Last year, global chip sales exceeded 1 trillion automotive semiconductors with the fastest growth rate, and China is the largest market

The Association of the American Semiconductor Industry (SIA) released the latest data on Monday, showing that 1.15 trillion chips were sold worldwide in 2021, with sales reaching a record $555.9 billion, an increase of 26.2% year-on-year, of which automotive-grade chip demand increased the most, with sales up 34% from the previous year to $26.4 billion.

SIA predicts that global chip production capacity will further increase in 2022 to meet growing demand, but chip sales growth will slow to 8.8% this year, but still higher than the 6.8% growth in sales in 2020.

According to SIA, China remains the largest semiconductor market, accounting for about a third of global sales. China's chip sales totaled $192.5 billion in 2021, up 27.1 percent.

Demand for semiconductors remains strong

SIA CEO John Neuffer said the sharp increase in sales in the semiconductor market in 2021 is mainly due to the rebound after the new crown epidemic, although this rebound will continue this year, but there will be no such a large growth effect as last year.

During the COVID-19 pandemic, some Asian chip factories have been shut down by epidemic control measures, which has had a significant impact on the global chip supply chain and led to the interruption of the supply of some chips.

A recent report released by the U.S. Department of Commerce said that the median inventory value of some semiconductor products has fallen from 40 days in 2019 to less than 5 days in 2021, and this problem will not be solved in the next six months.

Major semiconductor manufacturers, including TSMC, Samsung Electronics and Intel, have all announced tens of billions of dollars in new factories over the past year, but Norver said semiconductor demand remains strong as the coronavirus pandemic has driven global digitalization, and chips are expected to remain in short supply.

Gartner analyst Sheng Linghai told the first financial reporter: "The demand for cloud for home office driven by the epidemic, the substantial growth of 5G and new energy vehicles are the main factors leading to the continued demand for chips, and it is not excluded that some companies have hoarded goods in large quantities, exacerbating the shortage of chips." ”

In order to cope with the shortage of chips, since this year, both Europe and the United States have announced government investment in the semiconductor field, thereby intensifying competition in semiconductor manufacturing. Earlier this month, the U.S. House of Representatives voted to pass the U.S. Competition Act of 2022 to boost massive investment in U.S. semiconductor manufacturing.

Under the bill, the U.S. would include up to $52 billion in grants and subsidies to the semiconductor industry and would invest $45 billion to strengthen supply chains for high-tech products. Industry reports estimate that these investments will enable the U.S. to build 19 factories over the next 10 years, doubling chip manufacturing capacity.

Autonomy and industry integration have become a trend

In addition, the autonomous development of chips has also become a strategic focus of European and American governments. U.S. Commerce Secretary Gina Raimondo said: "The global chip shortage has a significant impact on the economy, including the automotive industry, and too much reliance on semiconductors produced overseas also has an impact on national security and must be dealt with immediately." ”

The European Commission and the European Commission also introduced a public funding bill totaling 42 billion euros last week. The bill marks a sign that Europe, which is highly open to competition, has also had to adopt a paradigm of interventionist industrial policy under pressure from the international environment in order to reduce external dependence.

According to the plan, by 2030, the EU plans to provide 12 billion euros in subsidies for innovative chip research and development and pilot production line construction, thus preparing for future industrialization. Another 30 billion euros of public aid will be used to build large-scale chip factories and encourage innovation by small companies, including to attract investment from overseas companies in Europe, such as Intel. The EU hopes that these public funding will also trigger more private investment.

European Commission President Ursula von der Leyen has set a goal of doubling the EU's market share in semiconductors to 20 percent of global production by 2030 to reduce dependence on Asian supply chains. This also means a fourfold increase in the production of semiconductors produced in Europe.

The COVID-19 pandemic has also reshaped the competitive landscape of the global chip industry, with the chip industry accelerating consolidation and record mergers and acquisitions over the past year. On February 14, chip company AMD announced the completion of a $50 billion acquisition of Xilinx, a deal that has brought the chip industry's transaction value to more than $100 billion for the first time in the past year.

Over the past year, U.S. semiconductor companies have seen their share prices rise sharply, with NVIDIA shares rising 74 percent, AMD shares up more than 40 percent, and Qualcomm shares up more than 20 percent, far better than European semiconductor companies Infineon, NXP and STMicroelectronics over the same period.

The consolidation of the chip industry is mostly aimed at the growing needs of data centers and artificial intelligence businesses. Big Internet companies like Amazon, Google, Microsoft, and others are investing heavily in new data centers to meet the needs of the surge in cloud computing businesses.

At present, in the data center business, Intel and Nvidia in the United States still dominate. Research by UBS estimates that Intel's data center business has approximately $26 billion in annual revenue, Nvidia at about $6.5 billion, and AMD's data center business at a relatively lagging annual revenue of $500 million.

However, last week, Nvidia's acquisition of British chip company Arm failed due to lack of regulatory approval, and Arm will go public independently. The deal was originally valued at $80 billion. Nvidia founder and CEO Jen-Hsun Huang expects that demand from supercomputing, cloud, artificial intelligence and robotics will make Arm the most important CPU architecture for the next decade.