Sending price increase letters, power semiconductors hit bottom and rebounded?

From 2019 to 2022, downstream demand for new energy vehicles, photovoltaics, semiconductors, and other industries continued to be strong. However, global wafer production capacity was insufficient, and the power semiconductor industry was in short supply, resulting in multiple price increases. IGBT, SiC MOSFET, and other products were in high demand. Since 2022, global production capacity has gradually been released, leading to a decline in the power semiconductor market. Supply and demand have reversed and prices have significantly decreased for MOSFETs, transistors, medium and low voltage MOSFETs, and high voltage MOSFETs; In addition, against the backdrop of the sluggish consumer electronics market, inventory depletion has become the main theme of the power semiconductor market in the past two years.

However, from December 2023 to January of this year, media reported that five local power semiconductor manufacturers, including Jiejie Microelectronics, Sanlian Sheng, Lancai Electronics, Yangzhou Jingxin, and Shenwei Company, have issued price increases and raised the prices of their products. Currently, there is a significant reduction in power semiconductor inventory, and there are signs of recovery in terminal demand. Has the power semiconductor industry bottomed out and rebounded?

Within a month, five power semiconductors issued price increase letters

On January 14th, Jiejie Microelectronics issued a "Price Adjustment Letter" to customers, announcing a 5% -10% increase in the unit price of the company's Trench MOS product line from January 15th, 2024. Orders placed before the adjustment date can continue to be executed according to the original unit price and quantity, while new orders need to be confirmed and communicated with the company's business personnel.

Regarding the reason for the price increase, Jiejie Microelectronics stated that "in order to continuously improve product quality and enrich product models, the company has been increasing investment in advanced equipment and process research and development in the early stage. However, in the context of a long period of market downturn and continuous decline in product prices, our company has independently borne multiple additional costs such as materials, exchange rates, and labor. After long-term losses, the original price is no longer able to meet normal supply needs. In order to continue to ensure the delivery of stable and reliable products and high-quality services, we need to continue

Obviously, the 2023 semi annual report released by Jiejie Microelectronics shows that its operating costs increased by 26.41% year-on-year to 580 million yuan in the first half of the year, mainly due to "simultaneous increase in sales and operating costs, insufficient capacity utilization, and increased unit costs

Jiejie Microelectronics announced a price increase this time mainly for its Trench MOS product line. It is reported that its MOS and related devices account for more than 20% of Jiejie Microelectronics' revenue.

On January 9th, Shenzhen Shenwei Semiconductor Co., Ltd. issued a notice stating that the past three years have been a tumultuous period for the entire semiconductor industry. The sluggish market demand has triggered malicious competition, with product prices continuously declining and industry competition leading to frequent quality accidents. Due to the continuous rise in overall raw material costs and the increase in comprehensive operating costs, Shenzhen Micro Company is also facing the reality of sustained financial deficits. After internal discussions within the company, it has been decided that from January 9, 2024, new orders received will be subject to the following price adjustments based on the original price:

The SOD-123/SOD-323/SOD-523 packaging series has increased by 10-20%;

SOT-23 packaging series has increased by 15-25%;

SOT23-3L/SOT23-5L/SOT23-6L packaging series has increased by 15-25%;

The SOT-323/SOT-353/SOT-363/SOT-563 package series has increased by 10-20%.

Shenzhen Sanlian Sheng Power Semiconductor Co., Ltd. also recently issued a price adjustment notice, stating that due to the rise in raw material prices and labor costs, the company's costs have significantly increased, and the costs have far exceeded the company's affordability. After careful consideration by the company, it has been decided that starting from January 1, 2024, the unit price of the company's entire product line will be increased by 10% -20%.

On December 29, 2023, Sichuan Blue Color Electronic Technology Co., Ltd. issued a notice on product price adjustment, stating that due to the continuous rise in upstream raw material prices and labor costs, the company's costs have increased significantly, and the original prices are no longer able to meet supply needs. After careful consideration, the company has decided to increase the unit price of its entire product line by 10% -18% from January 1, 2024.

The company that issued the price increase notice earlier was Yangzhou Jingxin Microelectronics Co., Ltd. On December 15, 2023, a price adjustment communication letter about Yangzhou Jingxin Microelectronics Co., Ltd. was circulated in the industry. Yangzhou Jingxin stated that since 2023, there has been vicious competition in the domestic chip market, with prices continuously declining and severe internal competition, making the entire industry chain suffer unbearable. On the other hand, terminal manufacturers have increasingly strict requirements for product performance and quality, constantly raising their demands in all aspects. Based on this, Yangzhou Jingxin has decided to increase the price of all tin backed chips by 10% -15% starting from January 1, 2024.

Regarding the above-mentioned price increase letter, some industry insiders have stated that inventory depletion is nearing its end, and the company has been losing money for a long time, so price adjustments are understandable.

What are the reasons for this round of price increases? Is there sufficient momentum for future development?

In the past two years, the sluggish market demand has triggered malicious competition, and the prices of discrete component products have been severely inflated. Many companies have shown a clear phenomenon of increasing revenue without increasing profits. According to incomplete statistics from Global Semiconductor Watch, manufacturers including Silan Microelectronics, Jiejie Microelectronics, New Clean Energy, Deeplove, Dongwei Semiconductor, Xinghai Electronics, Galaxy Microelectronics, Xinnuo Technology, Sanlian Sheng, and Mingxin Microelectronics experienced a decline in revenue in the first half of 2023. In terms of net profit data, Silan Micro, DeepLove, Changde Micro, Sanlian Sheng, and Mingxin Micro all incurred losses.

For this round of price increases, multiple A-share power semiconductor companies have stated that their power product prices are generally stable and there have been no significant changes in downstream market conditions in the near future. Among them, the staff of China Resources Micro Securities Department stated that the company's product prices remain stable at present. "The company has previously noticed that some enterprises have issued price increase signals, but mainly due to the significant price reductions of some small enterprises in the early stage. There are signs of recovery in some downstream areas this year, but further clarification is needed in the second quarter or later.

Industry insiders analyze that the price increase trend in the power semiconductor market this time is a self rescue behavior of some companies. Compared with medium and large power semiconductor companies, they can maintain price stability by binding high-quality industry top customers to ensure the company's order volume. Some small factories are more passive and can only "shop" in the market with low gross profit to obtain orders. When faced with inflation, they can't bear it directly.

For the development of the power semiconductor market in 2024, many industry insiders and institutions currently do not have high expectations. According to incomplete statistics from Global Semiconductor Watch, including Infineon, STMicroelectronics, and ON Semiconductor Wolfspeed、 The revenue of major power and IDM companies, including Renesas, continues to decline in the third quarter of 2023, and inventory levels remain high. And currently, related components in the automotive industry are still in the destocking stage. Due to the late start of destocking of automotive semiconductors, this downward cycle will continue for a period of time.

Industry insiders say that the current demand for power semiconductors is mainly in the consumer/industrial sector, but the visibility of this field is still unclear. Overall, the prosperity of the power semiconductor industry may not reverse in the short term.