In recent years, China has been aggressively pursuing the build-out of an independent semiconductor supply chain as it attempts to eschew dependence on foreign suppliers. The key to China’s success is whether it can establish domestic suppliers of semiconductor equipment.
Looking at the current state of China’s semiconductor independence, it should be pointed out that Chinese suppliers of semiconductor equipment have been making the greatest progress on the CMP, etching, and cleaning fronts, while lagging behind in terms of deposition, ion implantation, and photolithography.
CMP equipment is used for polishing silicon wafers and metallic/non-metallic thin films. TrendForce estimates that about 26% of all such equipment procured by Chinese foundries in 2020 was sourced from domestic companies. CMP equipment manufactured by Chinese brands can support process technologies as advanced as the 14nm node, which is sufficient for meeting the current demand of Chinese foundries.
An indispensable aspect of silicon or dielectric etch applications, about 24% of all etching equipment procured by Chinese foundries in 2020 was sourced from domestic companies. Chinese-manufactured etching equipment can currently support process technologies as advanced as the 5nm node.
Used for cleaning wafers after the deposition process, CMP process, etching process, and ion implantation process, about 23% of all cleaning equipment procured by Chinese foundries in 2020 was sourced from domestic companies.
Cleaning equipment manufactured by Chinese brands can support process technologies as advanced as the 14nm node. Remarkably, more Chinese companies have been entering this market segment compared to other semiconductor equipment, while some Chinese suppliers are already able to compete with major foreign suppliers in terms of market shares.
Used for PVD, CVD, and ALD processes, about 10% of all deposition equipment procured by Chinese foundries in 2020 was domestically sourced. Chinese-manufactured deposition equipment can support process technologies as advanced as the 14nm node. However, as the technological barrier for manufacturing these products is relatively high, Chinese suppliers are still in the process of catching up to their global competitors in terms of technology. Hence, it remains difficult for Chinese suppliers to continue raising their market shares in the short run.
Likewise, as the technological barrier for manufacturing ion implantation and photolithography equipment is relatively high, equipment from Chinese suppliers is unlikely to support advanced process technologies in the short run despite these suppliers’ aggressive R&D efforts. In terms of self-sufficiency, about 5% and 1% of all ion implantation equipment and photolithography equipment, respectively, procured by Chinese foundries in 2020 was domestically manufactured.
In response to the increasing demands of mobile applications, manufacturers are now placing a priority on extending the battery life of such devices like smartphones and notebook computers. However, due to the inherent limitations of physical space in these devices, the quest for ever-greater battery capacity has seemingly reached a bottleneck, forcing them to look elsewhere for solutions, hence the development of fast charging technology. As such, fast chargers equipped with GaN (Gallium nitride, which is a third-generation semiconductor) chips have are now expected to introduce the next chapter for the fast charging market.
According to TrendForce’s latest investigations, as smartphone brands including Xiaomi, OPPO, and Vivo have successively been releasing fast chargers since 2018, the market demand for GaN power devices has undergone a corresponding growth as well. Given the continued upward trajectory of the market, GaN power device revenue for 2021 is expected to reach US$61 million, a 90.6% YoY increase.
Due to their low portability and tendency to overheat, traditional fast chargers are increasingly unable to meet consumer demand
In the past, fast chargers were generally based on Si (Silicon) chips. However, as these chargers increase in wattage, their mass and physical dimension increased as well, meaning they suffered from low portability and a tendency to overheat when fast charging. On the other hand, as battery capacities expanded past the 4000mAh mark, traditional Si chargers began to see a drop in charging efficiency. In light of this, after certain breakthroughs in GaN manufacturing technologies were achieved, next-gen GaN chargers are likely to completely transform most consumers’ preexisting impressions of fast chargers.
Nonetheless, the manufacturing costs of GaN chargers are still 80%-120% higher compared with Si chargers at the moment. That is why very few devices bundle GaN chargers as a standard accessory included with the purchase and why GaN chargers are consequently sold separately instead. TrendForce expects the market for GaN chargers to experience rapid growth in 2021, with about 57 million units shipped for the year.
IC design company Navitas is the biggest winner in the GaN charger supply chain
The GaN charger supply chain encompasses virtually all major companies in various industries, and companies for which GaN businesses account for a larger share of their sales or technologies are more likely to benefit from the booming GaN charging market as well. As the largest supplier of GaN charger chips at the moment, Navitas has a clientele consisting of such major brands as Xiaomi, OPPO, Lenovo, Asus-Adol, and Dell. TrendForce’s investigations find that Navitas’ share in the GaN charger chip market surpassed 50% as of last year.
Navitas’ chips are currently fabricated with TSMC’s GaN on Si technology on 6-inch wafers, while TSMC is planning to increase its GaN production capacities by outsourcing its epitaxial processes to Ennostar subsidiary Unikorn. As Navitas expands its shipment volume going forward, TSMC and Ennostar are expected to benefit as well.
As infections among employees from semiconductor backend testing leader KYEC make news headlines, the company suspended operations for two days and undertook facility-wide disinfections starting on June 4, although at the moment KYEC’s facility has yet to resume operations at full capacity. In the vicinity of KYEC are packaging and testing operator Greatek and networking device manufacturer Accton, both of which have since been affected by the spread of the disease.
Not only have the confirmed cases in KYEC generated worries about possible disruptions to the semiconductor supply chain, but the semiconductor industry is also anxious about whether continued infections will spread to other semiconductor companies.
As a leading chip tester (as well as the 8th largest IC package and testing companies globally), if KYEC were to halt its operations altogether due to the continued spread of COVID-19 infections, the semiconductor supply chain would be considerably impaired as a result. Not only would upstream clients (including fabless companies, IDMs, and foundries) have their schedules disrupted, but lead times of downstream end-products will be prolonged as well, causing far-reaching impacts throughout the entire semiconductor industry.
According to KYEC’s publicly disclosed information, the distribution of its clientele is as follows: fabless companies (76%), IDMs (22%), and foundries (2%). In particular, of the 50 largest semiconductor companies globally, more than 30 currently make use of KYEC’s testing services.
According to TrendForce’s latest investigations, the packaging and testing industry has been impacted in the short run by KYEC’s two-day suspension and low-capacity operation resumptions successively. As such, MediaTek, Novatek, and STMicroelectronics, which are major clients of KYEC, are all notably experiencing impacts from the spread of the pandemic within KYEC’s ranks.
Although the above companies have already transferred some of their orders to ASE, Sigurd, and ChipMOS to make up for disruptions in KYEC’s operations, these orders are too numerous to be fulfilled completely at the present. Therefore, the tight capacity of chip testing services is expected to intensify going forward.
As software and hardware technologies improve in the automotive industry, cars now have an increasing number of smart features in response to the demand for user friendliness; for instance, the Car2Home ecosystem was created as a natural extension of V2X (vehicle-to-everything) technology. Advances in automotive systems and technologies, however, do little to assuage prospective car buyers’ fears of instant depreciation and maintenance fees, which are both justified and frequently parroted by existing owners.
Recent years, however, have seen the emergence of a new technology known as OTA (over-the-air) that can at least address car buyers’ maintenance-related worries. Automakers can fix software issues in the car with OTA updates, thus saving the driver the time and effort it takes to perform a factory maintenance. Simply put, OTA is a cloud-based service that allows automakers to perform a host of actions, including software/firmware updates, OS upgrade, issue fixing, and security patches, through a cloud-network-car connection.
As such, OTA technologies are highly dependent on data encryption, decryption, and transmission, meaning OTA services involve not only software and cloud services vendors, but also cybersecurity companies as well. According to TrendForce’s investigations, about 72% of new cars sold in 2025 will be OTA-enabled vehicles thanks to advancements in V2X, automotive electronic/electrical architectures, and intra-vehicle communications.
OTA pioneer Tesla kicked off its OTA strategies in 2012
Tesla is perhaps the impetus responsible for the surge in OTA viability in the automotive industry. Elon Musk believes that cars should be appreciated, as opposed to depreciating, assets for the consumer. As part of that belief, all Tesla models are capable of OTA updates of software and firmware, reflected in Tesla’s revenues from “service and other”, which saw yearly growths from 2016 to 2020 (Tesla’s 2020 earnings from “service and other” alone surpassed US$2.4 billion). Therefore, Tesla’s sales volume will remain the key to the market size and penetration rate of OTA technology.
Other automakers, such as BMW, Mercedes-Benz, GM, Ford, Toyota, and Volkswagen, also began rolling out OTA updates in their models from 2015 to 2020, although it wasn’t until the year 2020 did most of these companies perform OTA updates on any appreciable scale. Furthermore, most OTA updates were software updates as opposed to firmware updates (for ADAS and powertrain functionalities), since issuing firmware OTA updates still remains a major issue for automakers at the moment.
TrendForce also indicates that, should automakers wish to improve automotive functionalities with OTA updates, they would need to completely overhaul their cars’ electronic and electrical architectures. In this light, one of the prerequisites of performing functional OTA updates is the availability of compatible hardware in cars.
For instance, in order to activate LiDAR functionality, automakers must first equip a car with LiDAR hardware. Once self-driving technology matures to the point when it is deemed appropriate to be enabled on a given car, then automakers can activate the necessary LiDAR functionality with OTA updates.
Of course, all of this hinges on whether automakers are willing to bear the cost of preemptively equipping their cars with the necessary hardware, as well as whether they have any faith in the success of new services/functions to be activated by OTA in the future. Most importantly, however, if consumers were uninterested in these services and functions, then automakers would have no way of recouping their preemptive investments in the aforementioned hardware.
On the whole, despite most automakers’ planned to roll out the capability of OTA updates to their vehicles, they still face bottlenecks in performing OTA updates safely and providing useful upgrades for users. Only by overcoming these hurdles will automakers effectively improve the driving experience and convince car owners as well as prospective buyers that OTA is a worthy investment.
Owing to an uncontrolled spread of the COVID-19 pandemic, Taiwan has instituted Level 3 restrictions throughout the island. With employees from several tech companies testing positive for the virus, major foundries, including TSMC and VIS, are successively finding positive cases among their midst as well. Worries have therefore cropped up in the global semiconductor supply chain over whether the supply of chip can remain unaffected despite the infections in Taiwan.
Taking into account Taiwan’s share of foundry capacity within the global total, the aforementioned supply chain’s worries are not without merit. According to TrendForce’s investigations, Taiwanese foundries, including TSMC, UMC, VIS, and PSMC, collectively account for about 50% of the global foundry capacity, meaning about 50% of the global supply of chips is contingent on Taiwan.
However, TrendForce also finds that, despite the domestic spread of the pandemic, which forced various companies to institute WFH policies for their employees, most semiconductor fabs are operating without interruptions at the moment, indicating that the COVID-19 pandemic has yet to impact the production and supply of chips.
As well, both TSMC and VIS have immediately made public announcements stating that their operations remain unaffected by the positive cases. However, whether the pandemic can be sufficiently managed and whether it will hinder the supply of semiconductors going forward remains to be seen.