Electronic Components sector：December 2022

ElectronicComponentssector:December2022 December2022SecuritiesResearchJapan ResearchAnalystsAkinoriKanemoto +81-3-4550-7363 akinori.kanemoto@credit-suisse.com DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITY DISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision. KeytakeawaysfromDecember2022channelcheck KeyTakeaways Summary:ComparedwiththeSeptember2022survey,weseenosignsofimprovementinfinaldemand,onlyfurtherdeterioration.Onthesupplychainside,therearesignsofabottomingoutinMLCC,whichsawinventoryadjustmentsbeginatanearlystage,buttherearenosignsofafull-fledgedrecovery.Thepaceofcorrectionhasbeenacceleratingforsemiconductors,whichsawinventoryadjustmentsbeginatalatestage.Onlysomeanalogandpowersemiconductorshavebeendoingwell.InOct–Dec,wearebeginningtoseeadjustmentsintheiPhonesupplychaininOct–NovduetothespreadofCOVID-19infectionsinChina.ExcludingEV-relateddemand,demandforindustrialmachineryapplicationsisalsoslowingdown.SomemajordevicesuppliersexpectinventoryadjustmentstoendinApr–Jun2023attheearliest,butthemajorityviewisthatadjustmentswillendinJul–Seporlater. Focalpointsforhardwareanddevices (1)Smartphoneproductionplansfor2022havebeenloweredfrom1.23bnunits(−11%YoY)asofourlast(Sep2022)survey,to1.197bn(−13%)asofourmostrecentsurvey.For2023,majorChinesesmartphonemakersarelikelytokeeptheirproductionvolumesflatorslightlydownYoY.Planscallforglobalsmartphoneproductionvolumeof1.192bnunits(flatYoY)in2023. (2)iPhoneproductionvolumelookslikelytoreach250mnunitsin2022.ProductionoftheiPhone14isexpectedtoonlybearound80mnunitsin2022(downfrom90mn–100mnunitsasoftheprevioussurvey).InadditiontoweaksalesoftheiPhone14Plus,suppliesoftheiPhone14Pro/ProMax,whichhasbeensellingwell,arebeingconstrainedbylowerutilizationratesatEMSduetoCOVID-19.Atthisjuncture,iPhoneproductionplanstodevicemakershavenotbeenlowered,butlowerutilizationratesatEMShaveapparentlytriggereda20–30%correctioninprocurementandordersinOct–NovintheiPhonesupplychain.TheimpactfromtheiPhonesupplychainisagrowingconcernforOct–Decearnings.Meanwhile,otherEMScompanieswillcommencebackupproductionfromJanuary2023,raisingthelikelihoodofonlyminorseasonaladjustmentsinJan–Mar2023. (3)Productionvolumeof5Gsmartphonesislikelytoreachonly581mnunits(+3%YoY)in2022,andgrowthinproductionisexpectedtoremainflatin2023.Theshiftto5Gsmartphonesinthesub-$200pricerangehasbeenslowduetostubbornlyhighchipsetprices. (4)Onlysomeanalogsemiconductorsandsomepowersemiconductors,suchasSi-MOSFETsandIGBTs,areexperiencingtightsupply-demandconditions.OnlyEVandPVapplicationsareperformingwell. SmartphonedeviceexcludingChipset KeyTakeaways Regardingsupplychainsoutsideofchipsets,excessiveorderswereplacedinthesupplychainforChinesesmartphonesfromOct–Dec2020throughApr–Jun2021,andacorrectionstartedfromJul–Sep2021inreactiontoexcessiveprocurement.Mostdevicemakershavestartedtocommentthatinventorieshavereturnedtoappropriatelevelsatdistributors.Comparedwiththepeaksetin2021,ordersaredownbyaround70–80%inApr–JunandJul–Sep2022,andsaleshavecorrectedsharply,fallingfromtheirpeakbyaround70%toabottominJul–SepandOct–Dec2022. OrdersandsalesappeartohavehitbottominJul–SepandOct–Dec2022,butthepaceofrecoveryappearstobeextremelyslow.Itseemsthatviewsonthetimingofafull-fledgedrecoveryaresplitintotwocamps:(1)Apr–Jun2023,aftertheLunarNewYear,or(2)fromJul–Sep2023onward.WeunderstandthatamajorityofmanufacturersareseeingsalestoChinesesmartphonemakersfall50–60%YoYin2022,whichseemsconsiderablybelowthelevelofunderlyingdemand.Whileimprovementislikelytobesharponcedemandpicksbackup,atthispoint,theiroutlookislimited. AtSamsungElectronics,inventoryadjustmentsthatbeganinApr–Jun2022looklikelytowinddownbytheendof2022. IntheiPhonesupplychain,despitethelackofdownwardrevisionstoproductionplansatdevicemakers,weunderstandthatordersandcomponentprocurementinOct–Novhavecorrectedbyaround20–30%duetoproductioncutsandlowerutilizationratesatEMScompanies,causedbyCOVID-19measuresinChina.WithiPhone14Pro/ProMaxproductioncutsinevitableinOct–Dec,procurementisbeingquicklyadjusted.However,wethinkthecorrectioninJan–Mar2023islikelytobemilderthanusualfortheseason. SmartphoneChipset KeyTakeaways WeunderstandthatChinesesmartphonemakershaveexcessinventoriesofchipsetsworthabouttwomonths.Chinesesmartphonemakersareapparentlyaskingchipsetmakerstocutpricesbyaround20%,butpricesseemtobedownonly5–6%in2H.Chinesesmartphonemakersappearkeentogetpricesdownfurtherin2023.SamsungElectronicsalsointendstonegotiatelowerpricesfor2023.However,chipsetmakersareinatightspotbetweendemandsforpricecutsfromsmartphonemakersanddemandsforpricehikesfromfoundries. Semiconductor(analog,discreteICs) KeyTakeaways Wenoteanuptickininventoryadjustmentsbyapplication.Asofthelatestsurvey,supplyistightforsomeana