How can the three major domestic CIS enterprises continue to experience the first drop in the market?

　　As early as last September, IC Insights released a research report that predicted that the global CMOS image sensor market would experience its first decline in 13 years in 2022.

　　Recently, the results released by Counter Point Research, a market research organization, confirmed this point. In 2022, the global CIS market sales reached $19 billion, a year-on-year decrease of 7%.

　　From the perspective of segmentation, smart phones, which have been the biggest driving force for the growth of the CIS market, accounted for less than 70% of the total CIS market share, a significant decline; At the same time, market demand for monitoring, PC, and other products is also declining, while the share of automobiles and industries has increased significantly.

　　Due to the contraction of the overall market, the performance of domestic CIS manufacturers last year was not very satisfactory.

　　01. 2022 Battle Report of Domestic CMOS Manufacturers

　　Weil Semiconductor

　　Last year, Weir Semiconductor frequently launched new products, with results directly following Samsung.

　　Starting in 2019, Samsung image sensors have leapt to 108 million pixels, elevating image sensor pixels to an era of 100 million pixels; Three years later, Samsung announced the launch of a 200 megapixel image sensor. By July 2022, Samsung had released the ISOCELL HP3 image sensor, causing another market sensation. This 200 million pixel image sensor has a unit pixel size as small as 0.56 microns (㎛).

　　It is true that Samsung has maintained a leading position in the image sensor market through the development of patented technology and innovative design of memory semiconductors, but the domestic research and development speed of Weir Semiconductor is not weak. In January 2022, Weir Semiconductor announced the official launch of OVB0B, which has a resolution of 200 million pixels and has the smallest 0.61 micron pixel size in the world at that time; In August, Weil Semiconductor released OVB0A, a subminiature 200 million pixel image sensor with a pixel size of only 0.56 microns, which is comparable to Samsung.

　　Since then, in areas such as security and automotive CIS, Weir Semiconductor has also frequently launched new products. For example, a new high-performance, low-power 2K 4 megapixel image sensor OS04D for consumer security and surveillance cameras; A brand new 1.3 megapixel (MP) OX01E20 System on Chip (SoC) for automotive 360 degree Surround System (SVS) and Rear View Camera (RVC).

　　The launch of new products is also worthy of Weir's investment in research and development. According to the disclosure of Weir Semiconductor's 2022 semi-annual report, Weir Semiconductor invested 1.351 billion yuan in the research and development of its semiconductor design business in the first half of 2022, an increase of 11.66% over the same period last year, and the number of research and development personnel reached 1993.

　　However, even such excellent product iteration speed cannot prevent the performance decline caused by weak market demand. According to the 2022 performance forecast disclosed by Weir, the net profit of listed companies in this year was between 800 million yuan and 1.2 billion yuan, a decrease of 73.19% to 82.13% compared to the same period last year. The net profit after deducting non profit was between 90 million yuan and 135 million yuan, a year-on-year decrease of 96.63% to 97.75%.

　　Net profit plummeted by 97%, making many people call Weir shares the "first thunder" of this year's white horse stock. With regard to the decline in performance, Weir said that due to the impact of the global COVID-19, the overall performance of the consumer electronics market, and other factors, the demand for consumer electronics represented by smart phones has been strongly impacted, which also has a greater impact on the company's main business. The shipment volume of some market segments has declined, and product sales prices are under pressure.

　　According to the financial reports disclosed by the company, the decline in profits began in the second half of last year. In the first quarter of 2022, Weir shares were still profitable, with a net profit of 896 million yuan; By the middle of 2022, the net profit was 2.269 billion yuan, with a year-on-year increase of 1.14%. In the third quarter of last year, Weir started to experience losses. According to financial reports, the net profit loss in the third quarter of last year reached 120 million yuan, a year-on-year decrease of 109%.

　　Weir Shares' Third Quarter Financial Report

　　Behind the losses, the inventory impairment loss is also an important reason for the significant decline in the performance of Weir Shares. From a prudent perspective, the inventory falling price reserves accrued by Weir Stock in 2022 were 1.34 billion to 1.49 billion yuan.

　　Since 2019, the inventory amount of Weir Shares has been rising all the way. As of the end of September 2022, the inventory balance of Weir Shares was still as high as 14.113 billion yuan, an increase of more than 6.9 billion yuan compared to the same period last year. The growth rate of memory inventory in one year was nearly doubled, and the inventory amount ranked first among the major A-share digital chip design companies.

　　However, there are also analysts in the industry who believe that the large amount of inventory impairment losses accrued by Weir Shares belongs to active destocking, which is conducive to the company's light weight in the future.

　　Gekewei

　　As the manufacturer with the largest global CIS shipment volume, Geke Micro's traditional advantage products, 2-8 megapixel mobile phone CMOS image sensors, have a gross profit margin of over 30%, and 13-16 megapixel products are gradually mass produced in the domestic supply chain.

　　From 2022, Gekewei's performance and revenue have been declining. In the first quarter of 2022, its net profit was 240 million yuan, a year-on-year decrease of 17.36%; The mid year financial report showed that the net profit was 513 million yuan, a year-on-year decrease of 20.23%; In the third quarter, net profit fell by 40% year-on-year; After the 2022 annual financial report was released, Gekewei's net profit had dropped 61.92% year-on-year, halving by more than half.

　　Gekewei also has a problem of excessive inventory. Guo Xiuyi, the director secretary of Gekewei, said that at present, the overall inventory situation of Gekewei is still at a historical high, and the market competition it faces is particularly fierce.

　　However, at present, Gekewei's inventory is mainly composed of 2 million and 5 million pixel CIS products. Given that these two products account for around 70% of the global market, the company's inventory will not have a significant decline in sales. In addition, although Geke's micro inventory is currently high (the inventory amount at the end of the third quarter was 3.895 billion yuan), the company's inventory amount at the end of last year was 3.484 billion yuan. Based on years of experience in judging the industry cycle and attaching importance to inventory management, the actual inventory growth this year has been relatively stable, while the inventory growth of some other semiconductor companies in China has even exceeded 100%.

　　Stilwell

　　The year 2022 was a turning year for STW, with the security CMOS shipping volume ranking first in the world. STW successfully listed on the Science and Technology Innovation Board, with a significant increase of 61.88% on the first day of listing. However, based on the performance in 2022, STW did not continue its upward trend.

　　Among the three listed CIS manufacturers, STW was the only one that made a loss. During the 2022 financial reporting period, STW achieved operating revenue of 2.483 billion yuan, a year-on-year decrease of 7.67%; The operating profit loss reached 130 million yuan, a year-on-year decrease of 129.74%.

　　In fact, this is not the first time that Starway has lost money. In 2019, Starway's operating revenue increased, and its current net profit fell instead of increasing. From 2018 to January to March 2021, Starway achieved operating revenue of 325 million yuan, 679 million yuan, 1.527 billion yuan, and 541 million yuan, respectively, and net profits attributable to the owners of the parent company were - 166 million yuan, - 242 million yuan, 121 million yuan, and 68629000 yuan, respectively.

　　However, Stevie subsequently reversed losses. In 2020 and 2021, the revenue of Starway was 1.5 billion yuan and 2.7 billion yuan respectively, with a year-on-year increase of 125% and 76%; The net profit was 121 million yuan and 398 million yuan respectively, with a year-on-year increase of 150% and 229%.

　　Faced with the loss in 2022, STW explained three main reasons: First, the negative impact faced by end customers gradually transmitted to upstream manufacturers, which had a significant impact on the company's main business; Second, large financial expenses caused by exchange losses and interest expenses; Third, the year-on-year significant increase in research and development expenses.

　　From the perspective of research and development, Starway has indeed made a significant investment. In Q3 2018 to 2022, the company's R&D investment was 93 million, 122 million, 108 million, 205 million, and 223 million yuan, respectively. The proportion of the company's R&D expenses in operating revenue was 28.76%, 18.00%, 7.10%, 7.62%, and 13.50%, all exceeding 5%.

　　In addition to its unstable performance, the rapid growth of Starway's inventory is also worth noting. In the first three quarters of 2022, the total assets of Starway reached 6.6 billion yuan, a year-on-year increase of 51%. The company explained that the increase in this project was caused by expanding the business scale and increasing inventory reserves. According to the financial report, the company's current inventory amounted to 3 billion yuan, an increase of 140% compared to the end of 2021. The number of inventory turnover days increased from 160.76 days to 470.07 days. Inventory that cannot be quickly liquidated has also increased the pressure on the capital chain of STW.

　　02. CIS Enterprises Start to Group

　　Overall, CIS manufacturers still have a problem of inventory backlog. The pressure for inventory adjustment in mid and low end CIS is high, and automobiles are a structural growth point. Therefore, major mobile phone CIS companies, including Sony, Samsung Electronics, Howell, and others, are still adjusting their pace with customers, and it is estimated that there will be opportunities for recovery as soon as the third quarter.

　　In fact, in terms of technological development trends, market value still has great growth potential. "However, we are currently in a downward phase of the overall environment, which should be said to be more like a conventional downward trend.". From a technical perspective, CIS still has many hot spots and features that are very suitable for new applications. For example, for AR/VR, camera CIS requires a global shutter, as well as ToF sensors, and even event based visual sensors.

　　However, the wind direction of the CIS has also begun to change. Recently, SK Hynix has restructured its CMOS Image Sensor (CIS) team to shift its focus from expanding market share to developing high-end products. Before the change, its CIS team was a single organization, but the company has now created a sub team focused on specific functions and features of image sensors. It is reported that SK Hynix is developing a new CMOS image sensor (CIS) using neural network technology, and plans to embed an artificial intelligence accelerator into the CIS.

　　According to South Korea's SBS Biz report, Sony Group President Yoshida Yoshihiro will visit Samsung's wafer factory in Pingze. He is expected to meet with Samsung's semiconductor director, Kei Kei Hyun. It is reported that Yoshida Yoshihiro's visit will also include visits to Samsung's packaging plants in Tian'an and Wenyang. It is expected that the two sides will establish a closer cooperative relationship in the semiconductor supply chain.

　　Domestically, in March this year, Hunan Xinlite Electronic Technology Co., Ltd. announced that it had officially joined Howell Group. Xinlite is a high-tech enterprise specializing in IC design, commissioned development, and sales. Has low noise, low power sensor signal processing chip design technology; In terms of products, we have an RS485 chip integrated with TVS, and we are also about to launch an integrated TVS CAN bus driver chip. Especially in the field of on-board CAN, CAN FD, and LIN interface chips, it continues to assist domestic automotive and component manufacturers in their development.