Semiconductor Cycle Recovery Weak, A-Share Industry Leaders' Profits Slow in Q1
The disappointing performance guidance from the lithography equipment leader ASML (ASML Holding NV, NASDAQ: ASML) has triggered a "seismic" impact on the global semiconductor industry. It is reported that ASML's new orders for the third quarter plummeted by more than 50% compared to the previous quarter. The company also revised down its sales target for 2025 and expects that revenue from Mainland China will drop to 20%.
The news caused a significant decline in semiconductor stocks overnight in the US market, with ASML's stock price plummeting by 16.26%, marking the largest single-day drop in 26 years, and the Philadelphia Semiconductor Index plummeted by 5.28%. On October 16th, semiconductor stocks led the decline in the A-share market, with only some lithography-related concept stocks showing activity. Stocks such as Guomin Technology (300077.SZ), MXIC Semiconductor (688458.SH), and Tiande Yu (688252.SH), which had previously seen significant increases, all experienced declines.
This year, global semiconductor demand has seen a moderate recovery. Looking at the recent dense disclosure of performance forecasts, semiconductor leaders such as North Microelectronics (002371.SZ), Amlogic (688099.SH), and JiJi Microelectronics (300623.SZ) have all achieved considerable performance growth in the first three quarters. ASML's revision of its performance target for next year, does it imply that the recovery momentum of the semiconductor industry is slowing down? And will it affect the profit repair progress of A-share semiconductor companies?
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Several semiconductor leaders saw a decline in sequential growth in the third quarter.
As the third-quarter performance forecast disclosures heat up, companies at various stages of the semiconductor industry chain are successively "submitting their papers." A review by First Financial Daily reporters found that the revenue and net profit sequential growth rates of some semiconductor listed companies have shown signs of fatigue in the third quarter.
North Microelectronics is a leading semiconductor equipment company, and its performance recovery trend is highly watched by the market. On the evening of October 15th, North Microelectronics disclosed a performance forecast showing double growth in revenue and net profit for the first three quarters, with an expected operating income of 18.83 billion to 21.68 billion yuan, a year-on-year increase of 29.08% to 48.61%, and an expected net profit attributable to the parent company of 4.13 billion to 4.75 billion yuan, with a year-on-year increase of 43.19% to 64.69%.
Looking at the single quarter, North Microelectronics' performance sequential growth rate has slowed down. The announcement shows that in the third quarter, North Microelectronics is expected to achieve an operating income of 7.42 billion to 8.54 billion yuan, and a net profit attributable to the parent company of 1.56 billion to 1.79 billion yuan. In the second quarter, the company's revenue and net profit attributable to the parent company were 6.476 billion yuan and 1.654 billion yuan, respectively. According to the minimum forecast value, the revenue and net profit changed sequentially by 14.57% and -5.4%, respectively. Even according to the maximum forecast net profit, the sequential growth rate is far lower than the second quarter level.
JiJi Microelectronics is an IDM company for semiconductor power devices. The company was the leader in the previous market trend, with a cumulative increase of 100.22% since September 27th. According to the performance forecast, JiJi Microelectronics is expected to achieve a net profit attributable to the parent company of 313 million to 356 million yuan in the first three quarters, a year-on-year increase of 120% to 150%. According to the mid-year report data, JiJi Microelectronics' net profit attributable to the parent company in the third quarter is 99 million to 142 million yuan, with a sequential change range of -18.85% to 16.39%, all lower than the second quarter level.
JiJi Microelectronics stated that during the reporting period, the moderate recovery of the semiconductor industry, benefiting from the gradual recovery of demand in downstream market application fields, product structure upgrades, and increased customer demand, the company's comprehensive production capacity increased in the first three quarters of 2024, and the production capacity utilization rate remained at a high level, achieving an increase in operating income and net profit attributable to the company's shareholders compared to the same period last year.StarChip, a chip design stock that disclosed its earnings forecast at the same time, experienced a similar situation. After continuous growth in performance in the first and second quarters, the profit growth rate in the third quarter slowed down significantly. The company estimates that the net profit attributable to the parent company for the first three quarters will be 594 million yuan, with an estimated profit of 232 million yuan in the third quarter, lower than the second quarter level (234 million yuan).
ASML has lowered its sales target for next year.
The third quarter is the traditional peak season for the semiconductor industry and has a significant impact on the annual performance. The disclosed A-share semiconductor companies have seen a slowdown in profit growth rate in the third quarter, and ASML has clearly lowered its sales target for next year, casting doubt on the certainty of the semiconductor market's future performance.
According to the financial report, ASML's revenue and profit in the third quarter met expectations, but the scale of new orders fell sharply, indicating a slowdown in demand in the semiconductor market. ASML President and CEO Peter Wennink said that the decline in new orders and the lowering of next year's sales target are mainly in the field of logic chips. Due to the competitive situation among wafer foundries, the development of some customers' new technology nodes has slowed down, leading to some wafer factories postponing plans and affecting the timing of demand for photolithography equipment, especially for EUV lithography machines.
Regarding industry prosperity, Wennink said that, from the current situation, the recovery in other segments of the market, except for the artificial intelligence field, is relatively slow. The recovery process of the semiconductor market is slower than expected, and such a recovery process is expected to continue until 2025. Therefore, customers have become more cautious in decision-making.
Affected by the negative performance of ASML, on October 16, chip stocks weakened during the trading day.澜起 Technology (688008.SH) fell by more than 4%, and 北方华创、韦尔股份 (603501.SH)、中微公司 (688012.SH) fell by more than 3%, and 兆易创新 (603986.SH)、寒武纪-U (688256.SH) fell by more than 2%.
"A semiconductor cycle is generally more than 40 months, with more than two years of upward period and more than two years of downward period. In 2023, the entire industry reduced prices and inventory, reaching the bottom of the cycle. Since this year, the demand for consumer electronics has recovered, and the demand for artificial intelligence has increased significantly, driving the industry's prosperity." The head of investments at a private equity fund in Shanghai told reporters, "At present, it is in a gentle recovery period of the cycle, and there is no trend of accelerating to the peak of the cycle. Since 2022, the demand for the entire industry has shown obvious structuralization. Previously, the demand for new energy vehicles and photovoltaics grew rapidly, but it has also slowed down this year. Artificial intelligence is undoubtedly the biggest demand explosion point at present, and only a few companies can benefit due to the limitations of application scenarios."
In fact, during the research on semiconductor listed companies in August and September, 兆易创新 once stated: "Looking at previous years, the second and third quarters are the peak season for the industry. We maintain a relatively cautious and optimistic attitude towards the market demand in the third quarter of this year, expecting the third quarter to maintain growth compared to the second quarter." 泰凌微 (688591.SH) said on October 15 when accepting institutional research that the semiconductor market prosperity has rebounded compared to the previous year, but it has not met expectations. In the first half of this year, there were obvious signs of market prosperity, and overseas demand was also strong, with good momentum in the fields of smart home, computer peripherals, and audio.
Regarding this round of semiconductor market, 中信建投 suggests paying attention to three main lines. The first is terminal innovation: integrating the current hottest AI large models into terminal devices for local operation has also become an area that technology giants are focusing on and investing in. Given its potential for widespread application and impact, the evolution of this industry in the future is worth continuous attention. The second is the domestic computing power industry chain. Against the background of the rapid development of AI technology, the upper limit of the capabilities of large models is expected to be further improved in the future. As the cornerstone, computing power hardware is subject to U.S. export restrictions, and the domestic supply chain is facing a development window period. Finally, the cycle recovery: semiconductor inventory continues to be reduced, and the inventory of some sectors has been reduced to a healthy level, showing a bottom rebound trend. It is expected that demand will pick up in 2024, and the equipment, parts, and materials sectors are expected to benefit from the additional expansion demand of storage giants and logic giants, as well as the trend of significantly increasing the level of domestic production line localization.