Securities Times｜Semiconductor Companies in the A-share Market Expect Significant Profit Increase

Translated from Securities Times with the original title as "Good News! Two More Companies Expect Significant Profit Increase!"

In recent days, several semiconductor companies have released performance forecasts for the first half of 2024, showing a noticeable recovery in overall performance.

As of July 5, 15 A-share listed semiconductor companies have disclosed performance forecasts for the first half year of 2024, with 14 of them expecting performance growth and one expecting to turn losses into profits.

Many of those companies, when explaining the performance growth in the first half of 2024, mentioned "the recovery of the semiconductor industry," "the revival of end-market demand," and "the advancement of the industry driven by AI technology." This suggests a clear revival in the industries of semiconductors and electronics during the first half of 2024.

Market analysts believe that with the continuous development of generative large model technology, the focus of consumer electronic products is gradually shifting from the cloud to end users, leading to diversified AI applications, and the semiconductor industry is expected to continue to perform well, with players in the advanced packaging and high bandwidth memory sector likely to benefit substantially.

Multiple Companies Experience Performance Growth by Multiples

Companies in the semiconductor industry chain that have already disclosed performance forecasts have all reported profits in the first half of 2024, with many of them anticipating year-on-year performance growth by multiples in the first half of 2024.

On the evening of July 5, Will Semiconductor Co., Ltd. Shanghai, a leading image sensor company, released its performance forecast, predicting a net profit attributable to the parent company owner within the range of RMB 1.308 billion to RMB 1.408 billion for the first half of 2024, an increase of 754.11%-819.42% year-on-year.

The company stated that in the first half of 2024, market demand continued its recovery, downstream customer demand increased, and with the introduction of the company's products into the high-end smartphone market and ongoing penetration into the automotive market for autonomous driving applications, the company's operating income saw significant growth. Additionally, to better manage the impact of industry fluctuations, the company actively promoted product structure optimization and supply chain structure optimization, leading to a gradual recovery in the company's product gross margins and a marked improvement in overall performance.

Montage Technology Co., Ltd., a leading memory interface chip company, also released a performance forecast on the evening of July 5, expecting a net profit within the range of RMB 583 million to RMB 623 million in the first half of 2024, a growth of 612.73%-661.59% year-on-year.

The company mentioned two reasons for the performance growth. First, since the beginning of 2024, the demand for the company's memory interface and module-related chips has seen a restorative growth, with increased penetration of DDR5 downstream and continuous advancement of DDR5 successor iteration. By the first half of 2024, the company's shipments of second-generation DDR5 RCD chips have already surpassed those of the first generation. In addition, the company has begun to scale up shipments of some new chip products for AI operation capacity, contributing to new performance growth.

In addition to Will Semiconductor Co., Ltd. Shanghai and Montage Technology Co., Ltd., the results of analysis based on the currently disclosed semi-annual forecasts indicate that several companies in the semiconductor industry chain, such as Shaanxi Lighte Optoelectronics Material Co., Ltd., Southchip Semiconductor Technology (Shanghai) Co., Ltd., and Hubei Dinglong Co., Ltd., are expected to achieve performance growth by multiples. Listed consumer electronics companies such as Luxshare Precision Industry Co., Ltd. and Shenzhen Kinwong Electronic Co., Ltd. are also expected to grow substantially in the first half of 2024.

Biwin Storage Technology Co., Ltd., a leading memory company, anticipates a net profit within the range of RMB 280 million to RMB 330 million in the first half of 2024, representing a year-on-year increase of 194.44%-211.31%.

Biwin Storage Technology Co., Ltd. focuses on the R&D, packaging, testing and manufacturing of memory chips. Its memory chip products have been widely used in information technology fields such as intelligent mobile terminals, PCs, industrial terminals, data centers, smart vehicles and mobile storage.

Biwin Storage Technology Co., Ltd. stated that the major change in the company's performance in the first half of 2024 was the significant business growth driven by the recovery of the industry. In the first half of 2024, the company capitalized on the industry's upward trend, vigorously expanded its domestic and international top-tier clientele, achieved market and business growth breakthroughs, and saw a substantial year-on-year increase in product sales. Furthermore, the company has continuously increased R&D investment in areas such as storage solution development, chip design, advanced packaging and testing equipment, aiming to enhance its core competency. For the first half of 2024, the company's R&D expenses were approximately RMB 210 million, marking a growth of over 170% year-on-year.

Significant Industry Recovery

In 2023, the semiconductor industry as a whole was in the stage of "a cyclical downturn before bottoming out." The weak sales of end products such as smartphones and laptops led to lackluster demand for upstream components such as semiconductor storage chips and analog chips, putting pressure on the industry's prosperity.

Since the beginning of 2024, the semiconductor industry has been showing signs of recovery. According to the Semiconductor Manufacturing Monitor (SMM) Report for the first quarter of 2024 published by the Semiconductor Equipment and Materials International (SEMI), the electronics sector saw a 1% year-on-year growth in sales in the first quarter of 2024 and is expected to see a 5% increase in the second quarter. With an increase in the shipments of high-performance computing (HPC) chips and continuous improvements in memory pricing, integrated circuit (IC) sales achieved a strong year-on-year growth of 22% in the first quarter of 2024 and are expected to surge by 21% in the second quarter. IC inventories stabilized in the first quarter of 2024 and are anticipated to improve in the second quarter.

Benefitting from the recovery in consumer electronics sectors such as computing and smartphones, the global semiconductor industry's recovery trend has further solidified, with most institutions predicting a growth rate of over 10% for 2024.

The World Semiconductor Trade Statistics (WSTS) stated in its latest forecast that the global semiconductor market would grow by 16% in 2024, reaching USD 611 billion. This statement is part of the revised 2024 Spring Forecast of WSTS, reflecting the strong performance in the past two quarters, especially in the computing terminal market.

Specifically, according to the forecast of WSTS, the annual growth in 2024 will mainly be driven by two IC categories, each with double-digit growth: logic devices with a growth rate of 10.7% and memory with a growth rate of 76.8%. Other categories, such as discrete devices, optoelectronic devices, sensors, and analog semiconductors, are expected to experience single-digit declines.

WSTS further predicted that the semiconductor market would grow by 12.5% in 2025, reaching USD 687 billion in valuation. This growth is expected to be mainly driven by the memory and logic sectors, both of which are expected to soar to over USD 200 billion in 2025, marking a year-on-year increase of over 25% for the memory sector and over 10% for the logic sector. All other sectors are expected to achieve single-digit growth rates.

Central China Securities Co., Ltd. believes that the semiconductor industry has initiated a new upward cycle, with AI serving as a key driver of semiconductor industry growth. The demand for AI computing power is strong, fueling rapid growth in demand for cloud-based AI computing hardware infrastructure. With AI-driven smartphones and AIPCs accelerating industry ecosystem upgrades, AI terminals are expected to enter a new growth phase.

According to Dongguan Securities Co., Ltd., since the second half of 2023, driven by the demand recovery in traditional consumer electronics (represented by smartphones and PCs), AI-powered industrial innovations (represented by AI smartphones, AIPCs, and AI servers), and continuous import substitution (represented by semiconductor equipment and materials), the performance of the semiconductor sector has gradually recovered and officially entered an upswing cycle in the first quarter of 2024.

The above information is provided for reference purposes only and does not constitute investment advice.