In view of aggressive procurement activities for panels used in various applications, TrendForce forecasts a 2% glut ratio for the large-sized TFT-LCD panel market for 2021, representing a supply and demand situation that ranges from “healthy” to “slightly in shortage”. As a lack of components constrained panel shipment in 1H21, the overall panel market during this period had a 1.2% glut ratio, which was lower than the average range of 2.5-3% and represented a supply shortage in the panel market. Hence, panel prices were driven into an uptrend for the first half of the year.

Regarding the glass input of panel suppliers for 1H21, despite the tight upstream supply of glasses due to certain work safety-related accidents, the overall capacity utilization rate of panel suppliers remained above 80%. Furthermore, as newly installed capacities, including CSOT’s T7 fab and HKC’s production lines in Changsha, kick off production, large-sized TFT-LCD glass input by area grew to 117.8 Mn2 (million square meters). On the other hand, owing to the proliferation of the stay-at-home economy last year, most display brands carried a relatively low level of inventory, which prompted them to ramp up their panel procurement. However, owing to a shortage of ICs, panel glass shipment (by area) for 1H21 reached a mere 116.4 Mn2.

TrendForce expects two developments to take place in 2H21: First, the arrival of the traditional peak season for monitors in 3Q21 means that demand for IT panels will still remain above a certain baseline; second, there is an ongoing trend for TVs to shift towards large-sized form factors. In light of these factors, although panel suppliers are expected to install significant amounts of production capacity in 4Q21 and thereby drive the glut ratio of panels to 2.6% for 2H21, this overall glut ratio is still within a healthy range. Nevertheless, as suppliers gradually ramp up their newly installed capacities, the quarterly glut ratio of panels is expected to increase by 0.5% from 2.4% in 3Q21 to 2.9% in 4Q21. Not only is 2.9% the highest quarterly glut ratio in 2021, but it is also the second highest since 1Q20, during which the onset of COVID-19 led to an oversupply of panels at a 7.5% glut ratio. TrendForce therefore believes that peak demand in the panel market has already passed.

Regarding the glass input and shipment by area for 2H21, certain panel suppliers are expected to perform routine fab maintenance during the holiday season. Even so, as Gen 10.5 production lines from certain suppliers and various other production lines from HKC begin ramping up capacities, the overall large-sized TFT-LCD glass input area is expected to massively increase by 5.9% compared to 1H21 to 127.2 Mn2 in 2H21. In particular, 4Q21 will see the highest quarterly glass input by area, at 64 Mn2. As previously mentioned, the shift towards larger-sized TFs and the persistent demand for IT products are expected to propel the overall demand for large-sized TFT-LCD glass in 2H21 to 123.9 Mn2, which is 1.4% higher than 1H21.

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

Thanks to the increased adoption of AMOLED panels by major smartphone brands including Apple and Samsung, the penetration rate of AMOLED panels in the smartphone market is expected to reach 39.8% in 2021 and 45% in 2022, according to TrendForce’s latest investigations. As AMOLED panels see increased adoption, the consumption of AMOLED DDI will undergo a corresponding increase as well. However, not only are the process technologies used for AMOLED DDI manufacturing currently in short supply, but some foundries are also yet to finalize their schedules for expanding their AMOLED DDI production capacities. Given the lack of sufficient production capacity, the increase in AMOLED panel shipment may potentially be constrained next year.

Regarding process technologies, the physical dimension of AMOLED DDI chips is generally larger compared to other chips, meaning each wafer yields relatively fewer AMOLED DDI chips, and more wafer inputs are therefore needed for their production. The vast majority of AMOLED DDI is currently manufactured with the 40nm and 28nm medium-voltage (8V) process technologies. In particular, as 40nm capacity across the foundry industry is in tighter supply compared to 28nm capacity, and TSMC, Samsung, UMC, and GlobalFoundries are the only foundries capable of mass producing AMOLED DDI, an increasing number of new wafer starts for AMOLED DDI are being migrated to the 28nm node instead.

Regarding wafer supply, the foundry industry is currently unable to fulfill client demand for 12-inch wafers. Hence, 12-inch capacities allocated to AMOLED DDI production are relatively limited as well. At the moment, only TSMC, Samsung, and UMC are able to allocate relatively adequate wafer capacities, although their capacity expansion efforts are still falling short of growing market demand. In addition, while SMIC, HLMC, and Nexchip are developing their respective AMOLED DDI process technologies, they have yet to confirm any mass production schedules. TrendForce therefore expects that the additional AMOLED DDI capacities to be installed next year will remain scarce, in turn further limiting the potential growth of the AMOLED panel market.

AMOLED DDI suppliers must overcome the issues of limited production capacity and technological difficulties in R&D

Other than the issue of tight production capacities, the difficulty of AMOLED DDI development is further compounded by the fact that each panel manufacturer has its unique specifications of AMOLED panels. For instance, panel manufacturers differ in terms of their display image uniformity (including the calibration of on-screen picture quality via eliminating display clouding, poor color/brightness compensation, and sandy mura). Hence, in order to address the discrepancies among panels manufactured by different companies, IC suppliers must adopt different compensating solutions and account for different parameters. Panel manufacturers therefore are likelier to adopt DDI from IC suppliers whose solutions have already been in mass production.

If prospective IC suppliers were to enter the AMOLED DDI market, they would need to overcome various difficulties in AMOLED DDI development, including long processes of validation and revision, in order to mass produce at scale. As well, each individual panel supplier requires its own different set of IP cores (referring to the various functional modules in an IC) and specifications, making it difficult to manufacture AMOLED DDI that is universally compatible with all AMOLED panels. For instance, ICs that are supplied to Korean panel manufacturers by AMOLED DDI suppliers are incompatible with AMOLED panels from Chinese panel manufacturers, which require new wafer starts with their own requirements.

On the whole, other than certain DDI suppliers which have their own subsidiary foundries or have longstanding foundry partners capable of DDI production, TrendForce believes that fabless AMOLED DDI suppliers must not only secure a stable and sufficient source of foundry capacity, but also possess sufficient technological competency for mass production, in order to successfully expand their presence in the AMOLED DDI market.

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

Now that the chip shortage has persisted for more than half a year, markets and industries are closely monitoring whether chip demand is as strong as expected, or whether the current shortage is a mere mirage caused by overbooked orders from clients in fear of insufficient components.

At any rate, analyzing the current chip shortage entails doing so on both the supply and the demand ends. First of all, with regards to the demand for automotive chips, which has been in the spotlight for the past two quarters, automakers first began suffering from a shortage of automotive chips last year. This took place because automotive electronics suppliers, which had historically maintained a relatively low inventory level, slashed their chip orders placed at foundries ahead of other foundry clients at the onset of the coronavirus crisis in early 2020.

Hence, once automotive demand saw a sudden upturn later on, these automotive electronics suppliers found themselves unable to place additional orders at foundries, whose production capacities had by this time become fully loaded. Automotive chips subsequently began experiencing a shortage as a result.

At the same time, demand for CIS, DDI, and PMICs skyrocketed owing to the global 5G rollout and to the spike in demand for PCs and TVs caused by the proliferation of WFH. Given that foundries had already been experiencing fully loaded capacities across their mature technologies required for fabricating these chips, most clients had no choice but to resort to upping their volume of chip orders in orders to ensure that they are allocated sufficient foundry capacities.

Brands’ order placement strategies

On the other hand, several brands of electronic devices have been overbooking their chips to mitigate the risk of the chip shortage that began last year as well as the increased shipping times. These brands span the notebook computer, TV, and smartphone industries.

Of these three industries, smartphone brands have been overbooking foundry capacities due to the aforementioned expectation of chip shortage and most smartphone brands’ ongoing attempt to seize market shares left in Huawei’s wake. It should be pointed out that, however, in response to lackluster sales during the May 1^st Labor Day in China, most brands have now lowered their production targets.

Foundries, on the other hand, had already been experiencing fully loaded capacities due to high demand from various end devices. Hence, they were unable to reach the volume of orders that were overbooked by smartphone brands despite adjusting their product mixes and reallocating production capacities. As such, although smartphone brands have lowered their production targets, capacities across the foundry industry remain fully loaded.

“Brands are responding to the market situation by strategically procuring components. Even if they were to adjust their production targets, they could still adjust their purchases of raw materials and consumables. Actors in the supply chain are unlikely to rigorously examine the inventory levels of brands before any unexpected changes occur in either demand or material shortages”

Conversely, with regards to the notebook and TV industries, they had mostly experienced bullish demand in the past few quarters, meaning sales performances are mostly a non-issue. Their procurement efforts have thus been focused on taking stock of the supply of raw materials and consumables, and these efforts have been guided by a principle of stocking up on demand. This is in accordance with both the bullish sales and the expectations of the companies themselves.

Generally speaking, TV and notebook use the term of strategic stocking as an excuse to mitigate any doubts of rising inventory levels from market observers. For the supply chains of these industries, the current state of the market is primarily dictated by the demand side. Actors in the supply chain are unlikely to rigorously examine the inventory levels of brands before any unexpected changes occur in either demand or material shortages.

Taken together, the supply and demand situations of the notebook, smartphone, and TV markets, in addition to the capacity utilization rate of foundries, would seem to indicate that the inventory adjustments caused by overbooking is unlikely to taken place in the short run, contrary to the market’s fears. TrendForce currently expects the shortage of foundry capacities to persist at least until 1H22, only after which is the supply and demand situation in the semiconductor market like to gradually return to an equilibrium.

（Cover image source: Pixabay）

The stay-at-home economy brought about a soaring demand for TVs, which in turn resulted in a shortage of TV panels in 2H20, according to TrendForce. Also contributing to the bullish rebound of TV panel quotes last year was the fact that most panel manufacturers rapidly decreased their supply of TV panels around this time.

After the upturn of panel quotes kicked off in late 2Q20 and came to a temporary slowdown at the end of the year, this upward momentum once again intensified in mid 1Q21 without warning, and clients on the purchasing end were caught off guard as a result.

TV brands are now at the mercy of panel suppliers since panels are an irreplaceable component in the production of TV sets. Being unable to effectively address the shortage and price hike of TV panels during the current surge in TV sales, TV brands have no choice but to react by buying up TV panels as they become available, thereby further driving up prices of TV panels.

Upward trajectory of TV panel quotes will likely taper in 3Q21 after TV brands successfully retool their procurement strategies.

The movement of prices in the panel market suggests that TV panel quotes will most likely peak at the end of 2Q21, plateau throughout 3Q21, and face downward pressure caused by an expected easing of demand for TVs in 4Q21. Although fourth quarters have traditionally been peak seasons for TV sales, TrendForce expects such major seasonal discounts as Black Friday sales to be cancelled this year in light of persistently high panel prices. TV sales in 4Q21 are therefore expected to be relatively muted as well.

On the other hand, as more and more of the general public receive vaccines, recreational activities, at least in developed countries such as the US, are expected to gradually move from the confines of indoor environments to the great outdoors.

Should this transition take place, TV brands and distributors alike will conservatize their outlooks of TV sales and of safe inventory levels, respectively, with brands lowering their panel procurement and distributors performing appropriate inventory adjustments. TrendForce analysts expect that TV panel quotes will enter a bearish trend in 4Q21 and gradually return to a cyclical downturn in 1H22.

（Cover image source: Samsung Newsroom Taiwan）

As Samsung Display (SDC) decided to extend the manufacturing operations of its Korea-based Gen 8.5 LCD fab, and tier-two panel suppliers are still slow to reassign their production capacities from TV panels to IT panels, TrendForce expects total TV panel shipment for 2021 to reach 269 million units, which is relatively unchanged compared to 2020 levels. Panel suppliers will continue to focus on large-sized TV panels this year in response to several industry-wide developments, including M&A, reduced production capacities, improved manufacturing technologies, and increased panel demand. Furthermore, as the persistent price hike of TV panels continues to reduce the profit margins of TV sets, TV brands have started to gravitate towards larger, more profitable TV sizes. TrendForce therefore expects the average TV panel size this year to increase by 1.6 inches and move towards 50 inches.

TrendForce analyst Jeanette Chan indicates that the shift towards large-sized panels is an effective means of expending the production capacity of panel suppliers. Case in point, due to the limited production capacity for TV panels in 1H21, not only are TV panels currently in short supply, but TV panel prices are also on the rise. On the other hand, the demand for TV panels in 2H21 will depend on several key factors: first, whether the increased retail price of TV sets will hamper consumer demand; second, whether the pandemic will be effectively brought under control as more countries begin vaccinations; third, whether the impending global economic recovery will be a significant one. And finally, whether a market bubble will appear as a result of TV manufacturers’ overbooking panel orders in anticipation of potential hindrances including the price hike of materials in the upstream supply chain, the shortage of glass substrates due to such accidents as facility fires, the shortage of IC supply, and the extended shipping times.

Thanks to their persistently rising production capacity and successful acquisitions, China-based BOE and CSOT, the two largest panel suppliers in the world, are expected to collectively account for about 40% of total TV panel shipment this year. At the same time, BOE and CSOT are actively improving their technologies and making a push for high-end products, such as 8K, ZBD, and AM Mini LED. By leveraging their improved technologies and available funds, the two companies are likely to extend their operations upstream by systematically undertaking vertical integrations.

On the other hand, HKC, which is currently raising its production capacity, has garnered much attention in the market amidst the current shortage situation of TV panels. Along with its Changsha-based H5 fab, which is set to kick off mass production shortly, HKC possesses four Gen 8.6 fabs in total. By raising its production capacity and engaging in additional strategic partnerships with tier-one TV brands, HKC is expected to enter the top three ranking of panel suppliers by TV panel shipment for the first time ever, with a shipment of about 41.91 million units this year, a 33.7% increase YoY.

Taiwan-based AUO and Innolux are expected to experience YoY decreases in their shipments this year as their production capacities are relatively limited, although both companies’ efforts to optimize their products and engage in cross-industry partnerships have brought them certain competitive advantages. In particular, AUO is leading the panel industry in developing not only ultra-high-end products, such as 8K+ZBD, but also Micro LED displays, whereas Innolux holds competitive advantages in product diversity and in-house ODM services. It should be pointed out that these two Taiwanese companies are able to deal with the current IC shortage situation better than their competitors because their parent companies have longstanding business relationships with IC design companies.

With regards to Korean suppliers, although LGD and SDC have both prolonged their LCD manufacturing operations in Korea in order to satisfy the current bullish market demand, the two companies are primarily focusing on transitioning their offerings to new products. LGD will expand the OLED production capacity of its Guangzhou fab in 2Q21 as part of its effort to dominate the OLED market. As for SDC, the company has dropped out of the top six ranking this year as a result of its lowered production capacity. However, new TV sets featuring SDC’s QD-OLED panels are expected to officially hit the market in 4Q21, in turn driving SDC’s yearly TV panel shipment to 2 million units in 2022.

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