[News] Chinese Manufacturers’ Price Hikes: Signs of Power Semiconductor Industry Reversal?

2024-01-17 Semiconductors editor

From December 2023 to January this year, media reports revealed that five Chinese domestic power semiconductor manufacturers, including JJMicroelectronics, Sanlian Sheng, Sicilian Blue Color Electronics, Genesis Microelectronics, and Shenwei Semiconductor, have successively issued price adjustment notices to raise prices for their products.

The current significant reduction in power semiconductor inventory, coupled with signs of a gradual recovery in end-user demand, raises the question of whether the power semiconductor industry has hit rock bottom and is now rebounding.

Within a month, five Chinese power semiconductor companies consecutively issued price increase notices.

On January 14th, JJMicroelectronics sent a “Price Adjustment Notice” to customers, announcing a 5%-10% increase in unit prices for its Trench MOS product line starting from January 15, 2024. The reason for the price hike was stated as ” Due to prolonged losses, the existing prices have become insufficient to meet regular supply demands. In order to ensure the continuous delivery of products with stable and reliable quality, as well as high-quality services, prices are increased.”

On January 9th, Shenwei Semiconductor issued a notice stating that the past three years have been a challenging period for the entire semiconductor industry. Lackluster market demand led to malicious competition, continuous decline in product prices, and industry-wide competition causing frequent quality incidents. The company announced adjustments to packaging series prices for new orders, with increases ranging from 10% to 25%.

Sanlian Sheng Power Half Guide also recently released a price adjustment notice, citing significant increases in raw material and labor costs as reasons for a substantial cost increase beyond the company’s tolerance. After careful consideration, the company decided to increase the unit prices of its entire product line by 10%-20% starting from January 1, 2024.

On December 29, 2023, Sicilian Blue Color Electronics announced a product price adjustment notice, attributing the decision to continuous increases in upstream raw material prices and labor costs. The company’s existing prices were deemed insufficient to meet supply demands, leading to a careful decision to raise the unit prices of its entire product line by 10%-18% starting from January 1, 2024.

Genesis Microelectronics was the earliest to release a price increase notice. Industry rumors about Genesis Microelectronics price adjustment letter circulated on December 15, 2023, indicating a 10%-15% increase in prices for chips starting from January 1, 2024.

Some industry experts commented on the price increase notices, stating that with the current depletion of inventory and long-term losses incurred by companies, price adjustments are understandable.

What is the reason behind this round of price hikes, and is there sufficient momentum for future developments?

Over the past two years, sluggish market demand has led to malicious competition, especially in the discrete device segment, where severe competition has resulted in companies experiencing increased revenue but not increased profits.

Regarding this round of price hikes, several listed power semiconductor companies have stated that the overall prices of their power products are stable, and there have been no significant changes in downstream market trends recently.

Industry analysts believe that the recent wave of price increases in the power semiconductor market is a self-rescue measure for some companies that have no other choice.

Large and medium-sized power semiconductor companies can maintain price stability by binding with high-quality industry-leading customers to secure order volumes. In contrast, smaller factories appear more passive, forced to compete in the market with low profit margins to secure orders, making them vulnerable to inflationary pressures.

Looking at the development of the power semiconductor market in 2024, many industry professionals and institutions currently do not have high expectations. According to TrendForce statistics, major power semiconductor manufacturers and IDM, including Infineon, STMicroelectronics, ON Semiconductor, Wolfspeed, and Renesas, have experienced a continuous decline in revenue in the third quarter of 2023, with inventory levels still relatively high. Additionally, the relevant components in the automotive sector are still in the destocking phase. Due to the late start of destocking for automotive semiconductors, this downward cycle is expected to persist for some time.

Industry experts state that the main demand for power semiconductors is currently in the consumer/industrial sector, but the visibility in this area is still unclear. Overall, the short-term outlook for the power semiconductor industry may not see a reversal in prosperity.

(Image: JJMicroelectronics)