The semiconductor industry in 2023 is best described as a complex web of competitive dynamics, wherein several segments have witnessed intensified rivalry and an increasingly pronounced phenomenon of "involution." This competitive pressure is not limited to the previously spotlighted sector of microcontrollers (MCUs); companies manufacturing power management integrated circuits (PMICs) are also grappling with their own set of challenges.

In recent weeks, however, there have been signs of a potential easing in the fierce price wars that have predominantly plagued the PMIC sectorMajor players, including Texas Instruments (TI), have begun to exhibit a change in strategy that could herald a softer market environment.

One of the primary drivers behind this shift is the diminishing room for further price reductions, alongside a stabilization in inventory levels managed by some of the leading global firms

The escalating pressures that characterized the market throughout earlier quarters seem to be gradually subsiding as companies find opportunities for recovery.

For instance, in May 2023, TI made significant headlines by slashing PMIC prices in the Chinese market by a staggering 20% to 30%. By late May, this price reduction was extended across all of mainland ChinaWhile such aggressive pricing strategies aimed to capture market share undoubtedly impacted the profitability of other PMIC manufacturers, they also served to amplify the competitive environment within the sectorThe culmination of these price battles has left some smaller players exiting the market, unable to withstand the financial strains imposed upon them.

Despite these aggressive pricing strategies, TI's financial metrics reflect the toll that the pricing war has takenThe third-quarter earnings report revealed that the company had revenues totaling $4.15 billion, marking an 8.4% year-on-year decline

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Breaking it down further, the revenue from its analog chip segment stood at $3.22 billion, down 3.9%, while embedded processing revenues fell a significant 26.6%, totaling only $653 million.

In terms of inventory management, TI's third-quarter results indicated that while the company continues its efforts to deplete excess inventory, the trend of inventory accumulation has been checkedBy the end of the first quarter of 2024, TI’s inventory turnover days had risen to 235, up 16 days from the previous quarterThis followed a decrease from the second quarter, where turnover days were reported at 229.

Interestingly, several leading PMIC companies had hinted at renewed optimism regarding inventory situation mid-year, suggesting that the worst might indeed be behind themAnalog Devices (ADI) remarked that the second quarter would serve as the bottom for industry inventories, with positive expectations for improvements in the latter half of the year

Meanwhile, other key PMIC players like Monolithic Power Systems (MPS) observed that clients had depleted their surplus inventories, indicating a market recovery characterized by short delivery cyclesInfineon, too, highlighted that its inventory levels were stabilizing, with reductions expected to continue through year-end, despite prevailing scenarios of excessive downstream inventory levels.

Amidst these international market dynamics, the performance and adaptability of Chinese manufacturers are particularly noteworthyIn the initial stages of the price war, leading PMIC companies from mainland China faced considerable impactsResponding to the pressure, local firms swiftly recalibrated their strategies—innovating in technology and optimizing their product offerings while aggressively exploring new market segments.

As the global semiconductor landscape begins to warm with signs of recovery, domestic PMIC companies are beginning to register more promising outcomes in their performance results.

Industry insights reveal that international behemoths dominate over 80% of the global PMIC market share, with companies like TI, ADI, and Infineon maintaining an edge in terms of product line integrity and overall technological prowess.

However, due to the highly fragmented nature of various types of power management chips, even leading firms struggle to achieve monopolistic advantages, resulting in a diverse competitive landscape

Domestic PMIC entities have predominantly penetrated the consumer market, gradually gaining ground on their foreign counterparts in the low-power consumer electronics sector while expanding their product offerings from low-power circuits to medium and high-power applicationsNotable firms include the likes of Singatron, Silego Technology, Jichuan Technology, and others.

Analysis of the financial performance throughout the first three quarters indicates a recovery trend for PMIC firms, although growth in net profit remains tepidAmong the ten companies analyzed, seven showed year-on-year revenue growth in the initial three quartersThe growth rates for companies like Shanghai Belling and Singatron were around 30%, while five others hovered near or below 20%.

Concerning net profit, six of these companies posted a year-on-year increase in net profit attributable to shareholders during this period

Notably, firms such as Singatron, Shanghai Belling, and Mingwei Electronics recorded net profits that more than doubled compared to the previous yearEven as some companies experience declines in net profit—such as Silego Technology and Jichuan—they collectively reflect a positive trend in revenue growth that signals encouraging developments in the marketAs the industry cycle approaches the fourth quarter, firms are poised for potential rebounds in performance following adjustments to business strategies and optimization efforts.

A review of inventory turnover across ten domestic PMIC manufacturers from Q1 2023 to Q3 2024 showcases a promising downward trend in inventory turnover daysMost companies peaked in Q1 before yielding a downward trajectory in subsequent quarters.

Noteworthy among those making significant inventory reduction strides are Silego Technology, which saw its turnover days drop from 360.6 in Q1 2024 to 244.3 by Q3 2024—a considerable decrease of 116.3 days

Benefiting from increased demand across various niche markets such as optical modules and new energy applications, Silego achieved revenues of 342 million yuan in Q3, a notable year-on-year growth of 69.76%.

Other companies like Jichuan Technology and Jichuan's turnaround in inventory turnover also reflect significant improvements, seeing declines of 92.3 days and 88.1 days, respectively.

These manufacturers are actively pursuing measures to expedite inventory turnover while simultaneously delving into new business areas, aiming for stable and sustainable growth.

Turning attention to automotive applications, car-grade PMICs represent a key focus for domestic manufacturersThe strategic shift towards automotive PMICs stems from two principal factors: the realization of the need to navigate the increasingly competitive landscape fostered by price wars, and the burgeoning opportunities presented by the rapidly evolving automotive industry, particularly electric vehicles (EVs) that are transforming the market.

As electric and automated technologies propel growth, the automotive sector stands as the fastest-growing area for PMICs, with a compound annual growth rate of 9%. Analyst firm Yole predicts that by 2026, electric vehicles will account for 30% of the automotive market, significantly driving demand for power management chips.

Automotive PMICs find application across a spectrum of domains, including intelligent cockpit systems, advanced driver assistance systems (ADAS), body electronics, and battery management systems (BMS). These chips are generally classified into several categories: AC/DC, DC/DC, linear regulators, and battery management ICs.

Nonetheless, the automotive environment presents unique challenges with higher demands for temperature management, voltage precision, and reliability compared to consumer electronics

Greater tolerances in component selection must be incorporated during design phases to ensure robust performance under automotive conditions.

Additionally, the stringent certification processes for automotive chips limit the number of domestic suppliers capable of producing automotive-grade componentsCurrently, over 90% of the integrated circuits vital to automotive battery applications remain reliant on imports, placing domestic manufacturers at a disadvantage against foreign leaders like TI, ADI, and Infineon.

However, progress is evident as domestic PMIC firms are achieving successful mass production of automotive-grade products, particularly in categories like LDOs and DC/DC convertersThis progress suggests that these companies are staking their claims in the automotive ecosystem.

For instance, the Chinese company Silan Microelectronics has actively pursued collaborations with prominent automotive manufacturers, releasing the first verified ISO 26262 ASIL-D certified automotive BMS AFE product.

Furthermore, companies like Nanxin Semiconductor have launched vehicle-grade products such as the SC8101Q series synchronous buck converters, already in use across various electric vehicle models.

In March, Yiswei introduced a PMIC reportedly being the first automotive-grade LCD display PMIC produced in China, designed to accommodate multiple mainstream LCD types