A few days ago, the-share semi-annual report came to an end. As an industry with obvious cyclical attributes, the semiconductor industry has experienced a total of 9 major cycles since 1978 and is currently in the downward phase of the 9th cycle. How did A- share semiconductor companies perform in the first half of this year? Yinshi Finance and Economics has a glimpse into the semi-annual reports of 146 A- share semiconductor companies.

A-share semiconductor industry net profit halved year-on-year

According to data from Flush iFinD, the 146 A- share Shenwan Semiconductor Company achieved overall operating income of 220.193 billion billion yuan in the first half of the year, a year-on-year decrease of 7.43 percent, and a net profit of 15.321 billion billion yuan, a sharp decrease of 58.32 percent year-on-year.

Specifically, in the first half of the year, 109 of the 146 A- share Shenwan semiconductor companies experienced a decline in net profit attributable to their parents. Among them, the sealing and testing enterprises magnificent technology (688216.SH), digital chip design enterprises strway (688213.SH) and national technology (300077.SZ) ranked the top three in terms of net profit decline.

For the reasons for the decline in performance, many semiconductor companies have talked about weak demand for end-market products, "the semiconductor industry is still in a downward cycle". Sealing tap Tongfu Micropower (002156.SZ) in a previous institutional survey of the downstream terminal demand status of further elaboration, basically reflects the causes of the current situation of the semiconductor industry.

"The uncertainty of the global economic outlook has led to a decline in industry demand, and there has been a relatively obvious structural imbalance in the downstream terminal application market of integrated circuits: from the downstream application side, the automotive electronics market is developing rapidly, but the proportion of automotive applications in the integrated circuit market is not high; at the same time, computers and communications are still the main driving force, while the computer market is saturated or even partially shrinking, the communications market, represented by smartphones, has entered an adjustment period with high inventories. The above situation led to a decline in the business climate of the integrated circuit industry, and the growth rate of integrated circuit sales began to decline quarter by quarter in the second quarter of 2022." Tongfu micro-electric representation.

However, each segment of the semiconductor industry is affected differently by the cycle. According to Shenwan's three-level industry classification, among A- share semiconductor companies, the three core links of the semiconductor industry chain-chip design, wafer foundry, and sealing and testing performance in the first half of the year have all declined to varying degrees. At the same time, the performance of semiconductor materials has also declined, while the discrete device part has increased revenue. The only segment that achieved a double increase in net revenue in the first half of the year was semiconductor equipment.

Data source: Flush iFinD

Semiconductor equipment "outshine others"

In the downward cycle of semiconductors, in sharp contrast to the sharp decline in performance in the design, foundry, and sealing and testing of the industrial chain, the semiconductor equipment segmentation industry stands out. It is reported that the 17 A- share semiconductor equipment companies achieved overall operating income of 20.343 billion billion yuan, an increase of 35.32 percent over the same period last year, and realized a net profit of 4.499 billion billion yuan, an increase of 61.6 percent over the same period last year.

among them, northern huachuang (002371.SZ) realized operating income of 8.427 billion yuan in the first half of the year, up 54.79 year on year, and realized net profit of 1.799 billion yuan, up 138.43 year on year. Among them, the revenue growth rate of North Huachuang electronic process equipment product line was higher than the total revenue, achieving operating income of 7.349 billion billion yuan, an increase of 79.26 percent over the same period last year, accounting for 87.21 percent of the total revenue. At the same time, North Huachuang said in a previous investor survey that the company's equipment orders increased by more than 30% from January to May 2023.

micro company (688012.SH) achieved revenue of 2.527 billion yuan in the first half of the year, up 28.13 year on year. Net profit attributable to the parent was 1.003 billion yuan, up 114.40 year on year. By product, the company's etching equipment revenue was 1.722 billion yuan, an increase of about 32.53 percent over the same period last year, and MOCVD equipment revenue was 0.299 billion yuan, an increase of about 24.11 percent over the same period last year.

increased shipments are the main reason for the growth of semiconductor equipment "double male" performance. North Huachuang said that the company's performance growth in the first half of the year was mainly due to the steady increase in market share of the semiconductor equipment business and the continuous improvement of operating efficiency. China Micro Corporation said that one of the reasons for the growth of performance is that etching equipment continues to be recognized by more domestic and foreign customers, and the market share of key customers continues to increase.

In fact, the increase in shipments of semiconductor equipment manufacturers stems from the continuous expansion of production in mainland fabs. Yuanda Securities Research Report pointed out that the mainland fab expansion space is large, is expected to boost equipment capital expenditure. It said that by sorting out some wafer fab production line construction projects in mainland China, the total planned capacity gap exceeded 1 million pieces/month. In its 2022 earnings report, SMIC expects capital expenditure and capacity growth in 2023 to be the same as the previous year. When Changhong Group landed on the board on August 4, its IPO project included the construction of a 83000-piece/month 12-inch wafer production line, and plans to complete the installation of plant equipment by the end of 2024. The above information verifies that the demand for equipment in mainland fabs still exists, and the demand for domestic semiconductor equipment will not decrease in 2023.

At the same time, according to Soochow Securities (Hong Kong) research report also pointed out that the fab expansion is clear. According to JW Insights, a total of 23 12-inch fabs in mainland China are being put into production in 2022, with a total monthly production capacity of about 1.042 million pieces. At the same time, JW Insighsts expects that 25 new 12-inch fabs will be added to mainland China in the next five years, with a total planned monthly production capacity of more than 1.6 million fabs. By the end of 2026, the total monthly capacity of China's 12-inch fabs is expected to exceed 2.763 million pieces, up 165.1 percent from 2022.

poor performance in design, OEM and sealed testing

Different from the trend of equipment manufacturers, in the first half of the year, the three core links of the semiconductor industry-chip design, wafer foundry, and sealing and testing all experienced varying degrees of decline.

in the chip design process, the 42 digital chip design companies in a shares achieved an overall operating income of 48.045 billion yuan, down 17.03 percent from the same period last year, and a net profit of 2.226 billion yuan, down 79.09 percent from the same period last year. The overall operating income of 32 analog chip design companies was 16.973 billion yuan, down 14.86 percent from the same period last year, and the net profit attributable to the parent was -0.655 billion yuan, down 120.62 percent from the same period last year.

100 billion market value chip designer and domestic image sensor leader weir shares (603501.SH) in the first half of the year, the non-net profit loss reached 78.9613 million yuan, which is the first time since its listing in 2017 that the non-net profit loss has been deducted. In addition, Weir achieved operating income of 8.858 billion yuan in the first half of the year, a decrease of 19.99 percent from the same period last year, and net profit attributable to its parent company was 0.153 billion yuan, a sharp drop of 93.25 percent.

in response, weir shares explained that the overall downstream demand is still in a relatively low state. at the same time, due to the mismatch between supply and demand brought about by the high inventory at the end of the industrial supply chain, the prices of some products are under pressure in the process of inventory removal, and the gross profit margin level is greatly affected, resulting in a significant decline in net profit attributable to the parent and net profit deducted from non-profit. As Vail shares state, the company's gross sales margin has fallen from 30.75 percent at the end of 2022 to 20.93 percent in the first half of 2023.

also due to the downstream terminal demand downturn, facing the pressure of inventory, also contributing to the year-on-year decline in net revenue and profit were Zhuo Shengwei (300782.SZ), Zhaoyi Innovation (603986.SH), Lanqi Technology (688008.SH), Longxin Zhongke (688047.SH) Beijing , Biwin Storage (688525.SH) and other well-known chip designers.

Data source: Flush iFinD

The sluggish performance of chip designers is also transmitted to wafer foundry and sealing. According to iFinD data, the six A- share integrated circuit manufacturing companies achieved operating income of 41.078 billion yuan, down 10.83 percent from the same period last year, and realized net profit of 4.184 billion yuan, down 61.52 percent from the same period last year. A- share 13 integrated circuit sealing and testing companies achieved operating income of 31.418 billion yuan, down 12.56 percent from the same period last year, and net profit of 0.778 billion yuan, down 75.93 percent from the same period last year.

In the wafer foundry, SMIC (688981.SH) first-half revenue fell 13.32 percent year-on-year, and net profit attributable to the parent fell 52.06 percent year-on-year. At the same time, the company's gross profit margin fell to 22.4 in the first half of the year from 40.26 in the same period last year.4%. China Resources Micro (688396.SH) first-half revenue fell 2.25 percent year-on-year, and net profit attributable to the parent company fell 42.57 percent year-on-year.

In addition, the performance of several leading companies in the sealing and testing process also fell sharply. In addition to Tongfu micro-power losses in the first half of the year, Changdian Technology (600584.SH) first-half revenue fell 21.94 percent, net profit attributable to the mother fell 67.89 percent year-on-year. Huatian Technology (002185.SZ) first-half revenue fell 18.19 percent year-on-year, home-to-home net profit fell 87.77 percent year-on-year.

The positives are emerging

However, while the performance of the semiconductor industry is affected by the overall downturn in downstream terminal demand, there are still some positive factors.

Zheshang Securities Research Report pointed out that the current global semiconductor industry is in a downward cycle, is expected to usher in the second half of 2023 downward cycle inflection point. 2024, on the one hand, traditional chips will enter the inventory inflection point, on the other hand, AIGC's demand for computing power will increase significantly, will drive the outbreak of emerging chip demand, will accelerate the arrival of the upward cycle.

as Zhejiang securities research report point of view, many of the above-mentioned chip companies with declining performance in the first half of the year said that with the continuous de-stocking of the industry, downstream terminals and their own inventory have improved, and the company's performance is also improving month on month.

Among them, Weir said that some of the company's product revenue showed a trend of significant improvement from the previous month. It is reported that in the first half of 2023, the revenue of the company's image sensor business from the smartphone market increased by 23.76 compared with the second half of 2022, and the revenue from the notebook computer market increased by 8.28 compared with the second half of 2022.

Zhaoyi Innovation also said that in the second quarter compared with the first quarter, the mobile, consumer, computing, industrial, automotive and other markets all achieved an increase in the number of shipments, the comprehensive price was still at the bottom and other factors, and the quarterly revenue achieved a slight increase from the previous quarter. In addition, the results of SMIC and Hua Hong (688347.SH) two major fabs also picked up in the second quarter.

On the other hand, the AI dividend is being initially realized. Taking some chip companies in AI industry chain as an example, core original shares (688521.SH), haiguang information (688041.SH), lanqi technology and goongson zhongke all achieved ring-on-ring growth in the second quarter, with the ring-on-ring growth of core original shares and lanqi technology's net profit in the second quarter exceeding 200.

many companies have also made progress in AI-related chip shipments and research and development. it is understood that core original stock neural network processor (NPU)IP has been used by 68 customers in its 120 balance AI chips. its independent intellectual property general purpose graphics processor (GPGPU) can support large-scale general purpose computing and AIGC related applications, and has been adopted by customers to deploy high-performance AI chips with scalable Chiplet architecture for data center, high-performance computing and other fields.

as of the end of June this year, the amount of orders in hand for core shares reached 2.137 billion yuan, of which the amount of orders in hand converted within one year was 1.405 billion yuan, accounting for 65.73.

At the same time, with the development of AI applications, the demand for memory capacity and bandwidth is increasing, driving up the demand for server memory interfaces and supporting chips. Lanqi Technology's main business is related to it, and from its research projects, the company's product layout is extending to AI. In the first half of the year, shipments of the new generation of products-DDR5, which benefited from memory interface chips and module supporting chips, rose significantly, with Lanqi Technology's operating income increasing 21.11 percent in the second quarter from the previous quarter and net profit attributable to the parent company increasing 215.08 percent from the previous quarter.

Soochow Securities Research notes that AI may partially reshape the semiconductor cycle. The artificial intelligence revolution represented by generative AI has spawned computing power demand, data center demand will provide strong support for the next semiconductor cycle, and the improvement of the application side is expected to drive the Internet of Things, mobile phones and other downstream recovery.