AI semiconductor crash! 6 specially selected brands that are out of the shelf! Is the “AI boom” immortal even with “export restrictions to China”?!

◆ASML's sales for the second quarter (2Q) increased 18% compared to the previous quarter, and order balances increased 54%, both of which exceeded market expectations. In particular, the balance of orders greatly exceeded market expectations. Sales guidance for the 3rd quarter was 6.7 billion euros to 7.3 billion euros, which was slightly lower than the market forecast of 7.46 billion euros.

◆The CEO of the company stated at the financial results briefing that “strong development of AI is expected to drive most of the recovery and growth of the industry, and 2024 will be a year of transformation,” showing a positive outlook for the future.

◆Sales for the April-6 fiscal year (2Q) increased 40% from the same period last year, and net profit increased 36%, both of which exceeded market expectations. The 3Q sales guidance also surpassed market expectations.

◆For the full fiscal year 2024, the sales growth rate forecast was revised upward from the conventional mid-20% range to the latter half of the 20% range, and the lower limit of capital investment was raised from the conventional 28 billion dollars to 32 billion dollars to 30 billion dollars to 32 billion dollars.

◆The company's CEO said at the financial results briefing, “Over the past 3 months, when compared to 3 months ago, demand related to AI and high-end smartphones from customers has increased, and the operating rate of cutting-edge 3nm and 5nm process technology is expected to rise in the latter half of 2024. We anticipate that 2024 will be a year of strong growth for TSMC.” When asked about demand surrounding AI semiconductors, they stated that “demand is extremely high,” and “supply will probably remain extremely tight until 2025.” It was suggested that strong demand would continue for the time being.

◆ Vertically Integrated Device Manufacturers (IDM). Whereas many US semiconductor companies are fabless without factories, Intel consistently performs everything from design to manufacturing as IDM.

◆Intel has been robbed of its market share by other companies in the same industry due to delays in miniaturization, but it launched a revival plan 2 years ago in order to recover. Strengthening the “foundry business” is included as part of this. Microsoft became the first customer in the foundry business and has begun to produce certain results. In the foundry business, it may be difficult to take market share from TSMC, which has almost monopolized the cutting-edge market, but it seems that the benefits of “domestic return” can be received in non-cutting-edge fields.

◆The US government announced in March this year that it will provide a maximum subsidy of 8.5 billion dollars to the company. According to the U.S. Department of Commerce, this funding supports the company's plans to produce advanced semiconductors at large-scale plants in Arizona and Ohio.

◆Stock prices continued to be sluggish due to sluggish performance and delays in the AI field, so there is a possibility that some bad material has been factored into stock prices. In the future, it may be easier to respond due to good materials.

◆The largest US foundry. It is ranked 3rd in the world after TSMC, which is number 1, and Samsung Electronics, which is number 2 in the global foundry market. In addition to semiconductors for electronic devices, mobile phones, automobiles, etc., they also manufacture products for space and defense. Major customers include General Motors and Lockheed Martin.

◆The US government announced plans to provide 1.5 billion dollars to the company in February this year as part of measures to strengthen domestic semiconductor manufacturing. The company plans to use the funds to expand new manufacturing facilities and existing facilities. The plan is to expand production capacity within the United States with government support. However, the management team did not add more production capacity than necessary, and indicated their intention to expand production capacity in line with the real demand of the industry.

◆In the May financial results announcement, both results and guidance surpassed market expectations. The company expects growth to continue quarterly in the two fields where profits are most concentrated: automobiles and smartphone devices.

◆A major semiconductor memory company. It has the 3rd largest market share in the AI semiconductor memory market.

◆The company's production is mostly carried out in Japan, Singapore, and Taiwan, but it has revealed plans to invest 40 billion dollars to build a semiconductor manufacturing base in the United States by 2030. The US government announced in April this year that it will provide a maximum subsidy of 6.1 billion dollars to the company. It is planned to be used for the construction of semiconductor factories in Japan.

◆A unique US semiconductor manufacturer that not only benefits from the “return to Japan” of semiconductor production, but is also riding the “AI boom.” It lags behind SK Hynix and Samsung Electronics, which have the 1st and 2nd place market share in the AI semiconductor memory market, but they are rapidly trying to catch up. Mass production of NVIDIA's latest “HBM (broadband memory) 3E” for AI semiconductors began in February this year. Performance recovery is expected to continue due to increased demand for AI semiconductors.

◆The AI semiconductor market share is over 80%. Exports of advanced semiconductors to China have been prohibited due to “export regulations to China,” and China's sales structure ratio declined from 36.8% for the fiscal year ending 2017/1 and 32% for the fiscal year ending 2022/1 to 22% for the fiscal year ending 2024/1. Meanwhile, business performance has continued to expand in the meantime. This is because the benefits of the rapid expansion in demand for AI semiconductors by major US tech companies were far greater than the adverse effects of “export restrictions to China.”

◆Based on TSMC's strong earnings outlook, there is a high possibility that the company's strong demand for AI semiconductors will continue. This is because TSMC has an almost monopoly position in contract manufacturing of AI semiconductors, and NVIDIA is TSMC's main customer after Apple. In other words, it can be said that most of TSMC's outlook on AI semiconductors reflects demand trends for NVIDIA products.

◆Our business is based on the two pillars of semiconductor solutions and infrastructure software (including cloud services). VMware, which was acquired in 2022, is responsible for cloud services. The fact that it has two businesses that benefit from the AI boom can be said to be unique among other companies in the same industry.

◆ “China's sales composition ratio declined from 53.6% for the 2017/11 fiscal year and 35.5% for the 2021/11 fiscal year to 32.2% for the 2023/11 fiscal year.

◆In the semiconductor business, there is no direct confrontation with NVIDIA like AMD, but they make custom semiconductors for hyperscalers, which are NVIDIA's main customers. In the financial results announcement in June, sales forecasts for AI-related semiconductors were revised upward from the previous 10 billion dollars to 11 billion dollars, reflecting strong demand. On 7/18, it was reported that the company is discussing manufacturing AI semiconductors for Open AI, which developed “ChatGPT.” If true, there is a possibility that it will be a competitive product of NVIDIA, and it will be a positive material for the company.

◆ Electric power solutions company. Provides semiconductor-based power and power solutions. Customers include manufacturers of industrial equipment, communication infrastructure, cloud computing, automobiles, and consumer equipment. In the AI business, NVIDIA is one of the customers.

◆China's sales composition ratio is relatively high, but it has declined from 61.2% for the 2020/12 fiscal year to 51.3% for the 2023/12 fiscal year. China mainly provides power solutions for EVs (electric vehicles).

◆Stable performance has been achieved even during the semiconductor recession, and growth has accelerated in the past few years due to expanding demand due to the benefits of the AI boom. The company's market share is as high as 80% in the power field of NVIDIA's latest AI semiconductor Hopper and Blackwell platforms. Based on the fact that shipments of NVIDIA's latest AI semiconductors will begin in earnest in the latter half of the year, it is expected that benefits can also be expected for the company's performance.