Recently, the major IC manufacturers have released their financial results for the second quarter of 2020. Among them, some manufacturers continue to show their strong earning ability and influence; some manufacturers also face challenges from competitors while making profits; and some face some new challenges because of the uncertainty of the market. Here, we will interpret the financial reports of international well-known semiconductor companies to show you the latest pattern of the semiconductor industry.

It's so hard for the advanced process to love you.

In the second quarter of this year, semiconductor manufacturers disclosed in their financial statements some interesting information about the semiconductor process. First, Taiwan Semiconductor Manufacturing Co Ltd, as always, is in the lead. It is reported that mass production of 3nm will begin in 2021, while United Microelectronics Corp made a lot of money in the second quarter. Revenue increased by 23.2% over the same period last year, and capacity utilization increased to 98%. In the third quarter, more new 28nm product designs are expected to be finalized. Looking at Intel Corp, it seems to be expected that Intel Corp's 7nm product will continue to be delayed, and the first 7nm product is expected to be launched in the second half of 2022 or early 2023.

In terms of the wafer foundry market, according to the latest survey of the Topics Industrial Research Institute of Jibang Consulting, the revenue of the world's top 10 wafer foundry industrialists grew by more than 20% in the second quarter of 2020.

Wafer foundry factories such as Taiwan Semiconductor Manufacturing Co Ltd and United Microelectronics Corp have benefited from AP and HPC of 5G phones and CPU/GPU of telecommuting, driving demand such as IC, resulting in revenue growth.Next, let's take a look at the financial reports of several manufacturers that have been announced:

Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing Co Ltd released its financial results for the second quarter of 2020 on July 16. According to the financial report, Taiwan Semiconductor Manufacturing Co Ltd reported that consolidated revenue in the second quarter was NT $310.7 billion (US $10.54 billion), an increase of 28.9% over NT $240.999 billion in the same period last year, and net profit was 1208. NT $200 million, up 81.0% from 66.765 billion yuan in the same period last year.

From a product point of view, Taiwan Semiconductor Manufacturing Co Ltd did not disclose the revenue status of the 5nm process. 7nm and 16nm processes remain the main sources of revenue, with 7nm processes accounting for 36 per cent of Taiwan Semiconductor Manufacturing Co Ltd's wafer sales in the quarter.

Taiwan Semiconductor Manufacturing Co Ltd revealed at the second-quarter results presentation that the company's 3nm (nanometer) process expects risk mass production in 2021 and mass production in the second half of 2022. Compared with the 5nm process, 3nm will bring a 70% increase in density, 10% of the 15% rate gain and 20-25% increase in power. And will sprint more advanced manufacturing process, in 2nm R & D has a major breakthrough, has successfully found the path.

Taiwan Semiconductor Manufacturing Co Ltd expects the demand for 5G smartphones to continue to grow in 2020, and the company's business will be supported by the development of 5G and advanced chips. In addition, according to foreign media reports, people in the industry chain revealed that Taiwan Semiconductor Manufacturing Co Ltd has expected that Apple Inc's contract manufacturing orders for Mac processors based on ARM architecture will increase significantly in the second half of 2021, which will also improve their performance.

United Microelectronics Corp

United Microelectronics also released its operating report for the second quarter of 2020. According to the report, the consolidated operating income in the second quarter was NT $44.39 billion, up 5.0% from NT $42.27 billion in the previous quarter and 23.2% compared with NT $36.03 billion in the same period last year. The gross profit margin for the quarter is 23.1%, the net profit attributable to the parent company is NT $6.68 billion, and the profit per common share is NT $0.55.

Wang Shi, general manager of United Microelectronics Corp, pointed out that in the second quarter, the combined operating profit rate was 13.2%, the overall capacity utilization increased to 98%, and wafer shipments reached 2.22 million pieces of about eight-inch wafers. The growth in wafer shipments mainly reflects the demand for wireless connections, display drivers and flash memory controllers IC in computer-related areas, as well as inventory replenishment in the consumer market.

In addition, Wang Shi said that looking forward to the third quarter, the current market outlook shows that the demand for chips is still strong, with a significant increase in the finalization of 28nm designs in the first half of this year compared with the previous year. In the third quarter, more new 28nm product designs are expected to be finalized, and more products related to wireless applications such as 4G and 5G smartphones will also go into mass production, making United Microelectronics Corp's customer distribution in different 28nm markets more diversified.

Intel

On July 24, Intel Corp reported that Q2 revenue was $19.728 billion, up 20% year-on-year; net profit was $5.105 billion, up 22% year-on-year; operating profit was $5.7 billion, up 23% year-on-year; gross profit was 53.3%, down 6.6%.

From the perspective of the two core businesses of data and PC, data-related business has become a pillar of revenue. Total revenue from Intel Corp's "data-centric" business (Data-centric) was about $10.117 billion in the second quarter, while revenue from its "PC-centric" business (PC-centric) was $9.5 billion, up 7 per cent from a year earlier.

Looking at the results forecast for the third quarter and the whole year, the adjusted earnings per share for the third quarter is about $1.10, and the market is expected to be $1.14; revenue is about $18.2 billion, and the market is expected to be $17.9 billion; full-year adjusted earnings per share are expected to be $4.85 and the market is expected to be $4.78. revenue for the whole year is expected to be $75 billion and the market is expected to be $73.74 billion.

Intel Corp said earlier that the new 7nm product will be launched in 2021, but now Intel Corp explicitly mentioned in the financial report that the release time of the 7nm processor will be delayed by six months, mainly because the 7nm production capacity is lower than expected. the first 7nm product is expected to be available in the second half of 2022 or early 2023.

In addition, Intel Corp also has a strong competitor like NVIDIA Corp in terms of enhanced processor AI performance; in terms of architecture, x86 has been facing the challenge of ARM architecture, and now the momentum is even fiercer, with Huawei Kunpeng chip in front and Apple Inc's upcoming Mac processor later. Of course, Intel Corp's CPU castle is still strong, especially when it comes to server CPU.

Under the trend of heterogeneous computing, more and more participants come to eat Intel Corp's market, the future computing market will be more and more interesting, how the pattern changes, the industry will wait and see.

Demand for memory chips is soaring.

In a report in early March this year, foreign media said that after more than a year of downturn, the contract price of memory chips will rise significantly in the second quarter of this year, thanks to the growth of demand, and the increase is expected to reach double digits.

The key information we can get from the previous article is-demand growth. Analyzing the second-quarter results of storage manufacturers such as Samsung, SK Hynix and Meguiar, it is not difficult to find that these manufacturers have achieved growth to a certain extent. Of course, the demand is not the same, not only from consumer electronics, but also from different fields such as games.Next, let's take a look at the financial reports of several manufacturers that have been announced:

Samsung

On July 30, Samsung Electronics announced its official results for the second quarter of 2020. Samsung's operating profit in the second quarter of 2020 rose 23.48% from a year earlier to 8.15 trillion won (48 billion yuan), the highest since the fourth quarter of 2018.

By business unit, the semiconductor division contributed the largest share of operating profit in the second quarter. The semiconductor division had sales of 18.23 trillion won (US $15.3 billion) and operating profit of 5.43 trillion won (US $4.6 billion) in the second quarter, accounting for 66.6% of the total operating profit.

The semiconductor business is currently the main investment target of Samsung Electronics. It is reported that Samsung's capital expenditure in the second quarter was 9.8 trillion won, of which 8.6 trillion was spent on semiconductor business, accounting for 87.8%, and another 800 billion won was spent on display panel business. In the first half of the year, total capital expenditure was 17.1 trillion won, of which 14.7 trillion won was invested in semiconductor business, accounting for 86%, while display panel business spent 1.6 trillion won.

In its quarterly results, Samsung expects demand for mobile devices and consumer electronics to pick up in the second half of the year, the launch of new smartphones will drive overall demand for DRAM chips, and the release of new products by major customers will also boost demand for mobile displays.

SK Hynix

SK Hynix reported that its second-quarter net profit more than doubled to 1.264 trillion won ($1.06 billion) from 537.03 billion won a year earlier, exceeding market expectations due to robust demand and prices for memory chips.

Revenue rose 33% to 8.607 trillion won. Operating profit more than tripled to 1.947 trillion won. SK Hynix said weak demand for chips for mobile devices was offset by strong demand for memory chips used in data servers during the outbreak.

With regard to the business environment in the second half of this year, SK Hynix believes that the current economic situation is still uncertain. However, the reopening of economic activity in major countries and the launch of 5G smartphones and next-generation game consoles will stimulate demand for parts.

Meiguang

Micron recently released its financial report for the third quarter of 2020 (March 2020 to May 2020, the same below). The data show that its operating income is 5.4 billion US dollars, up 13.4% from the previous month and 13.6% from the same period last year; its operating profit is 980 million US dollars, down 2.87% from the same period last year and 81% from the same period last year; and its net profit is 940 million US dollars, up 82% from the previous year. Gross profit margin rose to 33% in the current quarter, up from 29.1% in the previous quarter.

Behind the better-than-expected results, SSD revenue hit a record high and DRAM and NAND prices continued to rise. According to Micron's financial report, in the third quarter, Meguiar's DRAM ASP increased in the single digits (about 5 per cent) and NAND Flash ASP increased in the high single digits (about 8 per cent).

Meguiar in the third quarter, from the server, PC, mobile phones and other market demand are month-on-month growth, only the embedded sector income affected by the automobile market has declined.

For the second half of the year, Micron expects data center demand to remain healthy, but may fluctuate, mobile phones and consumer electronics to return to growth, and the release of new game consoles to drive strong growth in DRAM and NAND demand. At the same time, Meguiar is optimistic that in the next quarter (June-August 2020), revenue is expected to grow by about 10% month-on-month, and gross profit margin will rise further. Capital expenditure in fiscal year 2020 was up to $8 billion, down 20 per cent from a year earlier.

Semiconductor equipment is in great demand

According to SEMI, North American semiconductor equipment manufacturers shipped $2.346 billion in May, up 2.9% from a month earlier, up 13.6% from January to May, up 21% from a year earlier, compared with a 24% decline in the same period last year.

Bank of China Securities believes that the revenue of eight global semiconductor equipment listed companies was $16.2 billion in the first quarter of 2020, down 7% from the previous quarter, mainly because public health events affected the progress of equipment delivery and the pace of revenue recognition. However, revenue still showed a 12% year-on-year growth in the first quarter, continuing the momentum of positive growth in the fourth quarter of 2019.

ASML's revenue growth slowed to 9.5% year-on-year in the first quarter, but remained positive. The company's second-quarter sales reached 3.3 billion euros, up 35 per cent from the first quarter. The gross profit margin reached 48.2%, a significant increase compared with the first quarter.

While several other listed companies, on the basis of a sharp rebound in gross profit margins in the fourth quarter of last year, fell slightly in the first quarter, but still close to the normal level of 45 per cent, of which gross profit margins of Applied Materials Inc, ASML and KLA were basically flat.

Applied Materials Inc

Applied Materials Inc's results for the second quarter of 2020 showed revenue up 12 per cent and net profit up 13 per cent year-on-year. After the announcement, the stock fell and then rose, rising 4.45% to $56.85 as of 7:21 Beijing time.

According to the financial report, Applied Materials Inc had revenue of US $3.957 billion in the second quarter of 2020, an increase of 12% over the same period last year.

Gary Dickerson, president and chief executive of Applied Materials Inc, said that although the situation is still unclear, based on the current visibility, the company's supply chain is recovering and potential demand for the company's semiconductor equipment and services remains strong.

ASML

ASML released its second-quarter results report, which showed that ASML Q2 sales reached 3.3 billion euros (RMB26.3 billion yuan), up 31.9 percent from the same period last year and 35.2 percent higher than the first quarter, with a net profit of 800 million euros (RMB6.4 billion yuan) and a gross profit margin of 48.2 percent.

In the second quarter, ASML set a record of 61 lithography machines, of which 9 EUV lithography machines shipped, which directly contributed to the company's second-quarter revenue growth.

In the first quarter of 2020, the financial aspect of ASML was inevitably affected by the global spread of the epidemic. Due to the inability to complete equipment delivery on time, ASML revenue fell by 39% in a row. For now, however, ASML's supply chain has returned to normal and showed strong momentum in the second quarter of its business.

With regard to the third quarter, ASML expects its business to continue to grow in the second half of the year, despite the global recession caused by the outbreak. According to the financial report, ASML's estimated revenue for Q3 ranges from 3.6 billion euros to 3.8 billion euros (RMB28.7 billion yuan to 30.3 billion yuan). Assuming that ASML does meet its target, the turnover will be 15% higher than in the second quarter and 20% 26% higher than in 2019.

ASML said that in the second half of the year, the company will receive deferred revenue from four EUV lithography machines, which is the amount that the equipment buyer has not paid in the second quarter.

Samsung and Taiwan Semiconductor Manufacturing Co Ltd also announced recently that they plan to set up sizeable new contract factories next year. At that time, these fabs may also need EUV lithography machines, so ASML will also receive a significant increase in orders in the third quarter.

KLA

On May 6th, Corey Semiconductor announced its results for the third quarter of fiscal year 2020. Klei Semiconductor had first-quarter revenue of $1.424 billion, up 30 per cent from a year earlier. By business, revenue from products is $1.051 billion and revenue from services is $373 million.

Net profit was $78 million, down 60 per cent from a year earlier. Diluted earnings per share were $0.50, down 59% from a year earlier. Under non-GAAP, net profit was $389 million, up 37.5% from a year earlier. Diluted earnings per share were $2.47, up 37% from a year earlier. Colley Semiconductor's net cash generated from its main business was $442 million, compared with $164 million in the same period last year. At the end of the period, Corey held about $946 million in cash and cash equivalents, compared with $1.092 billion in the same period last year.

The company did not give guidance for the full fiscal year in its financial report.

The car chip sings cool

It has to be said that novel coronavirus's influence is unprecedented, the entire semiconductor industry is feeling this impact, and the global automotive chip market is not immune. IDC had expected the automotive and industrial semiconductor markets to outperform other markets, but the COVID-19 pandemic hit the auto market particularly hard. Vehicle sales, including light commercial vehicles, fell 5.6 per cent to 81.4 million units in 2019, leading to a 2.7 per cent decline in automotive semiconductor growth to $38.4 billion.

NXP, Infineon, Renesas, Texas Instruments Inc and STMicroelectronics remain among the top five automotive semiconductor manufacturers, according to data analysis by Strategy Analytics. The total revenue of automotive semiconductors received by the big five suppliers fell 1.3% to $37.2 billion in 2019 compared with 2018. However, due to the impact of the COVID-19 epidemic, the latest financial reports of most of these manufacturers also showed a downward trend in 2020.

Italian semiconductors

On July 23, STMicroelectronics reported net revenue of $2.09 billion, down 4 per cent from a year earlier. Net income was $90 million, down 43.7% from a year earlier, while diluted earnings per share were $0.10, down 44.4% from $0.18 a year earlier. Gross profit was $730 million, down 12.2% from the same period last year; gross profit margin was 35%, compared with 38.2% in the same period last year. Operating income was $106 million, down 45.8 per cent from a year earlier.

Looking ahead to the third quarter of fiscal 2020, the company expects net revenue of about $2.45 billion, equivalent to a month-on-month increase of 17.4%; gross margin is expected to be 36%, plus or minus 200bp; the third quarter will end on September 26.

Commenting on the second quarter results, Jean-Marc Chery, president and CEO of STMicroelectronics, said: "net revenue in the second quarter fell 6.5% from the previous quarter, in line with expectations. Sales of automotive chips, analog devices and imaging products declined, but the decline was partially offset by growth in microcontrollers, digital chips and power discrete devices. Gross margin for the second quarter included spending on spare capacity of about 310 basis points. "

Looking forward to the third quarter, Jean-Marc Chery said STMicroelectronics will advance the company's latest business plan for fiscal year 2020, with full-year net revenue of $9.25 billion to $9.65 billion and an increase of $610 million to $1.01 billion in the second half of the year compared with the first half. Growth momentum is expected to come from identified customer projects, new products and improved market conditions. The capital expenditure plan for 2020 is currently about $1.2 billion.

Enzhipu

NXP Semiconductor released the latest second-quarter results after trading on the 27th, revenue fell nearly 18% year-on-year, less than analysts expected, profit and net loss of nearly $214 million, even in the epidemic is relatively strong semiconductor industry is actually struggling.

Enzhipu shares fell 3.7% after the results were announced. However, Kurt Sievers, chief executive of NXP, was relatively optimistic in the report, saying it was slightly better than the guidance and that the company had expected the market to be weak. He stressed that it is mainly because the epidemic has had a considerable impact on the overall global economic environment, but there has been no small improvement.

According to the data, NXP Q2 gross profit margin is still nearly 49.1%, slightly higher than expected, but this may be related to abnormal supply and demand in the market. While the industrial and Internet of things business, still holding a fairly good growth, an increase of nearly 12% compared with the same period last year. Mobile communications and infrastructure business are also showing signs of stabilizing.

Of course, the main automotive business is still suffering a sharp decline, with an annual decline of nearly 35%. Since the beginning of this year, NXP shares have fallen nearly 5.52%, 13.86% from the previous peak, and the Nasdaq index is up 17.43% over the same period, which is quite backward. However, in recent years, NXP is expected to become a new momentum by actively expanding the Wi-Fi and Bluetooth markets and strengthening the advantages of the Internet of things.

Infineon

Infineon's revenue for the quarter rose 4 per cent from a year earlier, unchanged from a month earlier and about 2 per cent lower than expected, according to the financial report. The car business fell 3 per cent year-on-year and grew 2 per cent from a month earlier, mainly due to increased demand for cockpit electronics and MCU. The industrial power control sector grew 3 per cent year-on-year and 7 per cent month-on-month, or about 4 per cent, under strong demand from manufacturers of wind turbines, electrical appliances and industrial drives, and revenue from power and sensor systems rose 4 per cent year-on-year and more than 2 per cent month-on-month due to strong demand for DC-DC power and phone components.

Last but not least, revenue from the small digital security solutions business shrank by 1 per cent year-on-year and grew by more than 2 per cent month-on-month, exceeding expectations by 2 per cent due to increased demand for authentication and payments.

The data show that Infineon's automotive business is very weak, with profits down 54 per cent year-on-year, 24 per cent month-on-month and profit margins down 680bp / 210bp, but other market segments perform better (+ /-5 per cent), with industrial power and sensors with profit margins exceeding 17 per cent, 22 per cent and 14 per cent.

With the addition of Cypress (the deal closed on April 16), the company's annual revenue should be about 84 euros, up and down 5%. Management also noted that it expects a sharp drop in demand for car-related parts, just as it will in areas such as home appliances and solar energy.

Infineon's situation in the automotive field is a little complicated. As the biggest competitor (after the acquisition of Cypress), Infineon is important to the sharp decline in car production compared to some companies that have only recently entered the market and have a greater positive influence on new models.

Summary

Of course, in addition to these manufacturers, there are also some manufacturers who have also given second-quarter results, which can only be released selectively with limited space. in fact, while the epidemic is still spreading, the Q2 results given by some manufacturers are indeed very unexpected and have achieved a lot of growth, partly because they have benefited from the epidemic and promoted the growth of related semiconductor products.

But in another part, we should also see something different. A few days ago, Cyrus released its Q1 results for fiscal year 2021. Revenue declined compared with the same period, while among the four regions where products were sold, only Asia, including China, had a positive month-on-month growth rate of 44%. The reason behind this is self-evident. Relevant people in the industry pointed out that this is mainly due to the upsurge of chip hoarding in China.

Bloomberg also reported that Chinese computer chip importers are increasing equipment purchases through Hong Kong channels. In the first half of this year, semiconductor re-exports to the mainland through Hong Kong increased by 11 per cent compared with the same period in 2019, almost double the increase in total chip purchases, and re-export trade increased by 21 per cent in June alone. Data show that chips imported from Hong Kong accounted for more than 38% of China's total chip imports.

Overall, Chinese companies have been actively preparing chip inventories for fear of further supply chain shocks, of which Hong Kong's entrepot trade is an important channel. So for these manufacturers, the contrarian growth figures may not necessarily reflect the whole story, and their revenue figures may be inflated under the frenzied hoarding of goods by domestic manufacturers, including Huawei. For them, the challenges in the second half of the year may be even more serious.