较 2023 年第三季度上升 0.1 个百分点。同期毛利率发展受到净外汇影响的不利影响；净收入为 46.8 million欧元，较 2024 年第二季度增长 11.7%，较 2023 年第三季度增长 33.7%，这主要是由于收入水平提高和成本控制力度加大，限制了基线运营费用的增长；2024 年第三季度净利润率从 2024 年第二季度的 27.7% 和 2023 年第三季度的 28.4% 上升至 29.9%。

BESI在财报中指出，与去年同期相比，2024 年第三季度的收入、订单和净收入显着增长，尽管主流和中国封装设备市场持续面临阻力，但公司继续受益于用于 AI 应用的先进封装产品组合的强劲增长。

其表示，本季度收入分别比 2023 年第三季度增长 27.0% 和 19.2%，主要归功于混合键合、光子学和其他 AI 应用等计算终端用户市场的强劲增长，但这种增长被汽车和中国终端用户市场的疲软所部分抵消，净收入增长反映了一系列有利趋势，包括先进封装系统收入增加、相关毛利率增加以及好于预测的运营费用水平，但于此同时，下一代混合键合和 TCB 系统的研发支出持续增长。

首席执行官表示，在 2024 年第三季度，BESI继续收到来自现有和新客户的大量混合键合系统订单。截至季度末，自 2021 年以来产生收入的混合键合订单总额超过 100 个系统，凸显了这项新技术对于 3D AI 相关组装应用的重要性。随着全球采用率不断扩大，预计 2024 年第四季度将有来自各种客户的更多订单。领先的逻辑和内存客户也对 BESI 的 TCB Next 系统产生了越来越浓厚的兴趣，这为其在下一代 2.5D 和 HBM 应用的预期增长奠定了有利基础。

It is worth mentioning that in the second quarter of 2024, BESI also stated that the growth in AI demand offset the decline in orders from China. However, by the third quarter, the negative effects of reduced Chinese orders began to intensify. In addition, delays in hybrid bonding equipment deliveries, similar to ASML, led to a less-than-expected outlook for the second half of the year. All signs indicate the weakness in the "Non-AI" semiconductor market.

• Lam Research

Unlike the previous two manufacturers, the leading equipment manufacturer based in North America $Lam Research (LRCX.US)$ reported strong financial results.

Semiconductor manufacturing equipment manufacturer Lam Research released its latest quarterly report on October 23. For the third quarter ending September 29, revenue was $4.17 billion, within its guidance range of $3.75 billion to $4.35 billion. This reflects a nearly 20% year-on-year growth. Operating results for this quarter were strong, with a gross margin of 48.0%, slightly higher than the upper limit of the guided range of 45.9% to 47.9%.

In terms of segment revenue, Lam Research's Systems and Customer Support revenue segments performed well. System revenue increased from $2.17 billion in the fourth quarter of fiscal 2024 and $2.06 billion in the first quarter of fiscal 2024 to $2.39 billion. This growth indicates an increased demand for its advanced equipment. Similarly, customer support-related revenue was $1.78 billion, higher than previous quarters, highlighting Lam's strong customer service network in its business.

It should be noted that a large part of Lam Research's revenue comes from Asia - China, South Korea, and Taiwan being its three major markets, with China alone accounting for 37% of total revenue in the latest quarter. This region underscores the relationships Lam has built with key industry manufacturers, especially in the Panlin Group.

Lam Research's recent product innovations include improvements to its Sense.i platform, which integrates AI and ML capabilities. These developments are crucial to supporting modern semiconductor manufacturing processes and solidifying Lam's leading position in the field.

In terms of market environment, Lam Research points out that despite the ongoing recovery in the NAND market, the company's investments in advanced logic and DRAM sectors remain strong. For the overall wafer fabrication equipment (WFE) spending in 2024, Lam's forecast remains in the moderate range of around $90 billion due to continued growth in demand for advanced logic nodes and HBM.

In the Chinese market, Lam expects the capital expenditure on wafer fabrication equipment (WFE) in China in the second half of 2024 to be lower than the first half, and revenue in China is expected to decline to around 30% by the December quarter. This change reflects a normalization trend in the Chinese market, with Lam relying more on the performance of other markets for future growth.

Looking ahead to 2025, Lam Research is optimistic about the growth of WFE, expecting it to exceed the moderate level of 2024. The company emphasizes that as demand for NAND technology upgrades increases, Lam's leading position in the NAND market will benefit it. Furthermore, with the rising demand for advanced packaging technology, Lam's market share in this area is also expanding.

For Lam Research, despite further narrowing of revenue from the Chinese market, growth in advanced packaging and NAND has compensated for it. The company is also bullish on the growth of these two major market demands, with hopes of delivering better performance in the next quarter.

• Teradyne

Specializing in testing equipment $Teradyne(TER.US)$ The performance in the third quarter is not bad, and an optimistic forecast is also given for the next quarter.

Teradyne recently announced its third-quarter financial performance, with revenue reaching $0.737 billion, at the higher end of expectations. In terms of segment revenue, semiconductor test revenue was $0.543 billion, with System-on-Chip (SoC) contributing $0.393 billion and memory contributing $0.15 billion. The revenue of the system test group is $73 million, with all businesses continuing to be weak. Wireless test revenue is $33 million, showing both year-on-year and quarter-on-quarter declines, while robot business revenue is approximately $89 million, holding steady on a quarter-on-quarter basis and increasing by 3% year-on-year.

Looking ahead, Teradyne expects sales in the fourth quarter to be between $0.71 billion and $0.76 billion, with a gross margin forecasted to be between 59.5% and 60.5%. Overall, its performance in various areas remains robust, especially in semiconductor test business, demonstrating a positive response to market demand.

In a recent earnings conference call, Teradyne CEO Gregory Smith discussed opportunities in the System-Level Test (SLT) market, emphasizing the increasing importance of SLT in smart phone processors and its gradual extension to computing customers. While there may be some contribution in 2024, 2025 is expected to be more significant. With the market recovery, Teradyne has added customers in the mobile sector, with an expected continuous growth in the customer base.

Regarding AI chip testing, Smith mentioned that the increase in testing time is related to the complexity of devices. SLT can help limit the growth of testing time, and Teradyne sees new opportunities in the AI accelerator field, particularly in Vertical Integration Producers (VIP) and networking sectors, which are driving demand.

Addressing market expectations, CFO Sanjay Mehta explained that although the Total Addressable Market (TAM) is expanding, especially due to the improvement in AI computing capabilities and a better understanding of the Chinese market, sales in the fourth and first quarters may be lower than the third quarter. Despite Teradyne's lower exposure in China, the TAM growth momentum has been significant.

When discussing the reasons for the slowdown in robot business growth, Smith emphasized that industrial automation is facing challenges, with current low PMI and high interest rates. To achieve 20-30% growth, Teradyne is expanding its product and distribution channels, including heavy-duty robots and OEM solutions, but continued growth requires a better market environment.

Finally, Mehta mentioned that although operating expenses are expected to increase at a double-digit rate, Teradyne's goal is to achieve operating leverage. The company will focus on strategic investments in the semiconductor test area, particularly in engineering and listing, to leverage the transition to computing and VIP strategies.

For Teradyne, it has been negatively impacted by geopolitical issues in the past. However, due to the strong performance of the AI and HBM markets, it has still achieved stable growth in the semiconductor testing business, with good future expectations.

• ASM

Both being Dutch semiconductor equipment manufacturers, ASM International's order volume in the third quarter actually exceeded analysts' expectations.

The financial report shows that this Dutch company's order volume reached 0.8153 billion euros (approximately 0.8816 billion US dollars), a 30% year-on-year increase based on fixed exchange rates. Analysts had previously expected an order volume of 0.776 billion euros. Quarterly revenue increased by 26% to 0.7786 billion euros, surpassing analyst expectations and reaching the company's high-end expectations. The group expects fourth-quarter revenue to be between 0.77 billion and 0.81 billion euros.

However, ASM's net income also decreased from 0.1296 billion euros to 0.1279 billion euros, below analysts' expectations. The gross profit was 0.38442 billion euros, with a profit margin of 49.4%. It is stated that revenue in the second half of the year is expected to grow by approximately 15% over the first half's almost 1.35 billion euros. Full-year revenue is expected to increase by about 10%.

ASM stated that the company has seen strong demand for key technology for AI chips. CEO Hichem M'Saad mentioned in a statement that their so-called 'full-gate technology' products will significantly improve equipment performance, and sales are expected to 'significantly increase' next year.

M'Saad also pointed out that despite the company's previous warning of a sales decline in China in the second half of the year, third-quarter sales were 'slightly better than expected.' However, he still expects demand in the Chinese market to weaken in the last three months of this year, citing subdued recoveries in personal computers and smartphones, as well as 'cyclical declines' in autos and industrial sectors as market weaknesses.

For ASM, its stock price had also experienced a significant decline due to ASML's poor performance in the past. However, the financial report's actual performance was much better than expected. ASM, in line with other equipment companies showing good performance, has been buoyed by strong demand in AI, offsetting losses in the Chinese market, leading to a less optimistic forecast.

• KLA

KLA, whose stock price had recently suffered a major decline, reported financial results that exceeded analysts' expectations. The semiconductor equipment manufacturer also provided an optimistic outlook, driving its stock price higher in after-hours trading.

KLA reported an adjusted earnings per share of $7.33 for the quarter ending September 30, higher than the analysts' average expectation of $7.04. The revenue was $2.84 billion, above the expected $2.75 billion and higher than the $2.69 billion from the same period last year, a year-on-year increase of 5.6%.

The company's outlook for the current quarter is also very optimistic. KLA forecasts earnings per share for the second quarter to be $7.75 Canadian dollars +/- $0.60, higher than the market expectation of $7.40 Canadian dollars. Projected revenue is $2.95 billion +/- $0.15 billion, higher than analysts' forecast of $2.85 billion.

KLA Corporation's President and CEO, Rick Wallace, said: "KLA's performance in the September quarter continued to excel, surpassing expectations." He added that the company remains optimistic about the sustained growth in the semiconductor market for the fourth quarter of 2024 and 2025.

Wallace stated that the company anticipates continued steady growth in 2025, primarily relying on the expansion of advanced process control and semiconductor packaging businesses. Additionally, the growing demand for AI has boosted the demand for the company's products. KLA actively integrates AI technology into its products to enhance performance and customer cost-effectiveness.

Regarding finance, CFO Bren Higgins pointed out that KLA's gross margin was 61.2%, slightly lower than expected, but the company demonstrated excellent cost control and operational optimization. The service business grew by 15% year-on-year this quarter, with free cash flow reaching $0.935 billion and $0.765 billion in capital return, including share buybacks and dividends. For 2025, KLA expects to maintain a competitive edge in the leading semiconductor market and will further invest in research and development to support revenue growth.

In the Chinese market, KLA accounts for approximately 42% of the business, but it is expected to decrease to around 35% in the fourth quarter of 2024. The market share is projected to stabilize at about 30% next year, while closely monitoring the impact of export control policies.

For KLA, AI still continues to provide dividends, while revenue from the Chinese market has also shown a downward trend similar to other equipment companies. Whether the two can bring higher revenue after offsetting each other may be a concern for many people.

• Aixtron

German chip equipment manufacturer Aixtron recently released its quarterly financial report. The company supplies deposition equipment to chip manufacturers, with order volume reaching 0.1435 billion euros (0.156 billion dollars), a 21% increase from the same period last year. In the third quarter, Aixtron's Earnings Before Interest and Taxes (EBIT) fell by 17% year-on-year to 37.5 million euros, lower than the average analyst expectation of 42.7 million euros.

Despite strong order volume in the third quarter, core profits for the quarter fell below market expectations. It stated that due to stricter export restrictions on chip equipment to China by the U.S. government, the chip sector has been under pressure. In addition, uncertainties surrounding the U.S. presidential election have kept investors cautious. Soft demand in autos, personal computers, and memory chips has only been partially offset by the growth in demand for AI chips.

Stifel analyst Juergen Wagner stated in a report: "The third-quarter order volume was 0.1435 billion euros, lower than the second quarter's 0.176 billion euros. Despite being below the market's expectation of 0.159 billion euros, we consider this result to be quite robust in the current soft market environment."

Jefferies analysts pointed out in a report: "We believe that clear and early guidance for next year will be accepted by the market. The market has revised down consensus expectations for the 2025 fiscal year in the past few weeks, primarily due to the ongoing softness in the electric vehicle (EV) and silicon carbide (SiC) markets. We still believe that Aixtron, with its leading market share, will be well positioned in the eventual recovery in the silicon carbide market."

Aixtron stated that it expects revenue in 2025 to be close to or slightly below the levels of the 2024 fiscal year. The company also confirmed its full-year guidance for 2024, with expected full-year revenue between 0.62 billion and 0.66 billion euros.

Overall, with the impact on the Chinese market and weak demand in other markets, AI also struggles to save Aixtron's full-year financial report.

Are storage chips taking the lead?

When it comes to storage chips, it is often impossible to avoid mentioning Samsung, SK Hynix, and Micron, with the first two representing the direction of the entire storage industry. South Korea's export of storage chips is also a barometer for the semiconductor market.

However, in terms of financial reports and future forecasts for the third quarter of this year, these two companies can be described as experiencing starkly different situations.

SK Hynix previously announced record quarterly profits and sales, mainly driven by high-end artificial intelligence memory products such as High Bandwidth Memory (HBM), which are also a key component of Nvidia's AI chips.

SK Hynix reported that sales in the third quarter nearly doubled, reaching a record 17.57 trillion Korean won, compared to 9.1 trillion Korean won in the same period last year. Its net income also reached historical highs at 5.75 trillion Korean won, reversing a net loss of 2.18 trillion Korean won in the same period last year.

It stated that the operating profit for the third quarter reached a historic high of 7.03 trillion Korean won (approximately 5.09 billion US dollars), reversing the loss of 1.79 trillion Korean won in the same period last year, with an operating margin as high as 40%.

These results exceeded market expectations and were even higher than the earnings during the semiconductor super boom in 2018. The company attributed its outstanding performance to strong sales of high-end products like HBM and high-end NAND flash memory (including enterprise-level solid-state drives eSSD).

SK Hynix's Vice President and Chief Financial Officer, Kevin Noh, stated: "SK Hynix has solidified its position as a globally leading AI memory company. We will continue to maximize profits and ensure stable revenue by offering flexible products and supply strategies to meet changing market demands."

HBM is the main source of revenue and profit for SK hynix, as the company benefits the most from the high-end memory chip AI-driven demand from companies such as Nvidia and AMD.

SK hynix stated in a declaration: "HBM sales performed well, with growth of over 70% compared to the previous quarter, and an increase of over 330% compared to the same period last year."

The company expects that in the fourth quarter, HBM sales will account for 40% of its total DRAM revenue, higher than the 30% in the third quarter. It is anticipated that as global technology companies continue to develop generative AI, the demand for memory chips in AI servers will further increase next year.

Last month, as the main supplier of Nvidia's HBM chips, SK hynix announced that they have started mass production of more advanced 12-layer HBM3E chips, and plan to supply the latest products to Nvidia and other clients starting from the fourth quarter as planned.

Therefore, HBM sales are expected to increase from 30% in the third quarter to 40% in the fourth quarter. Due to sales mainly focusing on high-profit high-end products, the average selling price of DRAM and NAND has also increased by around 10% compared to the previous quarter.

Regarding the outlook for the fourth quarter and 2025, SK hynix stated that although the demand for memory like HBM and eSSD in AI servers has seen significant growth this year, this trend is expected to continue into the fourth quarter of this year and 2025.

"Generative AI is evolving into multimodal forms, with large global technology firms continuing to invest in developing artificial general intelligence, which will further drive our revenue and sales growth," the company stated.

SK hynix also predicts that the recovery progress of the PC and mobile product market demand is slow, but stable growth is expected next year.

In contrast, Samsung Semiconductor has performed very averagely in both financial reports and future expectations.

Recently, Samsung Electronics announced its third-quarter financial report, with performance slightly exceeding the guidance provided earlier in the month, with revenue of 79.1 trillion Korean won, compared to the expected 79 trillion Korean won; operating profit was 9.18 trillion Korean won, higher than the expected 9.1 trillion Korean won.

Although its third-quarter sales and operating profit slightly exceeded expectations, the profit margin of the semiconductor division significantly declined compared to the previous quarter. The financial report shows that Samsung's semiconductor division recorded an operating profit of 3.86 trillion Korean won (approximately 2.8 billion US dollars) in the third quarter, a 40% decrease from the previous quarter, which is also lower than the expectations of many analysts.

Samsung stated that the strong demand for AI and traditional server products in the memory chip division was hampered by "inventory adjustments", which negatively affected mobile demand, while "increased traditional product supply from China" also posed challenges. Additionally, driven by AI, Samsung's foundry department saw a surge in demand for advanced nodes; however, the company noted that demand for mobile and PC products fell below expectations.

Looking ahead, Samsung predicts that the sustained demand for advanced chipsets will drive growth next year. The company also foresees that strong server demand will be maintained due to the substantial investments by tech companies.

Analysts attribute Samsung Electronics' recent challenges to weak memory market demand and its lagging competitiveness in the High-Bandwidth Memory (HBM) field. The report states that as mobile and PC chip demand slows down, Samsung may lose its lead in the memory market due to DRAM oversupply. Samsung also faced setbacks in the HBM market, failing to pass NVIDIA's qualification test to supply the latest AI chips, with SK Hynix already starting mass production ahead.

Despite the current difficulties, some analysts believe that Samsung Electronics may turn the tide in the first half of next year, pointing out that with the memory market reaching its low point and demand recovering, this Korean chip giant may benefit from increased sales and rising prices.

For the storage market, it seems more like an either-or problem. Despite AI bringing a bigger cake, not all manufacturers can share it. SK Hynix currently stands out with HBM dominance, while Samsung is on a downward trend, facing squeezed market share. If improvements are not made in a timely manner, the leading position in storage might be conceded to neighboring SK Hynix.

Chip factory, or Taiwan Semiconductor?

As a bellwether of the chip industry, $Taiwan Semiconductor(TSM.US)$ Earlier reports that the quarterly net income ending on September 30 was 325.3 billion New Taiwan dollars (about 10.11 billion US dollars), the highest level in the company's history. Its third-quarter revenue increased by 36% year-on-year to 23.5 billion dollars, exceeding the company's previous forecast of 22.4 billion to 23.2 billion dollars.

TSMC pointed out in its latest financial report that quarterly profit surged 54% year-on-year, exceeding market expectations, with capital expenditures expected to exceed 11.5 billion dollars this quarter, nearly doubling. Next year's budget may increase further as the company expects robust product demand to continue. The company stated that full-year revenue for 2024 is expected to increase by nearly 30% in US dollars, slightly higher than the previous guidance of just over 20% growth.

TSMC stated that revenue from AI processors is expected to account for mid-single-digit percentage of total revenue this year. "The demand is real," said Chairman and CEO C.C. Wei during the earnings conference call, adding that this demand will continue for many years.

TSMC CFO Wendell Huang said during the earnings call, "Our business in the third quarter was supported by strong demand for smart phones and AI-related applications, especially our industry-leading 3nm and 5nm technologies." He noted, "As we enter the fourth quarter of 2024, we anticipate continued strong demand for our leading-edge process technologies."

TSMC stated that this year's capital expenditures are expected to be slightly higher than 30 billion dollars, an increase from the previous forecast of 30 billion to 32 billion dollars, as it accelerates production expansion. TSMC also mentioned that capital expenditures for 2025 may be higher than this year, although specific numbers were not provided.

TSMC also pointed out that the outlook for next year looks "healthy," and expects to maintain a similar outlook over the next five years.

It is expected that the revenue for the fourth quarter will be between $26.1 billion and $26.9 billion, an increase from the $19.62 billion in the same period of 2023. In addition, the first factory in Arizona is expected to start mass production in 2025, the second factory is expected to commence production in 2028, and the third factory is expected to start mass production by the end of this decade.

For TSMC, with the continuous release of 3nm capacity, growth has been ensured for the coming quarters. The progress of 2nm mass production may be the next focus, but it is certain that TSMC still has no rival in wafer foundry.

• Power Integrations

Compared to the prosperity of TSMC, the situation of other foundries is not so optimistic.

The latest financial report of Power Integrations shows that the third quarter revenue was 11.651 billion yuan, a quarterly increase of 4.75%, an annual increase of 12.01%, gross margin -4.2%, turning negative from positive in the previous quarter and the same period last year, operating margin -23.12%, continual expansion of loss, post-tax loss of 2.879 billion yuan, an increase in losses compared to the previous quarter and the same period last year, post-tax loss per share of 0.69 yuan.

In terms of regions, Power Integrations' third-quarter revenue is mainly from Taiwan, accounting for 58%, Asia 24%, Europe and America 18%; in terms of customer distribution, IC design accounts for 84%, IDM for 16%; in terms of product distribution, discrete components 15%, high-pressure processing due to declining demand for driver ICs, the proportion dropped to 14%, PMIC demand increased, proportion increased to 14%, embedded logic products (IMC) about 11%, CIS 4%, DRAM 35%, and Flash 7%.

At the financial briefing, Power Integrations stated that in the third quarter, due to the ramping up of production capacity at the copper gong P5 new factory, the initial capacity climb affected profit performance. Post-tax loss of 2.879 billion yuan, loss increased, post-tax loss per share of 0.69 yuan, hitting a record low. Looking ahead, General Manager Zhu Xianguo stated that overall customer wafer starts are relatively conservative at present, especially with significant pressure on driver ICs.

Looking ahead, Zhu Xianguo frankly stated that, affected by mainland China's semiconductor policies, the current mature process market is experiencing a supply-demand imbalance. Especially with local panel factories in mainland China shutting down, there is an oversupply of large-size driver ICs. Despite the old-for-new policy, the stimulus is limited. There are rush orders for small-size driver ICs in the third quarter, but visibility remains low. Overall, there is still oversupply and significant price pressure, with overall wafer input for the fourth quarter being relatively conservative.

As for power management chip (PMIC), the customer products of Powerchip are mainly used in mobile phones, chargers, etc., and they are optimistic that the 12-inch aluminum process is very suitable for PMIC, especially suitable for applications such as mobile phones. The relevant products in the third quarter have gradually increased in volume. Next year, they will gradually fill the capacity gap for driver ICs and CIS. In the fourth quarter, PMIC demand remains flat compared to the previous quarter. In terms of automotive applications, they are optimistic that the demand in the European and American markets has reached the bottom and is gradually picking up.

Regarding storage, Zhu Xianguo mentioned that contract and spot prices in the fourth quarter are both declining, especially with a very noticeable decline in contract prices. In addition, large Korean factories have cleared out DDR4 and DDR3 at low prices, totaling 25 million pieces, causing significant price fluctuations. It is expected that there will need some time to digest DRAM, and the demand for Flash in the fourth quarter has also slowed down.

However, Zhu Xianguo is optimistic that Powerchip is a company that can simultaneously produce storage and logic wafers. They have also invested in the development of 2.5D/3D products, which can stack logic chips and storage to meet the demand for edge AI. They can also stack chips with other wafer factories, have received inquiries from major US CPU manufacturers, and anticipate that the mid-layer capacity will grow 2-3 times next year. Regarding this year's capital expenditure, CFO Shao Zhangrong stated that the equipment for the P5 factory in Chuzha has been gradually put into place, and the full year capital expenditure is about 8.5 to 0.9 billion US dollars, which is in line with previous estimates.

For Powerchip, the losses brought by the new factory on one hand, and the sluggish demand in other markets on the other, make it very difficult to achieve better results in the next quarter.

• United Microelectronics Corporation (UMC)

Compared to Powerchip, United Microelectronics Corporation's situation is relatively better.

Recently, United Microelectronics Corporation announced its third-quarter financial report, with a gross margin of 33.8%, a net profit of 14.47 billion yuan, and a net profit per share of 1.16 yuan for the quarter. For part of the fourth quarter, it is estimated that shipments and ASP will remain stable when calculated in US dollars. They also announced a reduction in this year's capital expenditure and revealed that the expansion of the new factory in Singapore is nearing completion, and the cooperation with Intel is progressing as planned in terms of operational strategy and expansion progress.

United Microelectronics' third-quarter operational report, with consolidated revenue of 60.49 billion yuan, representing a 6.5% growth from the second quarter's 56.8 billion yuan, and a 6.0% growth from the same period last year. The third-quarter gross margin was 33.8%, lower than the second quarter's 35.2%, the third-quarter net profit attributable to the parent company was 14.472 billion yuan, a 5% increase from the second quarter's 13.786 billion yuan, with an EPS of 1.16 yuan in the third quarter. As for the third quarter, the average capacity utilization rate was 71%, higher than the second quarter's 68%.

Regarding the outlook for the fourth quarter, wafer output is expected to remain flat compared to the third quarter. In terms of ASP, it will remain flat in US dollars as well, but will decline if calculated in New Taiwan dollars. The estimated gross margin for the fourth quarter is about 30%, with an average capacity utilization rate ranging from 66% to 69%. The full-year capital expenditure for 2024 will be $3 billion, lower than the $3.3 billion released in the previous quarter.

United Microelectronics' Co-General Manager Wang Shi stated: 'In the third quarter, our performance met expectations, especially benefiting from strong demand for the 22/28-nanometer process, wafer shipments exceeded expectations, growing by 7.8% compared to the previous quarter. At the same time, in terms of special processes, UMC's strategy is to develop the most efficient technical solutions. It is gratifying to see that the third-quarter revenue from special processes reached a historic high, accounting for 53.1% of total revenue. UMC also launched the industry’s most advanced 22-nanometer display driver solution, expecting strong wafer demand in the coming months.'

Wang Shi also stated: 'Regarding the outlook for the fourth quarter, we see demand in various end markets gradually stabilizing, with inventory levels showing a clear downward trend. Looking ahead, we have many exciting technology and collaboration projects underway and will continue to closely align with customer product roadmaps. Additionally, we have heard from clients that UMC's diversified manufacturing layout is crucial in supporting their long-term strategies. Our new factory expansion in Singapore is nearing completion, and our collaboration with Intel is proceeding as planned.'

For United Microelectronics, the cooperation with Intel is undoubtedly a very interesting point. However, this collaboration is unlikely to yield short-term results. Intel is currently facing troubles of its own, but its business itself is relatively stable, so its performance in the fourth quarter should not be too bad.

The Future of Automotive Semiconductors is Uncertain?

Recently, major automotive semiconductor manufacturer, ON Semiconductor, released its latest financial report, forecasting that fourth-quarter revenue and profits will fall below Wall Street's expectations. During the earnings conference call, ON Semiconductor cited the continued weakness in semiconductor demand from the automotive industry.

In stark contrast, Texas Instruments holds a more optimistic view of the automotive semiconductor market. They believe that the demand in the Chinese automotive market is increasing, which will drive the continuous development of the entire automotive semiconductor industry.

Analog Devices pointed out in its financial report that the revenue from the automotive terminal market in the third quarter was $0.9512 billion, a decrease of 17.8% year-on-year. In its financial report, it is projected that the revenue for the fourth quarter will be between $1.71 billion and $1.81 billion, slightly lower than the analyst's expected $1.77 billion.

Its customers include Chinese auto manufacturers Li Auto, BYD, and Xpeng, and the company stated that due to the decrease in auto demand, it expects the revenue in China for the second half of the year to fall short of expectations.

Overall, Analog Devices reported third-quarter revenue of $1.76 billion, exceeding the analysts' forecast of $1.75 billion. Adjusted earnings per share were $0.99, surpassing the expected $0.97.

Analog Devices CEO Hassane El-Khoury stated during the earnings conference call, "For the full year 2024, we do not expect significant market growth." Nevertheless, Analog Devices' stock rose by 2.7% in volatile trading as its third-quarter revenue and profit slightly exceeded expectations. The stock has fallen 14% this year due to concerns about slowing demand for auto chips.

Since El-Khoury took over as CEO in 2020, Analog Devices has been increasing its investment in silicon carbide, a key component of electric vehicles and data centers. El-Khoury mentioned, "We have collaborations in design with three of the four largest cloud service providers in North America, which is expected to contribute to revenue by 2025."

For major auto chip manufacturers like Analog Devices, the reduced demand in the Chinese market is undoubtedly very detrimental. Interestingly, this outlook contrasts with the optimistic comments from Texas Instruments, whose report states an improvement in demand in the Chinese auto market.

Benefiting from the recovery of orders for its analog chips in various fields and the improvement in demand in the Chinese auto market, Texas Instruments reported earnings exceeding expectations in post-market trading for the third quarter. The third-quarter report showed earnings per share of $1.47 in the three months ending September 30, surpassing the market's expected $1.37 according to LSEG's estimated data. Revenue in the third quarter decreased by 8% year-on-year to $4.15 billion, the smallest decline in the past seven quarters.

However, Texas Instruments predicts that due to continued weakness in the industrial market, fourth-quarter revenue and profit will be below expectations as customers face difficulties in clearing existing inventory. The company stated that the industrial sector's performance declined compared to the third quarter, while all other end markets showed growth compared to the previous three months. Revenue for the fourth quarter is expected to be between $3.7 billion and $4 billion, below the analysts' average expectation of $4.07 billion.

Why is Texas Instruments more optimistic? One important reason is that the revenue in the automotive market also achieved a month-on-month growth. CEO Haviv Ilan stated in the earnings conference call: "In China, the electric vehicle (EV) market is showing good growth momentum, and our content in this market is increasing, which truly drove the growth in the third quarter." However, he also mentioned that other parts of the automotive market are still expected to remain weak.

"Overall, Texas Instruments now sees a cyclical recovery in non-industrial end markets and expects the automotive market to continue to grow, although demand from non-Chinese automotive original equipment manufacturers (OEMs) is mixed, and the proliferation of electric vehicles is a key factor driving growth," said Summit Insights analyst Kinngai Chan.

It is worth noting that STMicroelectronics (ST) in Europe recently lowered its annual revenue outlook for the third time, citing weak demand from industrial customers and stating that the growth of its largest segment depends on expansion in China.

As Europe's highest revenue chip manufacturer, STMicroelectronics' clients include Tesla and Apple, and the company traditionally has had a stronger presence in Western markets. STMicroelectronics needs to achieve growth in China, despite its market share in China declining this year.

STMicroelectronics CEO and President Jean-Marc Chery said in a conference call: "Over the next three years, our growth drivers, especially around power and discrete devices and analog products, will be related to our ability to expand market share in China."

AI is also one of the target areas for STMicroelectronics, as chip manufacturers related to automobiles have not gained much in the AI wave so far. Chery mentioned, "We have won a design order for silicon and silicon carbide products, one of the leading suppliers of power units for AI server infrastructure, located in Taiwan."

STMicroelectronics stated that these chips will use silicon carbide, which is a more advanced and efficient material, providing power support for AI processors (such as Nvidia and intel's products).

STMicroelectronics is currently forecasting annual revenue of $13.27 billion, close to the low end of its previously expected range of $13.2 billion to $13.7 billion, which was adjusted in July. According to LSEG's survey, analysts expect the company's full-year revenue to be $13.26 billion. Earnings before interest and taxes (EBIT) in the third quarter fell 69.3% year-on-year to $0.381 billion, slightly higher than LSEG's average expectation of $0.321 billion. Revenue decreased by 26.6% to reach $3.25 billion, slightly higher than the expected $3.24 billion.

STMicroelectronics also issued a warning about the outlook for the next quarter: "Based on our current customer order backlog and demand visibility, we expect a significant drop in revenue from the fourth quarter of 2024 to the first quarter of 2025, far exceeding normal seasonal declines."

For the automotive chip market, similarly impacted by the chinese market, different automotive chip manufacturers have given almost diametrically opposite views and forecasts. Perhaps we should wait until the fourth quarter to see the actual performance of these companies.

Editor / jayden