One Article Analysis | 5 Key Trends That Affect The Future Growth Prospects Of Semiconductors

Semiconductor industryIt is now one of the most valuable industries in the world.With the shaping of many overlap variables and market forces, the semiconductor industry is constantly changing.Next, we will focus on the history of the industry, the current health status and future growth prospects that affect the industry5 key trends.

1. Periodic income and high volatility

Semiconductor sales are mainly driven by the electronics industry. It has a high degree of cyclicality and volatility. Its characteristics are that the cycle of prosperity and depression may last for many years (see the picture in the picture1).Recently, the market has shrunk by more than 10%in 2019, mainly due to the decline in memory prices, but rebounded in 2020, an increase of 7%(Sia Factbook, 2021).Semiconductor memory, like daily consumer goods, is highly sensitive to prices, much more volatility than non -memory semiconductor (Sia DataBook, 2021).

In order to manage the silicon cycle and annual volatility, semiconductor companies must be able to control costs without sacrificing key investment in R & D.For a semiconductor company headquartered in the United States, the expenditure of manufacturing is nearly one -third of the total cost. Next is R & D, depreciation and amortization, and sales and management costs (SG&A）（SIA Databook，2021）。

No factory design company andIDMThe cost may be very different,IDM has more capital equipment expenditures due to the wafer factory.If you have a large fixed cost from production facilities on your balance sheet, it is a real challenge to adopt the test of the recession of the industry.You have to pay for all these devices, even if the factory only runs with 50%capacity.Due to the increase in the cost of manufacturing and capital equipment, the proportion of production expenditures in total cost has been greatly increased in the past 20 years.

2. High R & D and capital investment

The rapid development of technological progress has prompted semiconductor companies to invest significantly high capital in core research and development.sinceSince 1999, US companies have invested 15 % to 20 % of annual income and invested in research and development, which is the highest in the US high -tech industry except pharmaceutical and biotechnology (see Figure 2 and Figure 3).In addition, American companies invest 8-20%of their sales into new property, factories and equipment each year, and they are the highest among all industries except alternative (Sia DataBook, 2021).

Due to the long -term competitive advantage of the enterprise, capital and research and development investment have been relatively unsatisfactory.According to the U.S. Semiconductor CompanyThe 10K and 10Q files submitted by USSEC and the data estimated by SIA were increased by 5.6%year by year from 2000 to 2020. In 2020, US companies' expenditures were as high as US $ 74.2 billion (SIA FACTBOOK, 2021To.

3. High returns and positive productivity growth

Over the past few decades, a series of factors have led to the wages and productivity of the industry than other industries.For example, the average annual salary has passed fromAbout 80,000 US dollars in 2001 increased to more than $ 160,000 in 2019, more than twice the average salary of all manufacturing (Sia DataBook, 2020).

（Sia DataBook, 2020) In addition, the income of each employee is also a strong productive forces. It has doubled in the past 20 years and reached nearly $ 571,000 in 2020 (Sia DataBook, 2020).Unlike most industries, the growth rate of the average sales price is equal to or higher than the inflation rate. The decline in unit cost is enough to keep the company profitable without excessive price increase.In an environment where important raw materials or manufacturing costs have decreased, only by improving production efficiency can we achieve stable profit.

4. Long -term profitability

Just as we are in the pictureAs seen in 5, the income of the semiconductor industry is famous for its violent fluctuations, but the extensive investment in personnel and technology has brought a strong general return to the entire industry.The profitable concentration is concentrated in the competitors. They have enough scale to resist economic recession and use disruptive technologies such as personal computers and smartphones. Since 1999, the average sales of taxes have received about 20%of the pre -tax profit, and the gross profit margin has reached 37%.To 57%(Sia DataBook, 2020).

futureThe expected growth of the five years seems very promising. The current forecast estimation is estimated that the total market value will be about $ 775 billion in 2026, and the annualized growth rate is slightly lower than 8%(Lucintel, 2021).The main growth momentum includes:

1) Due to the increase in disposable income of the family, the urbanization process has accelerated, the population increases rapidly, and the demand for consumer electronics products increases (Fortune Business Insights (2021));

2) The demand for integrated circuits with rapid expansion of emerging economies is growing (Fortune Business Insights (2021); 2021;

3) Technical driving force, including the Internet of Things (IoT), smartphones, 5G communication, and artificial intelligence and machine learning (AI/ML) (Columbus, 2020).If you want to prove that the light of the semiconductor industry is ahead, then look at the popularity of Covid-19 (New crown epidemic) Let's.At the beginning of the epidemic, analysts predict that sales will reduce5%to 15%, but sales in 2020 actually increased from US $ 413 billion in 2019 to about 440 billion US dollars, with a growth rate of 5.1%(Bauer et al., 2020) (SIA Factbook, 2021).

Because consumers are trapped at home and do not spend money to buy gasoline, vacation or new office wardrobe, they use money for new computers and game systems at home.The demand for automobiles, industry and part of the consumer market is reduced and is demanded by server, personal computers and artificial intelligence and and andThe long -term growth field of 5G has offset, helping the industry beyond the expected and maintaining healthy growth trajectory (Enews, 2021).

Nvidia is one of the leaders of image, artificial intelligence and cryptocurrency processors.The new quarterly revenue record was created every quarter in 2021, and the quarterly revenue reported in August 2021 reached a peak of $ 6.5 billion (Tyson, 2021).Although the explosive growth of new technologies and personal computers, servers, and mobile phones in the past few decades is the gospel for the entire industry, high integration has adversely affected many companies.

5. Highly integrated

along withThe SOC design has become more and more complicated, and the transistor is pushed to its physical limit. The design and manufacturing costs have never been as high as it is now.The industry's profitability has always rely on the continuous cost reduction brought about by R & D breakthroughs.As a whole, this has been successful, the cost is fromThe $ 0.98 per piece in 2001 was reduced to about $ 0.63 in 2019 (Sia DataBook, 2020).

In addition to reducing the pressure of the cost of each chip unit, the company is also facing the huge pressure of obtaining more benefits from each device——This is the gospel for consumers, because they can get greater computing capabilities with lower costs.This dual pressure that reduces costs and improve performance has promoted fierce competition between competitors and led to the comprehensive giants we see today.This model is not unique to semiconductor -the capital -intensive industry is often conducive to scale, because the fixed cost of expansion can be repaid or repaid in installments in higher annual income.

It's not surprising, the sales cost of small companies (COGS) accounts for a significant percentage of income because they lack the expenses and economies of competition with large companies.This trend is largely consistent with promoting greater integration. Since 2015, the average annual transaction volume has extended to $ 68.8 billion (IC Insights, 2021).

OnlyIn 2020, three large -scale acquisitions ranked among the top five semiconductor acquisitions in the industry -Nvidia acquired the ARM holding company for $ 40 billion, AMD acquired Selinis for $ 35 billion, and analog device company (Analog Device) was US $ 21 billion in US $ 21 billion.Swallow Maxim (IC Insights, 2021).Due to the surge in design expenditures and the cost of wafer plant close to $ 20 billion, only companies with sufficient strength and capital can share fixed costs to the number of annual income and units with a high level of high levels.As a result, the total profit of the top five companies (Samsung, Intel, TSMC, Qualcomm, and Apple) for the top five companies (Samsung, Intel, TSMC, Qualcomm and Apple) were US $ 35.5 billion, and the annual profit of other companies in the industry was US $ 28.7 billion (MCKINSEY & Amp; Company,2020) (see Figure 6).Such a dynamic prompt enterprise either to be bigger or bankrupt, which has led to a rapid integration period in the past few years.According to a report in McKinsey's 2018, 29 companies provided advanced wafer factories in 2001, but now there are only 5, including only two major foundries, several EDA companies and a light carved machine supplier(ASML).

In recent years, the trend of integration has become faster and faster——The most valuable 51 semiconductor companies have half the acquisition caseAboveAfter 2015 (Design and Reuse, 2021).It seems possible to continue integration, but considering that the main semiconductor companies in the United States are rarely maintained independently, it is unclear that it will continuehow long.picture7 clearly reflects this momentum, which describes the semiconductor mergers and acquisitions of the past 10 years.In this capital -intensive industry, the top 10 semiconductor companies have 55%of the market. Small companies are struggling to survive and have to maintain competitiveness through development (Hertz, 2021).

In order to understand the background of this chart, there are a few things that need attention:

① These are transaction announcements, and all transactions may not be implemented.There may be a variety of reasons, including being rejected by shareholders, the resistance of management, and the approval of the regulatory authorities, just like Qualcomm's failure to acquire NXP (NXP) for nearly $ 40 billion in 2016.

② The basic cumulative valuation data from 2011-2020 comes from the "IC Insights 2021 McClean Report) (IC Insights, 2021).The basic accumulation of valuation data in 2021 is estimated to be US $ 22 billion, but only the last eight -month M & A announcement report (Design & Amp; Reuse, 2021).

③ We have borrowed the benchmark assumptions in the Marklin Report. The main assumption is the coverage of the coverage of semiconductor companies, business departments, product lines, chip intellectual property (IP) and wafer fabry.Acquisition for software and system -level businesses ... Semiconductor capital equipment suppliers, material manufacturers, chip packaging and testing companies, and design automation software companies.

In the case of full disclosure, although we try to imitateIC Insight restricts all focus transactions, but according to the restrictions they use, some transactions may not be included, or the net worth of individual transactions may beA limit category.For example, in 2016, the total value of all acquisitions exceeded the $ 103 billion merger of IC Insights estimated — it is likely that a part of each transaction or one of the transactions itself is not included in the net estimation of IC Insight.The value estimation of the Enshiran acquisition case that was eventually rejected by the regulatory agency was also different -INSIGHTS estimated that the transaction was worth US $ 38.5 billion, and we quoted the valuation of $ 47 billion when it announced the acquisition.