The recent strong rebound in the U.S. stock market, AI chip leader Nvidia, memory chip leader Micron, and lithography leader AsML share prices have hit record highs, the global semiconductor industry is once again expected to turn the tide.

The most direct indicator of the semiconductor industry is sales data. From January 2022 to now, the year-on-year growth rate of global semiconductor monthly sales has been declining. Sales fell by more than 20% for three consecutive months from December 2022 to February 2023, the worst year-on-year growth in nearly a decade.

However, there have been some recent signs that active destocking in the semiconductor industry has begun and that inventory pressure is expected to ease in the coming quarters:

Signal 1: Capacity utilization in semiconductor and related industries is declining. Due to the rapid expansion of capacity in 2021, oversupply and the gradual emergence of business inventory pressure, the utilization rate of capacity in 2022 continued to decline, falling to 71.16 percent in January 2023, the lowest level in the past six years. Companies are actively reducing capacity to reduce inventory pressure, to work off existing inventories.

Among them, Samsung, Hynix, Micron CR3 have previously announced production cuts, Micron and Samsung said that from May no longer accept memory chip lower inquiry; Domestic storage company research feedback this cycle down has basically come to an end, it is expected that the second half of the year will show a clear signal of warming, open a new round of upward cycle; Domestic Yangtze River storage will also raise the price of NAND products.

Signal two: Capital expenditure growth in the global semiconductor industry has slowed significantly year-on-year. According to IC insights, the global semiconductor industry capital expenditure will decrease in 2023, down 19% year on year, which is the largest decline since 2008. Semiconductor industry investment will cool down, supply capacity on the whole will stabilize or decline, conducive to the initiative of enterprises to destock.

Signal three: semiconductor export prices fall, enterprises start to cut prices to destock. According to the U.S. semiconductor Export Price Index, the overall semiconductor export price index increased from October 2019 to September 2022 and peaked in September 2022. Since 2022Q4, the semiconductor export price index has continued to decline, reaching 58.8 in April 2023, the lowest level in nearly three years.

Zhao Zongting, fund manager of China AMC Chip ETF (159995), believes that the typical semiconductor chip business cycle includes recovery, boom, slowdown, recession, bottom five stages, and the review of the three rounds of semiconductor inventory cycle since 2009, the stock price is basically ahead of the fundamentals of the bottom two quarters. At present, the decline in the inventory index shows that the semiconductor chip industry has gradually stepped into the active destocking stage. From the perspective of the layout rhythm, the second quarter may be a better window period for the layout of the semiconductor chip plate.

The current domestic valuation adjustment to close to the lowest position since 2018, funds are also continuing to buy bottom chips and heavy warehouse chips of the Kechuang 50 index.
In addition, in addition to the traditional chip demand business is expected to bottom out and rebound this year, new demand such as AI artificial intelligence computing power is constantly emerging, which will help iron out the cyclical fluctuations and support the upward trend of the plate.

The long-term investment opportunity in the semiconductor chip industry still lies in the logic of domestic substitution and autonomy, and this logic has recently been strengthened. The semiconductor industry has the characteristics of high technical barriers, capital barriers and talent barriers. Looking at the world, the development of the semiconductor industry in history cannot do without the strong support of the government. The domestic semiconductor industry has a large room to improve the rate of localization, compared with other economies, it is still in the stage of rapid growth.