According to the news reports from money.udn, which indicate that Foxconn, the prominent tech manufacturer, has clinched a substantial contract to supply Apple with AI servers, marking a monumental stride into the Apple AI server market. Notably, these servers will be dispatched from Foxconn’s manufacturing facility in Vietnam, positioning it as a pivotal player in Taiwan’s burgeoning AI sector.

While Foxconn traditionally refrains from commenting on individual clients and order specifics, market insiders reveal that Foxconn is not only the foremost assembler of Apple iPhones but also a crucial supplier of data center servers. As Apple charges ahead in the realm of AI applications, necessitating heightened support from AI servers, Foxconn’s stronghold in the AI server market has positioned it as Apple’s preferred collaborator due to its longstanding partnership.

Insiders indicate that Apple’s directive has prompted Foxconn to exclusively ship AI servers to Apple via its subsidiary, Foxconn Industrial Internet (FII), stationed in Vietnam.

Market research firms report that Foxconn currently holds a substantial global server market share of approximately 43%. This prominence not only establishes Foxconn as a manufacturing leader but also as the primary supplier to Amazon, the global cloud services (CSP) frontrunner. Having already supplied AI servers for ChatGPT and NVIDIA, and with primary customer Google rapidly venturing into generative AI, along with Apple’s recent strategic foray, Foxconn is poised for a surge in server business orders.

Apple’s CEO, Tim Cook, recently confirmed Apple’s longstanding involvement in various AI technologies, including generative AI, while emphasizing the current surge of resources into AI development. With Apple’s R&D expenditure rising to $22.61 billion last quarter, experts speculate that a significant portion has been allocated to AI development.

Moreover, international sources report that Apple is discreetly crafting the “Ajax” large-scale language model, potentially heralding the arrival of the generative chatbot “SiriGPT” in the near future. With Apple’s vast user base across the globe, abundant data resources could pose a threat to rivals such as Google and Microsoft.

Industry pundits assert that Apple’s extensive global user feedback from devices like iPhones, iPads, and Macs, combined with the mature ecosystem of the App Store, endows it with a strategic advantage in AI application development. Swiftly advancing AI server and data center deployment could enable Apple to navigate the curve and surge ahead in this competitive race.

Foxconn’s Chairman previously expressed optimism in the growth potential of CSP and AI servers. With Foxconn’s server revenues reaching $1.1 trillion last year, the company’s status as a server manufacturing leader naturally aligns with this burgeoning demand. Industry estimates underscore the dramatic increase in Foxconn’s AI server-related orders, reaching several billion dollars. This positions Foxconn as the definitive victor in the current AI wave, solidifying its place at the forefront of global AI server leadership.

(Source: https://money.udn.com/money/story/5612/7351082)

As we enter the second half of 2023, smartphone brands are eagerly launching their new devices, hoping to revitalize the market that is yet to fully recover. Among them, Samsung stands out with its ambitions to captivate consumers with flagship models while maintaining stability in the mid-to-low-end segment.

However, the Galaxy A and M series, targeting the mid-range to low-end market, have faced lackluster sales. To reverse this trend, Samsung is gearing up to unveil new devices in the coming months, including the highly anticipated Galaxy Fold/Flip5. This foldable flagship is seen as a game-changer that could drive up shipments in the latter part of the year.

The company’s flagship models, which encompass the Galaxy S and Fold/Flip series, account for about 20% of its total shipments. Within this segment, foldable devices contribute approximately 5% to the overall sales.

On the mid-tier front, Samsung is planning to introduce the S23FE series later this year, targeting the mid-range flagship market. Although the S23FE will feature a dual-platform of AP configuration, catering to different regional markets, it will be equipped with older-generation processors. As a result, its potential to significantly boost sales might be limited. According to TrendForce’s estimate, the total production and shipment of the S23FE series are expected to be less than 1.5 million units by the end of 2023.

A comprehensive view of Samsung’s strategy reveals that the second half of 2023 will be driven by the flagship Fold/Flip and FE series. Despite the company’s efforts, the overall performance will still be influenced by the prevailing economic conditions, posing significant challenges.

Notably, the decision to unveil the FE series in the fourth quarter marks a strategic departure from the previous year’s delay of the S21FE until the following year’s first quarter. This move by Samsung demonstrates a strong commitment to address the market gap resulting from the absence of the A7x series mid-range models. By positioning the mid-tier flagship as a compelling marketing point, Samsung aims to entice consumers to upgrade their devices, potentially bolstering the company’s sales and maintaining a robust presence in the highly competitive smartphone market.

As the mass production of the new iPhone draws near, TrendForce, in April this year, raised concerns in the smartphone industry about several design changes made to the 2023 iPhone models almost half a year ahead of production. The industry is closely monitoring whether related components can keep up with the production schedule to ensure smooth execution of subsequent assembly plans. Recently, TrendForce provided updates on the production progress and details of these components.

According to TrendForce’s investigation, two critical components in the iPhone supply chain are causing worries about potential supply issues – the CIS (CMOS Image Sensor) and the titanium alloy frame. Currently, there are still bottlenecks in the production of these components that need to be overcome.

Regarding the CIS, the bottleneck arises from Sony’s supply of the new 48MP CIS, which is expected to be used in iPhone 15 and iPhone 15 Plus. This CIS adopts a new stacked design, separating the CIS photodiodes and peripheral transistors into three layers instead of the previous double-layer structure. This poses a significant challenge to yield rates, and despite Sony’s efforts to increase production capacity to cope with the yield ramp-up difficulties, the supply situation does not meet anticipated levels, affecting the initial production schedule of the entire device.

As for the titanium frame, due to the elimination of the pressure-sensitive button structure and the slight adjustment in the opening for the mute switch, the suppliers need to re-allocate, set up, and verify the basic operating time of the production lines.

Additionally, the processing procedures for titanium are more complicated compared to stainless steel, which leads to longer production lead times. TrendForce confirmed recently that the titanium frame for the new iPhone is currently one of the components with lower yield rates and supply stability. Therefore, suppliers have expanded production capacity by 20-30% and are working diligently to ensure that even if the initial supply is tight during the early stages of production, they can respond accordingly, ensuring that the launch and supply of the entire device will not be affected.

Given the supply constraints of these two components mentioned above, TrendForce believes that Apple may increase the production proportion of the two Pro models in 3Q23 to fill the gap caused by the initial iPhone 15’s production capacity shortage. This adjustment, in an optimistic scenario, will only involve shifting production proportions between different models in two quarters, with no impact on the annual shipment performance. TrendForce assesses that this possibility is more likely under the current circumstances.

However, if the CIS yield bottleneck is difficult to overcome, it could lead to a substantial reduction in the shipment volume of the 2023 iPhone models. TrendForce will continue to monitor the situation closely.

TrendForce’s investigation into the supply chain reveals that Apple plans to upgrade the PCB materials in its new iPhone models in 2024. The current copper-clad laminate (CCL) will be partially replaced with resin-coated copper (RCC), aiming to reduce the size and thickness of the mainboard. This upgrade is expected to enhance electronic signal transmission efficiency, reduce energy consumption, and save internal space, providing more room for increased battery capacity.

Apple first introduced the substrate-like PCB (SLP) with the launch of the iPhone X in 2017. SLP offers advantages over conventional high-density interconnect (HDI) PCBs by reducing line width and spacing, optimizing PCB area, and increasing battery space. This design has remained unchanged since its introduction. However, recent discussions within the supply chain indicate that there are plans to introduce RCC materials in the second half of 2024 for the upcoming iPhones, marking an upgrade after a seven-year gap.

The main difference between RCC and traditional CCL lies in their structure. RCC eliminates one layer of fiberglass cloth, significantly reducing the overall thickness of the PCB. It also simplifies the manufacturing process and improves the laser drilling yield. In terms of component performance, RCC allows for further reduction in line width and spacing of circuit wiring based on SLP, reducing the spacing between various passive and active components on the board. It even enables the embedding of some passive components, thereby saving space required for surface mount technology (SMT) processes. All these upgrades contribute to greater power efficiency and improved performance in end devices.

Considering the similarities between RCC and ABF substrates in terms of the manufacturing process, the most likely supplier for RCC is the Japanese company Ajinomoto. If Apple successfully replaces some layers with RCC in 2024, it may impact the demand for existing CCL, particularly affecting the CCL supplier, Elite Material (EMC). It is anticipated that EMC’s RCC product may require 1-2 more years of research and development before it has a chance to be completed.

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

The ongoing global economic downturn continues to impact consumer confidence in the market. TrendForce reports that the global production volume of smartphones in 1Q23 was only 250 million units—marking a 19.5% YoY decrease. This represents not only the greatest annual decrease but also a historic low in quarterly production since 2014.

Samsung observed a slight surge in Q1 production thanks to the launch of its Galaxy S23 series, reaching 61.5 million units—a 5.5% QoQ rise. However, TrendForce predicts a nearly 10% drop in Q2 production due to weakening demand for new models. Apple faced a substantial 27.5% QoQ drop in smartphone production in Q1, delivering a total of 53.3 million units. The new iPhone 14 series accounted for approximately 78% of this figure, an improvement from the same period last year. Nonetheless, as the company navigates the transition period between model launches, a projected decrease of 20% is expected in Q2.

In light of unsatisfactory market conditions and necessary inventory adjustments, brands such as Oppo (which includes Oppo, Realme, and OnePlus) made strategic moves to reduce production in Q1 to 26.8 million units, a 17% QoQ decrease. However, TrendForce forecasts a more than 30% rise in Q2 production, attributed to successful inventory management and a moderate demand resurgence in Southeast Asia and other regions. It’s worth mentioning that, in addition to continuously strengthening its market share of high-end models in China, Oppo has achieved notable sales success in South Asia, Southeast Asia, and Latin America. In fact, its overseas market accounts for nearly 60% of its total sales.

In the first quarter, Xiaomi (which includes Xiaomi, Redmi, POCO) saw its production volume dip to 26.5 million units—a 27.4% quarterly decrease. This decline can largely be attributed to a global dip in consumer confidence and an overstocked inventory of finished products at Xiaomi, leading to restrained production plans. Due to ongoing inventory adjustments set for the second quarter, quarterly production growth is projected to be capped, with a modest estimated increase of around 20%. Concurrently, Vivo (including Vivo, iQoo) reported a production volume of 20 million units for the first quarter—a 14.2% quarterly decrease. While China continues to be the primary market for Vivo’s sales, Q2 demand continues to remain stagnant in the Chinese market, following the reopening of its borders. As a result, the quarterly production volume is anticipated to show a modest increase of around 10%.

The continuous economic slump has led to increased activity in the used phone and repair markets, which could potentially hinder Q2 smartphone production growth. Notwithstanding, Q2 production is forecasted to reach 260 million units, demonstrating a QoQ increase of around 5%. However, due to the unfavorable economic environment, TrendForce forecasts that smartphone production will still fall by 10% when compared to the same period last year.