As third quarters have typically been peak seasons for the production of various end-products, the sufficiency ratio of DRAM is expected to undergo a further decrease in 3Q21, according to TrendForce’s latest investigations. However, DRAM buyers are now carrying a relatively high DRAM inventory due to their amplified purchases of electronic components in 1H21. The QoQ increase in DRAM contract prices are hence expected to slightly narrow from 18-23% in 2Q21 to 3-8% in 3Q21. Looking ahead to 4Q21, TrendForce believes that DRAM supply will continue to rise, thereby leading to either a further narrowing of price hikes or pressure constraining the potential price hike of DRAM products.

PC DRAM prices are expected to rise by 3-8% QoQ due to continued constraints on production capacities

From the perspective of demand, the stay-at-home economy has resulted in persistently high demand for notebook computers. Although discrepancies still exist among notebook brands’ inventory levels of various components, these brands are still making an aggressive attempt at maximizing their production of notebooks. However, as most of these brands are still carrying about 8-10 weeks’ worth of PC DRAM inventory (which is relatively high), PC DRAM purchasing strategies from the buyers’ side will therefore remain relatively conservative. From the perspective of supply, due to the rising demand for server DRAM, the production capacity allocated to PC DRAM is still in a severe supply crunch. Hence, DRAM suppliers are firm in their attitudes to raise PC DRAM quotes, and TrendForce expects the price negotiations between PC DRAM buyers and suppliers in 3Q21 to become both lengthier and more difficult as a result, with contract prices likely finalized at the end of July. Even so, what is now certain is that both sides have reached some level of understanding regarding the ongoing price hike of PC DRAM products. TrendForce forecasts a 3-8% increase in PC DRAM contract prices for 3Q21.

QoQ increase in server DRAM prices for 3Q21 are expected to narrow to 5-10% due to buyers carrying a relatively high inventory

With regards to demand, in spite of the minor increase in the shipment of whole servers, server DRAM buyers are less aggressive in their server DRAM procurement compared to the previous quarter. For instance, CSPs in North America and in China are currently carrying more than eight weeks of server DRAM inventory. In other words, procurement activities for server DRAM will gradually decline in the coming quarters in accordance with market demand. Notably, some Tier 2 clients will continue to procure server DRAM in 3Q21 since they did not sufficiently stock up in the prior quarters, and this demand will likely result in upward momentum for server DRAM prices. With regards to supply, the three major DRAM suppliers (Samsung, SK Hynix, and Micron) are limited by the fact they are currently carrying a relatively low inventory of server DRAM. As such, these suppliers will attempt to maintain their profitability by increasing prices each quarter. It should also be pointed out that the decreased DRAM demand from smartphone brands has in fact allowed more wiggle room for server manufacturers to negotiate for more favorable server DRAM prices. TrendForce thus believes that, before the supply side and demand side can reach an agreement, negotiations for server DRAM prices will become increasingly lengthy, and that server DRAM contract prices for 3Q21 will likely increase by 5-10% QoQ once negotiations are finalized.

Mobile DRAM prices are expected to defy market realities and increase by 5-15% QoQ, with potential risks of high price and low demand

In terms of demand, certain smartphone brands are now carrying a relatively higher inventory of mobile DRAM owing to Southeast Asia’s worsening COVID-19 pandemic, which led smartphone brands that primarily manufacture and sell their products there to begin lowering their production targets in 2Q21. In addition, some smartphone brands have set overly ambitious production targets; combined with the current shortage of foundry capacities, the discrepancies among the supply of smartphone components have now become more apparent, in turn forcing brands to slow down their mobile DRAM procurement in order to adjust their component inventories first. Demand has remained strong from clients in the smartphone market since 4Q21, so the supply fulfillment rate of the three major DRAM suppliers for their smartphone clients will be consistently higher compared to clients in other markets. As DRAM demand from non-smartphone applications ramps up and results in higher profitability than mobile DRAM, the three major DRAM suppliers will continue to adjust their production capacities in accordance with the shifting supply and demand from various segments, thus resulting in an increasingly constrained supply of mobile DRAM.

It should be pointed out that DRAM market leader Samsung has generally tried to minimize the profit discrepancies among its various products. Furthermore, the price hike in Samsung’s mobile DRAM products was relatively lower compared to Micron in 1H21. As a result, in view of the weakening mobile DRAM demand in 3Q21, Samsung will increase its mobile DRAM prices to a more notable extent compared to its US competitors. Going forward, Samsung’s price hike will lead its competitors to retool their pricing strategies, subsequently leading to an even wider price increase across the entire mobile DRAM market. As such, TrendForce expects mobile DRAM prices to increase by 5-15% QoQ in 3Q21, which is a step up compared to 2Q21. On the other hand, this price hike against market realities may potentially lead to a further decline in mobile DRAM demand, resulting in a situation with high price and low demand.

Graphics DRAM prices are expected to increase by 8-13% QoQ due to tight supply of GDDR6

Regarding graphics DRAM demand, many cryptocurrency miners were previously intent on mining ETH with older graphics cards as it reached peak prices. Nevertheless, the recent bearish turn of the cryptocurrency market has indirectly had an impact on demand for graphics cards equipped with GDDR5, although most of this impact primarily affected the spot market. For the contract market, more than 90% of graphics DRAM applications have migrated to GDDR6 products, which are now in short supply since new graphics cards are equipped with GDDR6 memory and are in high demand. In addition, the vast majority of GDDR6 stock from DRAM suppliers is currently cornered by graphics card manufacturers and game console manufacturers, thereby further limiting the graphics DRAM supply available to small and medium OEMs/ODMs. Regarding graphics DRAM supply, although GDDR6 accounts for more than 90% of the three major DRAM suppliers’ graphics DRAM production, demand for GDDR6 still far exceeds supply because end product demand has also migrated to GDDR6. As orders for server DRAM gradually ramp up in 3Q21, DRAM suppliers will prioritize fulfilling demand from the server market first. Hence, graphics DRAM contract prices for 3Q21 are expected to increase by 8-13% QoQ.

Consumer DRAM prices are expected to increase by up to 13% QoQ in light of strong demand

At the moment, consumer DRAM demand is relatively robust from the consumer electronics market and the telecom market. In addition, as China has been accelerating its build-out of 5G infrastructures and its rollout of WiFi 6 in the post-pandemic era, the overall demand for consumer DRAM remains strong going forward. On the other hand, the three dominant DRAM suppliers are slowing down their transition of production capacities from DDR3 products to CMOS Image Sensors or other Logic IC products now that the consumer DRAM market has taken a bullish turn. However, in the medium-to-long term, the general trend in the DRAM industry will still point to the elimination of the older 25/20nm process technologies and the continued migration towards more advanced 1Znm and 1αnm processes. As a result, given DDR3 products’ declining supply and strong demand, DDR3 prices for 3Q21 are expected to increase by 8-13% QoQ, while DDR4 prices are expected to undergo a minor growth of 3-8% QoQ in accordance with mainstream PC and server DRAM prices.

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 inclusion of certain Chinese semiconductor companies on the US Commerce Department’s Entity List in the past few years has created repercussions throughout industries and markets, with the semiconductor industry coming under heavy scrutiny by both China and the US. After SMIC was hit with a string of sanctions last year, including the EAR and the NS-CCMC List, recent rumors of further US actions on China are now once again making the rounds on social media platforms.

In particular, there have been rumors saying that the US has prohibited TSMC and UMC from importing 28nm process technology equipment into China for their fabs there. Conversely, some industry insiders from China point out that, although the US did not impose such prohibition, the export approval process for the aforementioned equipment has been conspicuously lengthy.

In reality, the Department of Commerce has levied procurement restrictions on SMIC specifically, while foundries unspecified on the Entity List have not been explicitly barred from importing semiconductor equipment for use in their China-based fabs. Although some are noting that the approval processes for semiconductor equipment exported to fabs located in China have been unusually lengthy recently, these processes are not specifically aimed at equipment for the 28nm process technology.

Instead, they apply to all semiconductor equipment exported from the US to China. It should also be noted that the approval processes for some exported equipment are currently progressing well, and foundries have already taken the extended lead times into account, according to TrendForce’s latest investigations. Hence, the lengthy approval processes have not been observed to have any negative impact on the semiconductor industry at the moment.

（Cover image source: ASML）

The indefinite extension of Malaysia’s MCO (movement control order) 3.0 has posed severe challenges for the global MLCC market, according to TrendForce’s latest investigations. The high-end MLCC segment, in particular, is expected to suffer the most severe shortage, and products that feature high-end MLCC, such as smartphones, notebooks, networking products, server, and 5G base station components, will likely experience a corresponding impact as well. With the imminent arrival of the traditional peak season for electronic products, ODMs may need to defer their whole-unit shipments due to potential delays in some MLCC shipments.

TrendForce indicates that some Japanese companies (MLCC suppliers Taiyo Yuden, crystal suppliers NDK and Epson, and electrolytic capacitor supplier Panasonic), as well as Taiwanese companies (R-Chip supplier Walsin Technology, etc.) have had their Malaysia-based manufacturing operations and lead times disrupted as a result of the latest MCO 3.0 extension. Notably, Taiyo Yuden was able to partially resume its Malaysian fab operations on June 14 and activate about 60% of its work force in accordance with domestic regulations, thereby gradually ramping up its domestic capacity utilization rate to 80%. However, given the extension of MCO 3.0 through July, Taiyo Yuden will unlikely be able to raise its production capacity any further.

According to TrendForce’s latest findings, most MLCC suppliers currently carry a healthy level of about 60 days’ worth of low-end and mid-range MLCC inventory as of June, although Japanese suppliers are still carrying less than 30 days’ worth of high-end MLCC inventory. In view of the persistent MCO 3.0 restrictions in Malaysia, MLCC suppliers with Japan-based manufacturing operations, such as Murata, Kyocera, and Samsung, are expected to benefit from client orders redirected from suppliers whose operations are primarily based in Malaysia.

Japanese suppliers are scrambling to ramp up capacity utilization rates in response to influx of orders from ODMs in 3Q21

With regards to various end products, Murata, Taiyo Yuden, and Kyocera, all of which are major suppliers of MLCC for iPhone and MacBook Pro, will see peak demand from 3Q21 to 4Q21 due to Apple’s upcoming release of new products in 3Q21. It should be pointed out that the MLCC used in Apple devices features specifications that are compatible with many notebooks, servers, and networking products from other manufacturers. Given Taiyo Yuden’s inability to raise its capacity utilization rates in July, ODMs are expected to aggressively compete for this particular type of MLCC in 3Q21.

On the other hand, demand for servers is expected to undergo a steady growth in 3Q21. Hence, not only are ODMs closely monitoring the supply of various ICs, but the extended restrictions in Malaysia has also hindered the supply of certain passive components, such as SP-Caps, Tan caps (tantalum capacitors), and high-end MLCC. To mitigate potential risks of their ODM clients redirecting orders for the aforementioned components elsewhere, Murata and Kyocera have now been placing a top priority on expanding their production capacities to meet client demand.

Finally, the overall demand for other IT products such as Chromebooks will likely experience a slowdown in 4Q21 as increased vaccinations in Europe and the US lead to a gradual easing of border restrictions. In addition, ODMs currently carry a relatively high level of low-end and mid-range MLCC inventory on average. As a result, low-end MLCC suppliers, such as Yageo, Walsin, and Samsung, will likely face pressure from certain clients lowering their orders for low-end MLCC.

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 rise of such products as automotive, industrial, telecom, and networking chips in recent years has resulted in continued advancements in packaging and testing technologies, and the market revenue of these technologies has seen a corresponding rise as well. Demand for advanced packaging has been relatively strong thanks to high demand for 5G smartphones, consumer electronics, and high-performance processors.

In particular, the mainstream development of advanced packaging and testing is currently concentrated on three major fields: HPC chip packaging（2.5D/3D）, FOPLP（fan out panel level packaging）, and SiP（system in package）. Some of the other factors driving forward the technological development of advanced packaging also include improvements in end product functions, advancements in transistor gate sizes, reduction in advanced packaging L/S, and migration of chip interconnect technology from micro-bumping to hybrid bond.

According to TrendForce’s investigations, the advanced packaging market last year reached a revenue of US$31.037 billion in 2020（which was a 13% increase YoY）and accounted for 45.8% of the total packaging market. At the moment, most packaging and testing companies have successively entered the advanced packaging market, with Flip Chip applications accounting for the majority of applications across smartphone AP, WiFi chips, entry-level processors, and high-end PMICs. Flip Chip applications make up more than 80% of the total advanced packaging revenue.

In spite of continued growth, advanced packaging will unlikely overtake traditional packaging in terms of market share within 5-10 years

In spite of the multitude of companies that are eager to enter the advanced packaging industry, not all of them possess the technological competence to progress in R&D, thus making acquisition the fastest path to advanced packaging success. With regards to technological competence, foundries and IDMs are the likeliest candidates to enter the industry, as they already possess ample experience in chip development.

At the moment, TSMC, Intel, and Samsung are the most well-equipped to do so, respectively. With regards to outsourced operations, Taiwanese companies such as ASE, SPIL, and PTI lead the industry in terms of packaging technologies, while U.S.-based Amkor is able to compete for neck-and-neck with ASE. Although these aforementioned companies are not specialists in chip fabrication, they have an extremely strong grasp of the downstream assembly ecosystem, hence their superiority in advanced packaging.

On the other hand, thanks to China’s Big Fund, the trinity of Chinese packaging and testing operators（JCET, TFME, and Hua Tian）were able to acquire major global players, including STATS ChipPac, AMD-SUZ, and Malaysia-based Unisem, respectively, during the 2014-2019 period.

Hence, not only have the Chinese trio been able to raise their market shares and rankings in the global packaging and testing market, but they have also been able to acquire certain competencies in advanced packaging technologies.

The current market would seem to suggest that advanced packaging has been gradually cannibalizing the market share of traditional packaging. However, as applications including home appliances and automotive electronics still require traditional packaging, TrendForce believes that only after 5-10 years will advanced packaging overtake traditional packaging in terms of market share.

（Cover image source: TSMC）

As UMC and GlobalFoundries successively end their respective developments of advanced processes, the advanced process market has now become an oligopoly, with TSMC and Samsung as the only remaining suppliers （excluding SMIC, which is currently affected by geopolitical tensions between China and the US）. According to TrendForce’s latest investigations, TSMC holds a 70% market share in advanced processes below – and including – the 1Xnm node, while Samsung’s market share is about 30%.

As electronic products demand faster data transmission speeds and better performance in response to IoT and 5G applications, the chips contained in these products also need to shrink in size and consume less power. Hence, process technologies need to evolve in order to enable the production of increasingly advanced chips. In this light, suppliers of such chips as smartphone AP, CPU, and GPU primarily rely on Taiwan for its semiconductor industry’s advanced process technologies.

Why is Taiwan able to hold key manufacturing competencies, market shares, and unsurpassed technologies in the global foundry industry?

After TSMC pioneered its pure-play foundry services more than 30 years ago, UMC also subsequently transitioned to a foundry business model. However, the build-out and maintenance of wafer fabs require enormous human resources, capital expenditures, and environmental support, all of which have been skyrocketing since the industry progressed below the 40nm node into the EUV era. Factors including governmental support, human resource development, utility services, and long-term amortization and depreciation are all indispensable for foundries to keep up their fab operations. TrendForce’s findings indicate that Taiwan possesses about 50% of the global foundry capacity, and this figure will likely continue growing due to the persistent demand for advanced processes.

Taiwanese foundries led by TSMC and UMC operate based on a pure-play foundry model, which means they do not compete with their clients outside of foundry operations. Foundries are able to maximize the profitability of the semiconductor ecosystem in Taiwan thanks to Taiwan’s comprehensive PC, ICT, and consumer electronics industries.

In addition, not only are they able to deliver PPA（performance, power, and area） advantages to their clients through technology scaling and node shrinking, they are also unsurpassed in their comprehensive silicon IP cores and longstanding product development services. Other competing foundries are unlikely to make breakthroughs in these fields and catch up to Taiwanese foundries in the short run.

On the whole, the Taiwanese foundry industry is able to maintain its leadership thanks to competencies in human capital, client strategies, process technologies, capital intensify, economies of scale, and superior production capacities.

Furthermore, not only do advancements in semiconductor fabrication technology require developmental efforts from foundries, but they also need support throughout the entire supply chain, including upstream wafer suppliers and downstream client feedbacks, both of which can serve to eliminate yield detractors and raise yield rates. Therefore, the Taiwanese semiconductor industry derives its advantage from foundries（TSMC, UMC, PSMC, and VIS）, as well as from the cross-industrial support across silicon wafer suppliers（SAS and GlobalWafers）, fabless IC design clients, and packaging and testing operators（ASE, etc.）

（Cover image source: TSMC）