Source: Semiconductor Industry Vertical and Horizontal
In 1995, Nvidia's first chip, NV1, encountered numerous setbacks, leaving the company with only 30 days of working capital. In 2024, Nvidia's Blackwell GPU is in short supply, and the company's total market value exceeds $3.6 trillion.
In 1995, Intel held a market share of over 75% in the global PC processor market, establishing its leading position in the personal computer market. Going back to 2024, Intel's stock price has plummeted by nearly 60% since the beginning of this year, with its market value dropping to over 80 billion US dollars, marking the first time in Intel's thirty year history that it has fallen below the 100 billion US dollar mark.
The market value changes of the two major semiconductor giants are a microcosm of the current semiconductor landscape.
There is a saying that goes: "People often overestimate the changes that will occur in one year, but underestimate the changes that will occur in five years." Looking back, the changes in the semiconductor industry in 2024 for the whole year will be even greater than the sum of the previous five years.
2024 will be a turning point for the semiconductor industry. Why do you say that?
As a type of industry, the semiconductor industry also relies on the basic characteristics that can characterize the industry: division of labor, products, and services. And products like computers and chips cannot do without the science behind them. Industry and science are interdependent, and even before the 1870s, industry was clearly dependent on science. The controversy surrounding the Siliman incident later became a watershed in the relationship between science and industry
The significant changes in the semiconductor industry this year are the result of a fierce competition among technology (science), policy, and market.
The Great Transformation of Semiconductor Enterprises
There are many news that will stimulate the nerves of industry insiders in 2024.
The first to bear is the continuously soaring market value of Nvidia. Microsoft and Apple have been the top two companies with the highest market value in the world since 2010. Although they have been entangled in the ranking of "top US stocks" for more than 10 years, they have not been replaced by anyone else.
On June 18, 2024, local time, Nvidia's stock price rose 3.51% to $135.58, with a total market value of $3.335 trillion, surpassing Microsoft and Apple to become the world's highest valued listed company.
This is a change that affects the world, such as in August 2011, when Apple defeated ExxonMobil for the first time to win the title of the world's largest company by market value, which was also a landmark moment for technology companies to defeat traditional oil companies. And Nvidia becoming the world's largest company by market capitalization represents a shift in the focus of the technology industry's development. Traditional fields such as consumer electronics and software, represented by Apple, have led an era in the past, while Nvidia's first move means that the development focus of the technology industry is accelerating towards the AI field.
In addition, on November 8th of this year, Nvidia replaced Intel as a constituent stock of the Dow Jones Industrial Average. S&P Global stated that the adjustment of constituent stocks is to ensure that the index has a more representative semiconductor exposure. In fact, this is also evidence that AI has truly entered the commercialization track, and its impact on the semiconductor industry is becoming increasingly significant.
In the semiconductor industry in 2024, in addition to constantly increasing upper limits, there are also constantly refreshing lower limits.
There are two major leaders in the semiconductor industry, which can be said to be known by children on the roadside: Intel and Samsung. Since 1992, Intel has been the world's largest semiconductor manufacturer and has remained at the forefront for the next 25 years. Although Samsung's chip business surpassed Intel for the first time in 2017, it is still constantly striving for a leading position.
This year's two major chip giants seem to have fallen into a "swamp" and are constantly struggling.
As mentioned earlier, Intel's market value has declined due to its continuous loss making performance. In the second quarter of this year, Intel incurred a loss of $1.6 billion, significantly higher than the previous quarter's loss of $437 million. And the latest third quarter financial report announced its largest quarterly loss in 56 year history - $16.6 billion (approximately RMB 118.2 billion).
Samsung is also in a difficult situation in 2024. In October, Samsung announced a third quarter operating profit of approximately 9.1 trillion Korean won, lower than the previous market expectation of 11.5 trillion Korean won.
Jeon Young hyun, the head of Samsung's device solutions department, also issued an apology statement, stating that the company's performance was not as expected by the market, which has raised concerns about the company's basic technological competitiveness and future. As the senior management leading the company's operations, they will take responsibility. (South Korea has even learned from Japan's apology)
Similarly, the stock market reflects the company's situation, with Samsung's stock price falling 2.45% to 51700 Korean won on November 14th local time, the lowest point since June 24, 2020. If this trend continues, Samsung's stock price for the whole year will be the worst performing year in over 20 years.
The Decadence of Europe
What will change in 2024 is not only the explicit ranking of enterprises, but also regional changes.
Amidst the global government attention on the semiconductor industry, there is a region where semiconductor prices have been declining throughout the year - Europe. Many people may not have paid attention, but WSTS data will not deceive
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Source: WSTS Semiconductor Industry Horizontal Table
We have calculated the chip sales released by WSTS since January this year, and as of now, the annual chip sales in Europe have been negative year-on-year. Of course, there is also Japan, but Japan slightly recovered year-on-year in August and September.
The European semiconductor industry is in a weak state in 2024. The "three giants" of European semiconductors: Infineon, STMicroelectronics, and NXP, all have poor revenue.
Infineon's revenue reached 3.702 billion euros in the third quarter, a year-on-year decrease of 9%. At present, Infineon has lowered its performance outlook for 2024, adjusting its revenue forecast for this year to 15.5-16.5 billion euros, lower than the previous expectation of 16.5-17.5 billion euros. STMicroelectronics' net revenue for the third quarter was $3.25 billion, a year-on-year decrease of 26.6%. NXP's revenue decreased by 5.4% year-on-year to $3.25 billion, slightly lower than analysts' expectations of $3.26 billion.
Currently, the automotive and industrial markets in Europe have experienced negative growth. From a more specific perspective, the performance of optoelectronics and discrete devices is not satisfactory, and the MCU market is showing a shrinking trend with negative growth. The analog market has also experienced 17 months of continuous negative growth. According to the prediction of market institution Future Horizons, the European semiconductor market will only have an 8% growth rate by 2025.
find by hard and thorough search
The only constant in the world is change itself. The reason why there have been so many changes in the semiconductor industry this year is to trace back to policies, markets, and technologies.
policy
The impact of policies on industries is self-evident. At the policy level, the United States, Europe, Japan, South Korea, and Vietnam have all issued semiconductor related policies around the past two years. But from now on, the implementation of the Chip Act in the United States and Europe is not significant.
So far, more than half of the $52 billion subsidy under the US chip bill has been disbursed, with over $35 billion allocated to approximately 26 projects. But the funding seems to be delayed, and Intel has been complaining that "it's been two years and I haven't seen a penny
The US Chip Act is on the verge of collapse after Trump takes office next year. Because Trump is opposed to the Chip Act. In an interview with the media, Trump bluntly said, "It's too bad." The European Union's "European Chip Act" has not made a splash. Although it was proposed in 2022, there are not many factories currently being built in Europe, and Intel's projects have not even started.
However, it should be noted that the Chip Act has played a role of 'empty handed catching a white wolf'. Intel, TSMC, Samsung, Micron, Gexin, Amkor, and others have already built factories in different regions of the United States due to subsidies under the Chip Act. Even if the funding subsidy period is extended or even cancelled in the later stage, will half of the wafer fabs already built become "abandoned buildings"? I'm afraid not. It can be said that for semiconductor companies, building a factory in the United States is already "on the verge of an arrow and has to be launched".
Although the implementation of the Chip Act is not yet in place and Trump denies it, he certainly has nothing to say about the return of advanced manufacturing to the United States.
That's why we think Intel won't be so bad when we look at it. Although Intel has always been criticized, we cannot ignore everything and observe this company from only one perspective. We cannot ignore that Intel actually plays an important role on the geopolitical stage and is also one of the chips in the US government's semiconductor industry and diplomatic strategy.
When looking at Intel's prospects, we cannot ignore the elements of American strategy and geopolitics. Now the semiconductor industry occupies an important strategic position, and everyone knows it well. Regardless of whether it can achieve the ultimate 3nm process, there are only three companies worldwide that can manufacture advanced process chips: TSMC, Intel, and Samsung.
The US Chip Act still has a significant portion of plans to flow towards Intel's construction of two large factories in Arizona and two additional factories in Ohio.
So, Intel's future is still full of highlights. We cannot simply assume that it will 'decline to the end'.
market
Why has the term 'involution' been used in China in recent years? Due to the slower pace of technological innovation and the impact of the three-year pandemic, China's economic development has also slowed down under various pressures, leading to the phenomenon of 'involution'.
The theory of the "second curve" holds that industrial development has a lifecycle, and any growth curve is a parabolic curve that first rises and then falls. The secret to achieving sustained growth is to start a new growth curve before the turning point appears, thus forming a development trend of continuous improvement and progression of new and old driving forces.
We are currently in a period of depression during the last round of technological and industrial revolution. In order to revive the economy, we need to ignite a new round of technological and industrial revolution. This is the turning point brought about by the cycle.
The new wave of explosive points undoubtedly lies in AI, which is also a consensus among many industry insiders. AI brings new growth points to the market, and many technologies are buried under AI.
technology
Above AI, what we need to see is technological development.
The explosion of AI this time is undoubtedly driven by technology. The emergence of GenAI has been brewing for a long time. And this explosion of AI has also driven other technologies that were originally in the making.
The first representative one is TSMC's advanced packaging technology, CoWoS。
The two most concerned products in semiconductors currently are: GPU、HBM， Both of these products rely on advanced technology to produce. And TSMC's CoWoS packaging still plays a crucial role in it, to the point where some people jokingly say that "TSMC will be the world's number one packaging and testing factory." Here, packaging and testing, which originally belonged to the back-end process, has shown a clear trend towards front-end processing.
And in the process of HBM suppliers continuously improving stack density, the interconnection between the future fifth generation HBM (i.e. HBM4) and the logic layer will be jointly completed by storage manufacturers and contract manufacturers. According to SK Hynix, HBM4 will greatly change the industry's perception of DRAM as a "general-purpose chip" and transform it into a customized storage special process chip. In this process, the relevant technical know-how will be jointly undertaken by the OEM and storage OEM, which is also the essence of TSMC's "OEM 2.0" plan announced this year.
The second representative one is the architecture competition, which refers to the market competition between x86, Arm, and RISC-V.
A clear trend this year is the increasing market share of Arm architecture chips. The x86 Alliance has made it very clear recently that it is positive. Although it may seem like a change in the market for the three major architectures at first glance, it is actually a thirty year competition between the design concepts of CISC (Complex Instruction Set) and RISC (Reduced Instruction Set) chips. This competition is essentially an extension of the development of computer architecture as a "science and technology" in the field of "industry".
The emergence of AI has given these two design concepts more application scenarios. From the current perspective, RISC architectures (Arm, RISC-V) do have inherent advantages, as they possess the low power consumption and high energy efficiency that AI naturally needs. This also means that Arm may one day achieve a higher market share, driven by both technology and market forces.
