It is one of the functions of the market analysis company to forecast the growth of the global semiconductor industry every year. For example, the market forecast at the beginning of the year basically depends on the growth momentum emerging in 2016, which should last until 2017. However, due to the weak growth of the terminal product market, such as smart phones, and the declining trend of computers, the promising AI, the Internet of Things, and self driving have not yet reached the breaking point, Therefore, at the beginning of the year, market analysis companies remained cautious and optimistic about the growth of the global semiconductor industry in 2017. For example, the famous WSTS released a forecast of 3.3% growth in November 2016, and another IC Insight predicted a 5.0% growth.

However, "man’s calculation is not as good as heaven’s calculation". In 2017, unexpected things happened. One is that the price of silicon chips has always declined in the past ten years, and this year it began to rise, and the stock is out of stock. The other is that the price of storage has entered a cycle of soaring again, leading them to raise their forecasts. For example, WSTS was revised to increase by 17% in August, and IC Insight increased by 22%.

Because their forecasts allow multiple revisions as the market changes, their final forecasts are almost always correct. Obviously, it may be very difficult to truly predict the trend of the industry and guide the operation of the enterprise.

China’s semiconductor industry is out of sync with the world

The growth of the global semiconductor industry in 2017 exceeded most people’s expectations, especially the booming memory industry, which was like holding a "golden bowl".

IC Insight forecasts that the average sales price (ASP) of DRAM will increase by 77% in 2017, leading to a 74% increase in DRAM sales this year, which is the highest since the 78% increase in 1994. For NAND flash memory, its ASP increased by 38%, resulting in a 44% increase in sales in 2017. Global storage is expected to grow by 58% and by 11% in 2018.

IC Insights estimates that in 2017, the sales of DRAM market will reach $72 billion, becoming the largest product in the semiconductor industry this year, substantially surpassing the FLASH market by $49.8 billion and about $22 billion. Due to the strong growth rate of memory this year, the semiconductor sales in 2017 increased by 22%, of which memory accounted for 13 percentage points. If the growth rates of DRAM and FLASH are deducted, the semiconductor sales in 2017 only grew by 9%, obviously less than half of the overall sales growth rate of 22%.

In the face of the high growth trend of the global semiconductor industry, the development of China’s semiconductor industry seems to have no linkage effect. From the analysis, there is a certain inevitability, because the main growth power this year comes from memory. From the perspective of China’s semiconductor industry chain, memory has just begun to be deployed, and it is unlikely that there will be large sales by 2019. In addition, from the perspective of global OEM, this year’s situation is not as good as last year’s.

Therefore, at the recent SMIC International Q3 Law Conference, the senior management of SMIC also said frankly that its Q3 gross profit margin was 23%, down from 25.8% in Q2 this year and 30% in Q3 in the same period last year. The main reason was that the operating rate was low, only 83.9%.

At present, SMIC International is ushering in two transformation periods. The first is the management transformation. As the industry knows, Mr. Liang Mengsong joined; The second is strategic transformation, which will cover a wider range of product lines. At the same time, it will also vigorously develop advanced process technology to narrow the gap with international peers.

In addition, SMIC International has changed in the following three aspects with the change of the industrial environment. On the first hand, it has developed many new manufacturing processes, which has a capacity climbing process, obviously affecting its gross profit margin; The second aspect is the average ex factory price of silicon wafer OEM. Last year, the whole market was in a state of shortage, supporting the price to rise. This year, the whole OEM industry did not boom last year, resulting in the average ex factory price lower than the same period last year; The third aspect is the increase of SMIC’s capital expenditure. The good thing is that some of these expenditures have been directly converted into productivity. However, they also began to accrue depreciation, leading to the decline of gross profit margin.

SMIC made timely strategic adjustments, actively moved towards marketization, fully reflected its upward vitality, and let the industry see new hope.

China’s chip manufacturing industry cannot maintain an annual growth rate of 20%, and some fluctuations are completely normal. At this stage, various feasible methods are being promoted and practiced, from which many experiences and lessons are also summarized. Although strengthening R&D is fundamental, it is a matter of "planting trees for the past and enjoying the cool for the future". The investment risk is large and the cycle is long. However, only the achievements of R&D can truly fall into their own hands, and there is no shortcut.

If there is any "magic bullet" available, as Zhou Zixue, Chairman of SMIC International, said at the 30th anniversary meeting of Huadeng International, 10% is capital, 30% is good team, and 60% is determination and confidence to persist.