After experiencing performance fluctuations in the fourth quarter of 2023, Huahong Semiconductor finally showed signs of recovery in the first quarter of 2024. According to Huahong Semiconductor's latest financial report, sales revenue and gross profit margin in the first quarter of this year have achieved sequential growth, although there is still a decline compared with the same period last year, but the market's optimistic expectations for the company's prospects are increasing.
In an interview with the China Times, Huahong Semiconductor said that with the industrial upgrading and transformation of automobiles, home appliances, new energy and other industries, as well as the in-depth development of information and wisdom trends, it is expected that the semiconductor market will usher in a rebound in the second half of this year. In order to seize this opportunity, Huahong Semiconductor has not stopped the pace of capacity expansion, its second 12-inch wafer fab in Wuxi is under construction and is expected to be put into production by the end of this year.
First-quarter results showed significant sequential growth
According to the financial report data, Huahong Semiconductor achieved sales revenue of $460 million in the first quarter of 2024, profit attributable to the owner of the parent company reached $31.8 million, and the gross profit margin was 6.4%. Compared with the last quarter, Huahong Semiconductor's performance has improved significantly. In the fourth quarter of 2023, the company's sales revenue was $455.4 million with a gross margin of 4%.
Tang Junjun, president and executive director of Huahong Semiconductor, said that the sales revenue in the first quarter of 2024 was in line with the company's expectations, and the gross profit margin in a single quarter was slightly higher than the guidance, and the capacity utilization rate, sales revenue and gross profit margin were all improved quarter-on-quarter. This fully verifies that the market demand for the company's characteristic processes is gradually improving.
In terms of business structure, Huahong Semiconductor's revenue performance is particularly outstanding in the two technology platforms of logic and RF, analog and power management. Compared to the same period last year, the two technology platforms achieved revenue growth of 63.8% and 15.9%, respectively. Tang Junjun pointed out that with the continuous destocking of the industrial chain and the rapid penetration of new generation communication, Internet of things and other technologies, the semiconductor market has shown a boost signal. The company's image sensors, power management and other products achieved good market performance in the fourth quarter of last year.
However, compared with the same period last year, Huahong Semiconductor's performance still declined. According to the financial report, in the first quarter of 2023, the company achieved sales revenue of $630.8 million, profit attributable to the owner of the parent company reached $152.2 million, and the gross profit margin was 32.1%. Tang Junjun explained that the overall semiconductor market is still in a downturn, and due to the impact of seasonal and annual maintenance, the first quarter is the traditional off-season for foundry companies.
Despite the challenges of the market downturn, Huahong Semiconductor has not given up the pace of expansion. The company said it will continue to increase the construction of its second 12-inch wafer fab in Wuxi to cope with future market demand growth. At the same time, the company will continue to increase investment in new technology and new product research and development to maintain its leading position in the semiconductor market.
According to third-party research agency IBS data show that in 2023, the global semiconductor market declined by about 10% due to the continued malaise of the terminal consumer market, and the wafer foundry market also encountered challenges, which is forecast to decline by about 10%-15%. However, Huahong Semiconductor remains optimistic about the market outlook and plans to respond to market changes through continuous technological innovation and capacity expansion.
Actively expand production capacity to meet the market recovery
In the volatility of the semiconductor market, Huahong Semiconductor has shown a firm pace of expansion.
At present, Huahong Semiconductor has laid out three 8-inch fabs in Shanghai Jinqiao and Zhangjiang, with a total monthly production capacity of nearly 180,000 wafers. At the same time, in the Wuxi High-tech Industrial Development Zone, a 12-inch wafer fab with a monthly production capacity of 94,500 wafers (" Huahong Wuxi ") has already been put into operation.
According to the "China Times" reporter learned that the construction of the second 12-inch wafer fab in Wuxi is steadily advancing. The new plant is expected to have a monthly capacity of 83,000 chips and will mainly produce 55/40nm ics and power devices to meet the market demand for high-performance chips. The new plant is expected to start production by the end of the year, said Tang Junjun, Huahong's president.
Although Huahong Semiconductor's total capacity utilization rate in the first quarter of 2024 was 91.7%, an increase of 7.6 percentage points from the previous quarter, it was still lower than 103.5% in the same period last year. But why does the company insist on expanding capacity?
Huahong Semiconductor said that the company's order demand is gradually picking up. In particular, revenue from the automotive and industrial control sectors has accounted for nearly 30%, showing strong growth momentum. Tang Junjun stressed that the company maintains a leading position in a number of technical fields, which is also an important reason for the increase in capacity utilization.
It is worth mentioning that Huahong Semiconductor's expanded production line is 12-inch wafers. At present, the investment enthusiasm of domestic and foreign chip foundry companies for 12-inch fabs is not reduced. Yuan Bo, a senior communications engineer and strategic planning expert, pointed out that 12-inch wafers have high production efficiency and low cost, and are mainly used in high-performance chip manufacturing, such as CPU, GPU, DRAM and so on. Therefore, with the advent of the smart age, the demand for 12-inch wafer processes will continue to grow.
Huahong Semiconductor expects that with the industrial upgrading and transformation of automobiles, home appliances, new energy and other fields, as well as the deepening of information and wisdom trends, the semiconductor market is expected to pick up in the second half of the year. The company's sales revenue for the second quarter of 2024 is expected to be in the range of $470 million to $500 million, and gross margin is expected to be in the range of 6% to 10%.
Yuan Bo also believes that the domestic semiconductor market will show a steady recovery trend this year. The intelligent terminal consumer market began to bottom out in a small range, and the construction of AI computing infrastructure will also inject new vitality into the market. At the same time, the consumption incentive policy introduced by the state will further stimulate market demand. But Yuan Bo also stressed that this recovery is steady and gradual, rather than explosive growth.
In the face of market changes and challenges, Huahong Semiconductor actively responds by expanding production capacity and optimizing product structure, showing strong competitiveness and market adaptability.
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