In addition, the top three memory chip vendors -- Samsung, SK Hynix and Micron -- are each expected to grow 10 per cent, while Kaixia expects third-quarter sales to rise 11 per cent as demand for memory chips remains strong for data centre servers, enterprise computing, as well as 5G smartphones and related infrastructure.
Overall, IC Insights expects the top 15 companies to grow 7% in the third quarter of this year. Semiconductor sales are expected to remain strong through year-end, supporting IC Insights' current forecast for global semiconductor sales growth of 24% this year.
Here's a look at how these companies performed.
samsung
Samsung once again overtook Intel to take the top spot. The first is the strength of its memory-chip business, which stands in stark contrast to Intel's CPU sales, which have been on an upward trajectory, while Intel's CPU sales have struggled and are locked in a price war with AMD.
In the second quarter, Samsung's main source of revenue was semiconductors, which accounted for more than half of the company's operating profit and nearly 35% of revenue. The consolidated revenue of the semiconductor division was 22.74 trillion won ($19.768 billion), up 24.7 percent from the same period last year. Operating profit was 6.93 trillion won ($6.024 billion), up 24.7 percent from the same period last year. Revenues rose 19.6 per cent and operating profit more than tripled compared with the first quarter.
Samsung is also strengthening its storage business on the back of its strong performance. In China, for example, Samsung has invested heavily, mainly in its memory plant in Xi 'an. The move follows Samsung's decision to invest $15 billion in its Xi 'an plant, the company's only overseas memory production base. The first phase of investment was $7 billion in August 2017, followed by the second phase of investment of $8 billion in 2019. A production line built by the first phase of investment started production in March 2020. Recently, the second plant will also be put into operation, and the third phase of the project is also under investment planning. Upon completion of the second phase of investment in Samsung xi 'an, the NAND flash capacity of the second plant will reach 130,000 wafers per month. The capacity of the first plant is 120.000 tablets per month. The total output of 250,000 wafers per month is about half of Samsung's 2020 NAND flash production.
Samsung's wafer foundry business, though less impressive than its memory business, has long been in the spotlight, as it is the world's number two in the sector and has a strong desire to overtake TSMC.
Intel
In its most recent earnings report, Intel set its sales guidance for the third quarter of 2021 at minus 3% and for the full year at minus 1%. That would be a particularly weak performance for the processor giant in a year when total semiconductor sales are expected to rise 24%.
Before Intel in the first quarter of 2020 and the gross margin of around 60%, but since the second quarter of 2020, the company's gross margin began to shake down slightly in the first quarter of 2021, due to the data center business revenue of $5.6 billion, compared with the same period last year dropped 20%, originally it is Intel's most profitable business, Its lower revenue dented overall gross margin, which fell to 55.2 percent, down more than 5 percentage points from the same period in 2020.
It can be seen that Intel's gross profit margin has slightly decreased, because Intel has been in constant trouble in recent years, both in chip design and manufacturing, especially in the r&d and mass production of 14nm and more advanced processes, which have not been able to form market competitiveness.
In recent years, Intel has struggled with capacity issues that have led to the development of new products lagging behind AMD.
Intel's Q2 earnings report showed that while total revenue and PC revenue increased, data center revenue fell 9% year on year to $6.5 billion, processor ASP average price fell 7%, operating profit fell from $3.1 billion to $1.9 billion, and operating margin dropped from 44% to 30% now. That is, it is getting cheaper and cheaper. The price war has begun. It also confirms Intel's previous statements that it can compete on price to retain its share of the data center market.
Intel CEO Pat Gelsinger has argued that competitive pricing in the server CPU market would hurt the company's performance, but would preserve or even increase market share.
Considering that Intel's 14nm process has been mature enough, and the cost of 10nm process has been significantly reduced by 45% recently, the strategy of price war still has the foundation. After all, AMD's 7nm process still costs a lot up to now, and TSMC's OEM price is not cheap. The OEM price of 7nm chip is quoted at tens of thousands of dollars, and 5nm is as high as 17,000 dollars. Another increase is likely this year.
In the data center processor market, performance and total cost of ownership are more important than price, su said.
From AMD's point of view, their current advantage is still super core, with 64 cores and 128 threads in a single slot, and the 5nm Zen4 is expected to go further up to 96 cores and 192 threads, at a lower unit cost.
In the past year, Intel has begun some test wafer projects at TSMC, as its capacity has not kept pace with market demand. These include a 6nm GPU expected to be launched in the first half of this year, and a 5nm Atom processor expected to be mass-produced for mobile platforms in the second half of this year. Some estimate that about 5% of Intel's processors used in pens will be made by TSMC this year.
TSMC
IC Insights forecasts TSMC sales to grow 11% in the third quarter. Sales will rise another 4% in the fourth quarter. IC Insights believes TSMC's second-half sales will grow 14% from first-half sales and 24% for the full year. If realized, it would mark a consecutive year of revenue growth of more than 20% for the foundry giant. TSMC's annual sales rose 31 percent in 2020.
TSMC's revenue in the second quarter was US $13.29 billion, up 2.9% quarterly and 28% year on year. Its revenue was NT $372.15 billion, up 2.7% quarterly and 19.8% year on year. Its gross margin was 50%, down 2.4 percentage points quarterly and 3 percentage points year on year, and net profit after tax was RMB 134.36 billion. Quarterly decrease of 3.8%, annual increase of 11.2%.
In the first half of the year, TSMC reported revenue of US $26.203 billion and NT $734.555 billion, up 18.2% year on year, gross margin of 51.2%, down 1.2 percentage points year on year, and net profit after tax of NT $274.049 billion, up 15.2% year on year.
It can be seen that in the latest quarter, TSMC's profit still showed a year-on-year growth trend, but decreased from the previous quarter, mainly due to the alternating effect of low season and peak season. In terms of gross margins, TSMC has always been the industry's highest, and the year-on-year and sequential declines in the quarter did not affect its excellent performance in revenue and profit. The decline has a lot to do with cost pressures, as the company has invested heavily in 5nm and 3nm processes and the return on investment is not proportional in the short term. In addition, the loss of Huawei Haisi, a high-quality large customer with the most advanced manufacturing process, will certainly have an impact on its profit margin in 7nm and 5nm. Moreover, in the face of the general trend of rising prices in the industry, TSMC has made few changes to the original customer contracts, which will also have an impact on the gross margin to some extent.
In the second half of the year, TSMC entered the traditional peak season, and the growth momentum came from the new 5nm orders successively entering the mass production. Among them, Apple M1X and subsequent M2 will adopt 5nm mass production in the second half of the year. The A15 application processor of iPhone 13 started mass production with TSMC's enhanced 5nm version in June, and gradually increased the volume of the second half of the year until the fourth quarter.
Moreover, TSMC received strong orders for 5G mobile phone chips in the second half of the year. Qualcomm used TSMC's 6nm mass production of new 5G mobile phone chips and shipped them in large quantities in the third quarter. Three 5G mobile phone chips will be expanded to use TSMC's 7nm or 6nm process for chip casting. The new generation Snapdragon 895+, which will be launched early next year, is expected to be mass-produced with TSMC's 5nm chip in the fourth quarter, while Mediatek's new Generation Phecda 2000 series will be mass-produced with 5nm chip in the second half of the year.
SK hynix
SK Hynix, no. 4, relies heavily on its memory chip business, and has invested heavily in its wafer foundry business in recent years. SK Hynix's CEO has said he will increase investment in the wafer foundry business because it is key to the company's business transformation.
From the second half of 2016 to the first half of 2018, the global memory market witnessed massive shortages and price increases, resulting in the profits of the world's three largest memory manufacturers, Samsung, SK Hynix and Micron. But from the second half of 2018, the market began to change, with DRAM and NAND Flash prices falling, so Samsung, SK Hynix and Micron's revenues went from boom to bust in just over a year.
In this situation, SK Hynix announced that in the next few years to increase the investment in non-storage business, focus on wafer foundry and logic chips, to reduce risks, reduce the impact of a single field of ups and downs on the company's revenue.
At present, the foundry business only accounts for 5 per cent of SK Hynix's revenue, so there is still a lot of room for growth. The company provides contract manufacturing services through its SK Hynix System IC subsidiary, which moved its factory from Cheongju, South Korea, to Wuxi, China.
In 2020, SK Hynix also bought a 49.8% stake in Key Foundry, a wafer Foundry spun off from Magnachip.
According to the CEO of SK Hynix System IC and Key Foundry, which produce 8-inch wafer mature process chips, SK Hynix hopes to make a breakthrough in advanced process.
In February 2018, SK Hynix announced that it would invest $107 billion to build four fabs to consolidate its position in the memory chip industry.
Nvidia is closing in on Qualcomm
No. 7 nvidia is nipping at the heels of No. 6 Qualcomm.
In recent years, the top two companies in the global IC design list have always been Qualcomm and Broadcom, and Qualcomm has been in the leading position for a long time, While Broadcom only occasionally surpassed, and was the second most of the time. This year, Nvidia with its strong performance, came to the second place, close to Qualcomm, which also reflects from a side in recent years in the industry in technology, application changes and changes have a greater impact on the market, so that the corresponding chip design manufacturers to achieve a reverse attack.
Broadcom represents traditional technologies and forces, especially network communication, which is broadcom's strength, and radio frequency chips and modules, which are also the focus of its business. But it's all traditional, and Nvidia's Gpus are relatively well-suited to the combination of high-performance computing and AI, which has been the biggest market growth in recent years. In addition, Nvidia's consumer Gpus in console applications caught up with the post-pandemic market explosion and generated substantial revenue.
In short, Broadcom is more of a proxy for legacy technology and application power, while Nvidia is a proxy for emerging technology and application power that is gaining momentum, and it wouldn't take long for Nvidia to overtake Qualcomm if it weren't for the size of the smartphone battleground it specializes in.
mediatek
Mediatek has overtaken Texas Instruments to rank ninth.
In the past year, Mediatek not only achieved a record high in revenue, becoming the third largest IC design company in the world, but also saw its net profit increase by 80% compared with 2019. More recently, it has been reported that it has infiltrated Apple's supply chain to supply chips for its branded earphones.
In the third quarter of last year, For the first time in its 23-year history, Mediatek became the world's largest mobile chip market leader, overtaking long-time giant Qualcomm, a position it held until the most recent quarter.
Mediatek's shares have risen 1.4-fold in the past year, hitting record highs as industry bodies have raised their price targets.
Behind all this is the company's product roadmap and strategy. At the same time, the industrial environment and external forces are also assisting at the right time, which is mainly reflected in the outbreak of the Sino-US trade war in May 2019. After Huawei was sanctioned by the United States, Chinese mobile phone brands switched from Qualcomm to Mediatek in order to diversify the risk of chip supply sources. According to statistics, mediatek's market share in the Chinese mainland rose from 17% to 31.7% in the second half of 2020.
Texas instruments
As the absolute leader in analog chips, Texas Instruments (TI) saw its analog sales increase by about 6% in 2020 compared to 2019, accounting for 80% of its IC sales of $13.6 billion and 75% of its semiconductor revenue of $14.5 billion in 2020.
TI so bright performance, to a large extent is due to the characteristics of analog IC itself and its market, that is, analog IC difference is significant, long life cycle.
The technology of analog IC comes from collecting and capturing the information of the real world. Because the real world is complex and heterogeneous, the product design used to capture this feature also has complex and heterogeneous characteristics. Analog IC differences are very significant, reflected in the company's IP is particularly important. At the same time, analog IC emphasizes the high signal-to-noise ratio, low power consumption, high reliability and stability, long life cycle, low price, which is significantly different from digital IC (digital IC follows Moore's law, usually after 1~2 years to face the elimination of higher process products).
In addition, from the supply side, analog IC industry research capacity supply is limited. In the design process, human resources are difficult to be copied. The design process for analog ics relies more on experience and less on computer models than for digital ics. There is more trial and error in the design process, and good engineers have more than 10 years of experience, so analog IC companies build strong barriers to entry.
Moreover, product diversity and limited supply of research capacity reduce market competition, while the decentralized nature of the end market continues to amplify the strategic advantages of the analog IC industry. The end market for analog ics is very fragmented, with tens of thousands of product lines and a decrease in average order numbers. The industry leader has advantages in horizontal categories, and it is difficult for new entrants to compete effectively. The market competition pattern is stable, and the leader has the right to speak on the pricing ability.