Sentence | Kazuo Tsuki
The chip semiconductor sector welcomes great benefits!
A few days ago, the third phase of the National Fund (National Integrated Circuit Industry Investment Fund Phase III Co., Ltd.) was formally established, with a registered capital of 344 billion yuan, exceeding the sum of the previous two phases; In addition to the old faces such as the Ministry of Finance and China Development Bank Capital, the six major state-owned banks such as the Industrial and Commercial Bank of China and the Agricultural Bank of China have also joined it, with a very luxurious lineup, and the six major banks plan to contribute 114 billion yuan, with a shareholding ratio of more than 30%. Behind all these phenomena is the greater expectations and higher attention of the top management to the chip semiconductor industry. Affected by this, the A-share chip semiconductor sector has moved frequently recently.
In fact, in 2015 and 2019, when the past two large funds were established, the chip semiconductor sector set off a wave of big market - after all, according to past experience, large funds can drive about 3 times the investment leverage of the chip semiconductor industry. If we take an analogy, the 344 billion yuan of the third phase of the big fund may even drive an investment of more than one trillion yuan, which is undoubtedly a huge positive for the sector, which also makes the market have more expectations for a new round of chip semiconductors, and the opportunities in related segments are naturally worth digging into.
In my opinion, memory chips are expected to usher in a good opportunity. Let's discuss it here.
First, let's briefly introduce what a memory chip is. As the name suggests, memory chips are an important carrier of data storage, and also an extremely important part of the chip semiconductor industry, with a wide range of applications and a high market share, accounting for about 1/4 of the entire integrated circuit market, second only to logic chips, and the second largest market segment of integrated circuits.
At the category level, memory chips can be divided into volatile memory chips and non-volatile memory chips according to whether the stored information is retained after power failure, among which the representative products of volatile memory chips are DRAM and SRAM, and non-volatile memory chips are dominated by NAND Flash and NOR Flash. At the market level, foreign manufacturers occupy most of the market share by virtue of their first-mover advantage and brand advantage in the terminal market, and the industry's leading manufacturers Samsung Electronics, Micron Technology, Hynix, Kioxia, Western Digital, etc. have formed an oligopoly competition pattern in their respective fields.
Due to the high degree of standardization, strong substitutability, and commodity attributes of memory chips, their prices are sensitive to the impact of downstream demand, so they have an extremely obvious cyclicality. Since 2012, the memory chip industry has generally experienced three rounds of ups and downs:
The first round (2012~2015): Due to the emergence of iPhone 4/4s, the smartphone industry was detonated, which stimulated the market demand for memory chips, and major storage manufacturers expanded production, resulting in oversupply in the market, and the price turned from rising to falling, and then entered a downward cycle.
The second round (2016~2019): With the increasing strength of Android mobile phones, the market has started a round of chasing to improve memory and storage space, during which Samsung, SK hynix, Micron and other major memory manufacturers have shifted their production capacity to 3D NAND, DRAM is facing insufficient capacity while boosting demand, resulting in price increases. The subsequent downward trend is mainly due to the lack of demand momentum for PCs and servers after the expansion of 3D NAND production by major manufacturers, and the overall situation of oversupply.
The third round (2020~2023): At the beginning of 2020, the global outbreak of the new crown epidemic triggered a significant increase in the demand for home office, which in turn drove the market demand for PCs and servers. The update of 5G terminals also opens up new space for downstream growth of storage. However, due to various reasons such as repeated epidemics and increased uncertainty of the international situation, downstream demand continues to weaken, and the industry's inventory overcapacity is serious, resulting in the price of memory chips continuing to fall, and products in some segments will even break through historical lows in 2023.
However, it should be noted that the current memory chip industry has ushered in a substantial reversal.
According to public information, since the end of last year, mainstream manufacturers, including Micron, Samsung, Western Digital, etc., have raised the price of their own memory chip products. Judging from the data, the price of memory chips did touch the bottom in Q3 of 2023, and began to continue to rebound and rise in the following months. Taking DRAM Wafer as an example, from the low point of the average spot price on September 12, 2023, to the end of May this year, the cumulative increase has reached about 25%, and an upward trend has been formed. In addition, according to TrendForce's market estimates, the quarterly price increase of DRAM contracts and NAND Flash contracts will reach 13%~18% and 15%~20% in the second quarter of this year, reflecting the sustainability of the industry's upward trend.
The reason why the price of memory chips will reverse is mainly due to the following two reasons:
From the perspective of market supply, due to the significant decline in the market prices of various products in the previous downward range of the storage cycle, the performance of major storage manufacturers has declined significantly or even suffered significant losses, so in order to avoid further decline in market prices, major leading manufacturers of memory chips have taken substantial measures to reduce production, and some have also carried out countercyclical investment and other behaviors, which will help promote the balance of market supply and demand pattern, and promote product prices to stop falling and rebound.
According to IDC's forecast, by 2025, the continental data circle will grow to 48.6ZB, accounting for 27.8% of the global data circle; On the other hand, at the beginning of last year, ChatGPT released by OpenAI opened the era of the AI wave, and then major manufacturers have successively developed and launched large model products, which need to provide larger capacity, higher performance, lower latency and higher response speed for the working scenarios of AI servers. According to Micron's calculations, the DRAM and NAND required for AI servers are 8 times and 3 times that of conventional servers, respectively, which will obviously become a strong driver to support the growth of the storage market.
It is worth mentioning that, according to the statistics of market institutions, in the past, the upward cycle of memory chip prices could last at least 6~8 quarters, and the current new round of rising cycle only lasted less than 3 quarters, and there is still a large upside space in the future. With the continuous increase in the price of memory chip products in the future, the performance of related manufacturers will also continue to improve, which is expected to trigger the "Davis double-click" of the performance and valuation of the memory chip sector. Coupled with the establishment of the third phase of the National Fund as a catalyst, as well as the grand background of domestic substitution and independent controllability, the memory chip sector really has the opportunity to have a wave of large-scale rise.
To sum up, now is the best time to lay out the memory chip sector, and it is recommended that interested investors pay more attention to those industry leading companies whose fundamentals have bottomed out and demand has recovered, and may be able to have good returns.
Attached: Profile of representative companies of memory chips
1. GigaDevice
It is a leading enterprise in memory chip design in China, and its main products include memory, MCU and sensors.
The company is one of the few companies in China that can provide self-developed NOR Flash, NAND Flash and DRAM products at the same time and is comparable to international leading companies in the code-based storage market, and is also the world's leading Fabless chip supplier, Arm general-purpose 32-bit MCU is the first in China, the touch chip is the fourth in the world, the fingerprint job chip is the third in the world, and the second in China.
2. Beijing Junzheng
It is a leading domestic vehicle memory chip company, with the world's leading 32-bit embedded CPU technology and low-power consumption technology, and its main business is the R&D and sales of ASIC chip products and overall solutions such as microprocessor chips and intelligent video chips. The company has a strong ability of independent innovation, over the years in the independent innovation of CPU technology, video codec technology, image and sound signal processing technology, SoC chip technology, software platform technology and other fields to form a number of core technologies, and the formation of "computing + storage + simulation" technology and product pattern, on the basis of intelligent hardware, intelligent security terminal application market, the business will be further expanded to automotive electronics, industrial manufacturing, medical equipment, communications and high-end consumer and other fields.
3. BIWIN storage
The domestic memory module giant has core competitiveness in memory technology research and development, advanced packaging and testing manufacturing, industrial chain resources and global operation, and is a national specialized and special new small giant enterprise and a national high-tech enterprise. The company's Biwin brand is mainly for the To B market such as smart terminals, industrial-grade applications, enterprise-level applications, automotive-grade applications, and PC OEM, while the sub-brand Biwintech and the exclusive brands such as HP, Acer and Predator are aimed at the To C market such as DIY, e-sports, and mobile storage. The company's products are widely used in intelligent terminals, PCs, big data, Internet of Things, Internet of Vehicles, industrial Internet and other fields.
4. Ziguang Guowei
Tsinghua Unigroup is a listed company in the semiconductor industry, focusing on the field of integrated circuit chip design and development, and is a leading supplier of integrated circuit chip design and system integration solutions in China.