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2021-01-19

Shortage Caused by Explosive Growth in Mini LED Demand to Result in 5-10% Price Hike for LED Chips, Says TrendForce

LED

While major OEMs such as Apple and Samsung prepare to release their new notebook computers, tablets, and TVs that are fully equipped with Mini LED backlights this year, various companies in the LED supply chain began procuring Mini LED chips ahead of time in 4Q20, leading to an explosive demand growth for these chips, which in turn crowded out the LED suppliers’ production capacities for other mainstream LED chips, according to TrendForce’s latest investigations. Given this structure-wide shortage of LED chips, certain LED chip suppliers have been raising the quotes on chips supplied to non-core clients and chips with relatively low gross margins. This price hike is estimated at about 5-10%.

TrendForce further indicates that companies in the downstream LED supply chain have started to aggressively procure components in order to mitigate the impending price hike on raw materials and shortage of components due to manufacturers’ tight production capacities after the Chinese New Year. However, products of certain serial numbers or specifications are already in shortage at the moment, therefore prompting these downstream companies to raise quotes first for small- and medium-size clients who place relatively low-volume orders. As for tier one clients who have relatively higher bargaining power, should they reject such a price hike, they would then need to wait for more than two months in lead times, which is significantly longer than the average of two weeks.

Epistar is currently shipping about 150,000 pcs of Mini LED wafers (4-inch equivalent) per month. As Mini LED chips yield far higher gross margins than do traditional LEDs, Epistar has reallocated some of its production capacities for the latter, less profitable products to Mini LED chip manufacturing instead. On the other hand, San’an and HC SemiTek are directly benefitting from Epistar’s order transfers. In addition to persistently growing demand for traditional LED backlights and RGB LED chips for video walls, San’an and HC SemiTek are also shipping several tens of thousands of Mini LED wafers per month (4-inch equivalent) owing to skyrocketing Mini LED demand.

Worth mentioning is the fact that HC SemiTek’s product strategy of focusing on LED chips for display applications is paying off noticeably. By leveraging its competitive advantage of highly cost-effective products, HC SemiTek’s capacity utilization rates have been fully loaded for two consecutive quarters since 3Q20. On the other hand, about 400,000 pcs in PSS production capacity was suspended last month due to the fire at GAPSS’ fab. This incident led to a 5-10% price hike in key upstream LED chip materials including sapphire wafers and PSS, likely to further exacerbate the price hike and shortage of LED chips.

TrendForce believes that the structural shortage taking place in the LED industry, which led to a price hike for LED chips, can primarily be attributed to the that fact the industry underestimated the production capacity needed for key parts of the supply chain during the infancy of pandemic-related emerging applications, in addition to the corresponding production capacity squeeze, although these issues are expected to be resolved within half a year. As well, the downturn experienced by the LED industry within the past few years led to a clearance of excess capacities and subsequently a highly concentrated supply of key materials in the upstream LED supply chain, including sapphire wafers and PSS. As a result, the suppliers of these key materials now enjoy increased bargaining power in price negotiations. Given the simultaneous increase in material costs and limited material supplies, TrendForce thus forecasts a price hike for LED chips.

For more information on reports and market data from TrendForce’s Department of Optoelectronics Research, please click here, or email Ms. Grace Li from the Sales Department at graceli@trendforce.com

2021-01-13

TSMC to Kick off Mass Production of Intel CPUs in 2H21 as Intel Shifts its CPU Manufacturing Strategies, Says TrendForce

Intel has outsourced the production of about 15-20% of its non-CPU chips, with most of the wafer starts for these products assigned to TSMC and UMC, according to TrendForce’s latest investigations. While the company is planning to kick off mass production of Core i3 CPUs at TSMC’s 5nm node in 2H21, Intel’s mid-range and high-end CPUs are projected to enter mass production using TSMC’s 3nm node in 2H22.

In recent years, Intel has experienced some setbacks in the development of 10nm and 7nm processes, which in turn greatly hindered its competitiveness in the market. With regards to smartphone processors, most of which are based on the ARM architecture, Apple and HiSilicon have been able to announce the most advanced mobile AP-SoC ahead of their competitors, thanks to TSMC’s technical breakthroughs in process technology.

With regards to CPUs, AMD, which is also outsourcing its CPU production to TSMC, is progressively threatening Intel’s PC CPU market share. Furthermore, Intel lost CPU orders for the MacBook and Mac Mini, since both of these products are now equipped with Apple Silicon M1 processors, which were announced by Apple last year and manufactured by TSMC. The aforementioned shifts in the smartphone and PC CPU markets led Intel to announce its intention to outsource CPU manufacturing in 2H20.

TrendForce believes that increased outsourcing of its product lines will allow Intel to not only continue its existence as a major IDM, but also maintain in-house production lines for chips with high margins, while more effectively spending CAPEX on advanced R&D. In addition, TSMC offers a diverse range of solutions that Intel can use during product development (e.g., chiplets, CoWoS, InFO, and SoIC). All in all, Intel will be more flexible in its planning and have access to various value-added opportunities by employing TSMC’s production lines. At the same time, Intel now has a chance to be on the same level as AMD with respect to manufacturing CPUs with advanced process technologies.

(Cover image source: Taiwan Semiconductor Manufacturing Company, Limited )

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

2021-01-13

Strong End-Demand to Result in 8.6% and 46.2% YoY Growths for Smartphone and Tablet TDDI IC Shipments for 2021, Respectively, Says TrendForce

Given the forecasted recovery of the smartphone market and the corresponding rise in TDDI IC demand throughout this year, total smartphone TDDI IC shipment for 2021 is expected to reach 760 million units, according to TrendForce’s latest investigations. Tablet TDDI IC shipment for 2021, on the other hand, is expected to reach 95 million units.

TrendForce indicates that the overall demand for consumer electronics and IT products has been gradually intensifying since the COVID-19 pandemic began to slow down in 2H20. At the same time, smartphone manufacturers restocked their component inventories, while Huawei was sanctioned by the U.S. Department of Commerce. These events marked an upturn in demand for smartphone components, including IC products. However, although foundries ramped up their capacity utilization rates in response to soaring end-product demand, semiconductor component supply has been lagging behind the rising demand.

Case in point, TDDI IC prices have been increasing due to the component’s tightening supply. As foundries’ production capacities at their 12-inch fabs’ 80/90nm nodes are unable to meet the global demand for TDDI ICs, IC design companies have been stepping up the pace to transition the manufacturing process of their higher-end TDDI IC products from the 80/90nm nodes to the 55nm node instead. Smartphone and tablet manufacturers, on the other hand, have expanded their procurement activities for TDDI ICs owing to a forecasted shortage of these components. These factors propelled smartphone TDDI IC shipment for 2020 to 700 million units, a 25% increase YoY.

Tablet TDDI IC shipment for 2021 is projected to reach 95 million units as the tablet market becomes the next battleground for IC design companies

Smartphone manufacturers have been ramping up TDDI IC adoption in light of smartphone TDDI ICs’ increasing maturity. In addition, as 8-inch capacities become fully loaded across the foundry industry, IC design companies are accelerating the transition of traditional discrete DDIC architecture to TDDI IC, which is primarily manufactured with 12-inch wafers. This transition is expected to result in even higher demand for foundry capacities. As previously mentioned, wafer capacities at the 80/90nm nodes have been in severe shortage. Therefore, to mitigate the risk of tight wafer supply in 2020, IC design companies are now not only transitioning their TDDI IC manufacturing process towards the 55nm node, but also looking to secure a stable supply of wafer capacities by outsourcing their manufacturing operations across a diverse number of foundries. As smartphone demand rises going forward, smartphone TDDI IC shipment for 2021 is expected to reach 760 million units, an 8.6% increase YoY.

Likewise, IC design companies have also turned their attention to the budding tablet market and started releasing TDDI ICs for tablets. IC design companies are primarily interested in developing TDDI ICs for tablets for two reasons: First, a mid-range or high-end tablet contains double the number of TDDI ICs per unit compared to smartphones. Secondly, most of these tablets feature active stylus compatibility, which means the ASP for their display ICs is relatively high. For the past two years, Huawei in particular has been ambitious in cultivating its tablet market and developing TDDI ICs. However, other IC design companies are now following suit and participating in this market as IC design technologies become more mature, and more tablet manufacturers become proactive in adopting TDDI ICs for tablet use. Tablet TDDI IC shipment for 2020 is estimated at 65 million units, whereas this number is projected to reach 95 million for 2021, an impressive 46.2% increase YoY.

For more information on reports and market data from TrendForce’s Department of Display Research, please click here, or email Ms. Vivie Liu from the Sales Department at vivieliu@trendforce.com

2021-01-12

Limited IC Supply to Bottleneck Monitor Panel Shipment in 2021, Says TrendForce

The stay-at-home economy generated by the COVID-19 pandemic has resulted in persistent demand for IT products such as monitors, according to TrendForce’s latest investigations. However, the shortage of monitor panels has been increasingly severe since non-IT panels have been occupying most of manufacturers’ production capacities, while foundries’ wafer capacities dedicated to IC products have also become increasingly strained.

Furthermore, Samsung Display (SDC) is set to shutter its panel manufacturing operations within 2021, during which its monitor panel market share is expected to drop to 1% from last year’s 12%, and as the ownership of CEC Panda’s Gen 8.5 production line transfers to BOE, other panel suppliers are likely to benefit from these events.

Looking ahead to the activities of various panel suppliers throughout 2021, TrendForce analyst Anita Wang indicates that CSOT will be the main beneficiary of SDC’s exodus from the panel manufacturing business. By acquiring SDC’s Suzhou-based Gen 8.5 production line, maintaining its capacity expansion efforts, and taking additional orders for curved VA panels this year, CSOT is likely to double its monitor panel shipment in 2021 compared to the previous year.

HKC, on the other hand, is currently preparing to enter the monitor panel market. Not only does HKC have sufficient production capacity for VA, IPS, and TN products, but the company is also primarily focused on offering open cell panels, meaning HKC’s business model coincidentally complements both monitor ODMs and Korean monitor brands, which primarily manufacture their products in-house. Should HKC’s mass production schedule proceed as planned, its monitor panel shipment for 2021 may exceed 10 million units. Nonetheless, in spite of the massive planned increase in panel production by both CSOT and HKC, the shortage of IC components remains a major bottleneck constraining the two companies’ shipment this year.

Thanks to the acquisition of CEC Panda’s Gen 8.5 production line, as well as BOE’s existing panel capacity, BOE, the largest monitor panel supplier in the world by shipment, is expected to raise its market share from 26% in 2020 to 31% in 2021, thereby widening its lead over second-ranked LGD. Going forward, BOE will attempt to maximize its competitive advantage in the industry by fully integrating and optimizing the Gen 8.5 production line it acquired from CEC Panda.

Apart from efforts by CSOT and HKC to increase their respective panel supplies, SDC is also planning to extend its panel manufacturing operations. In 2021, SDC is expected to produce about 1.1 million units of panels, all of which will be supplied to the other Samsung subsidiaries. Similarly, LGD will increase its production capacity for monitor panels in response to increased profits from these panels, along with the fact that its clients have been redirecting their orders for IPS panels from SDC to LGD. LGD is expected to revise up its targeted shipment of monitor panels for 2021 to 38 million units, although the power outage at NEG’s glass fab at the end of 2020 may cause LGD to defer its scheduled capacity expansion plans in 1Q21.

AUO is currently focused on increasing its production capacity for curved panels owing to high demand from monitor brands. AUO’s market share in this product category is expected to close in on 50% this year. Likewise, the company is expected to raise the market share of its monitor panels to 18% because demand for gaming monitors and curved monitors has been strong, and because AUO is expected to invest more resources in monitor production. Finally, Innolux (INX) will focus on improving the product structure of its monitor panel offerings this year, while increasing the per-area price of its panels. Hence, Innolux has been making an aggressive push to raise the allocation of large-sized, IPS, and gaming products within its overall product shipment.

For more information on reports and market data from TrendForce’s Department of Display Research, please click here, or email Ms. Vivie Liu from the Sales Department at vivieliu@trendforce.com

2021-01-11

Power Outage at UMC’s Lixing Fabs Results in Large-Scale Voltage Drops in Vicinity, Forecasted to Cause Minor Impact, Says TrendForce

An abnormality which caused a power outage in the GIS (gas insulated switchgear) equipment at UMC’s facilities on Lixing Road, Hsinchu, resulted in a voltage drop for other fabs located in the surrounding area, according to TrendForce’s latest investigations.

Affected foundries include TSMC, Vanguard, and PSMC. However, TrendForce’s investigations also reveal that, apart from the temporary power outage at UMC’s Lixing fabs, facilities operated by TSMC, Vanguard, and PSMC experienced only a temporary voltage drop. While the uninterruptible power supplies of the facilities kicked in shortly after the outage, normal manufacturing operations resumed following certain equipment crashes that occurred during the transition from one power source to another. UMC’s Lixing fab has currently resumed operations after about four hours of power outage, and TrendForce expects the impact from this incident to be minimal.

TrendForce believes that the total production capacity in the affected area accounts for about 20% and 4% of the respective global production capacity of 8-inch wafers and 12-inch wafers. Although the affected area is a strategically significant location of semiconductor production, investigations show that this incident resulted in a mere voltage drop for the immediate surroundings, and the affected parties have resumed operation after making adjustments.

As such, their overall production capacities have not been substantially impacted. With regards to UMC, the power outage primarily took place at its Fab 8A(B), which focuses on the 0.25~0.5µm processes mainly used to produce power discretes such as MOSFET, whereas Fab 8C/D, which primarily produces DDIs and PMICs with 0.35~0.11µm processes, sustained minimal impact from the voltage drop. The incident’s impact on UMC is expected to come to less than 1% of the foundry’s yearly revenue, which can be essentially compensated for through hot runs.

TrendForce indicates that UMC manufactures driver ICs (mainly with 8-inch 0.11~0.15µm processes) at Fab 8C/D for certain desktop and notebook monitors. With regards to driver ICs, the power outage incident is expected to have very limited impact on their global supply. However, as large-sized driver ICs have been in shortage since 2H20, this incident may exacerbate the industry-wide panic over the availability of driver ICs, thereby resulting in additional upward momentum ensuring persistent price hikes for large-sized driver ICs and IT display panels.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

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