Global PCB market revenue will decline by 3.4% in 2023 due to low demand for consumer electronics, reaching around USD 80.5 billion, down from approximately USD 83.3 billion in 2022. However, the industry is expected to rebound, with a potential to reach USD 100 billion by 2027, with a CAGR of 3.7% from 2022~2027, led by automotive PCBs of USD 9.2 billion accounting for the largest part in 2022, and will reach USD 15.6 billion in 2027. TrendForce research shows that China dominates PCB production with a 53% market share in 2023, followed by Taiwan at 13%, Korea at 10%, Japan at 9%, and SEA at 8%.

China’s rising labor costs, environmental regulations, and geopolitical tensions have led to a shift in the PCB supply chain outside of China. SEA, with its labor advantages and free trade benefits, has become a popular destination for PCB manufacturers. TrendForce says that Thailand currently accounts for 50% of the total PCB production value in SEA. Major Taiwanese manufacturers have established factories in Thailand to establish complete industry chains. With an average monthly salary level of $8,800, Thailand is well-positioned to become a key production base for the PCB industry in Southeast Asia.

SEA PCB Production Value to Follow China’s Closely in the Next 10 Years

SEA such as Thailand, Malaysia, and Vietnam have an average manufacturing labor cost of about half of that in China, but their production efficiency is still 20% lower than China’s. In addition, SEA is limited by a shortage of industry talents and incomplete supply chains, resulting in high procurement costs, especially for mid-to-high-level engineering and management personnel. Therefore, large-scale investment in the region is still unlikely at this stage. As the PCB industry chain relocation requires a long time due to its cluster effect, China is expected to remain the world’s largest PCB producer in the next 10 years, accounting for over 40% of the global PCB production value, while SEA is expected to become the 2^nd largest producer.

Taiwanese companies are leading the expansion of PCB factories in Southeast Asia.

Taiwanese PCB manufacturers have the highest market share at 34%, but only 38% of their production capacity is located in Taiwan, with the majority around 60% being concentrated in China. To follow the trend of supply chain relocation, 9 Taiwanese PCB manufacturers, including Elite Material, ITEQ, and CCL, plan to establish factories in Thailand, while Chinese manufacturers like Shenzhen Jove Enterprise, and China Eagle Electronic have all set up factories in Thailand. International ones like CMK and Kyoden have also set up factories in Thailand, while TTM, Simmtech, and AT&S focus on Malaysia, and Vector Fabrication has chosen Vietnam.

The risks associated with the United States’ suppression of China’s semiconductor industry and the ongoing tension in China-US relations continue to permeate the supply chain. However, most customers of foundries are adopting a cautious approach, either maintaining a wait-and-see attitude or gradually introducing second sources to mitigate risks.

The operational conditions and challenges faced by China’s two major foundries, SMIC and HuaHong, differ to some extent. In the case of SMIC, despite being added to the U.S. Entity List as early as 2020, most of its customers continue to place orders with SMIC due to concerns about the time-consuming and costly nature of verification.

According to a survey by TrendForce, only one U.S.-based brand is actively pursuing a decoupling strategy in response to U.S. government bids, while other brands are mostly conducting risk assessments of their supply chains without fully implementing a complete decoupling strategy.

In particular, SMIC still maintains a competitive edge in terms of lower prices and the advantage of the domestic Chinese market, which keeps most of its customers placing orders and prevents a significant drop in overall capacity utilization rate compared to other foundries. Its utilization rate in 1Q23 was approximately 65-70%, and it is expected to slightly increase to nearly 70% in 2Q23.

HuaHong, on the other hand, is taking a cautious approach to address the risks arising from the China-US tension. HuaHong’s subsidiary, ICRD, primarily focuses on process technology R&D, with a particular emphasis on the 28/14nm process nodes.

It is currently setting up a specialized 28nm production line, which uses photolithography equipment from two major international manufacturers, ASML and Nikon. For all other equipment, Chinese domestically manufactured machines are being used as substitutes.

The planned total production capacity for this production line is 40Kwspm ( wafer starts per month). Considering the possibility of both Japan and the Netherlands potentially joining trade sanctions later this year, the future expansion plans for HuaHong’s production capacity are uncertain.

(Photo Credit: SMIC)

TV sales in China hit their peak in 2019, with 44.5 million units sold, but the market experienced a sharp decline in 2020. This was due to the previous marketing strategy of lowering prices to increase sales volume no longer being effective for small and medium-sized products. In response, brands shifted their focus to larger-sized products, specifically those with a screen size of 65 inches or above, which has accelerated the trend of larger TVs dominating the market.

Panel prices skyrocketed between 2020 and 2021, causing a significant price disparity for TV products during promotional events in China. In the 2021 618 promotion, 55-inch TV prices surged by 67% compared to the previous year, while 65-inch TVs increased by 50%, leading to a surge in demand for larger TV sizes. TVs with a screen size of 55 inches and above accounted for over 65% of the market share in China in 2021, and it is anticipated to reach 80% by 2022. With greater discounts, 65-inch TVs became the mainstream size in 2022, surpassing 55-inch TVs in sales volume and market share. The market share of smaller TVs (43 inches and below) fell from roughly 30% to 16%.

According to recent market research, the dominance of smart TVs has surged from 85% in 2016 to a staggering 98% in 2022. Additionally, the popularity of 4K TVs has risen rapidly, with an 80% market share in 2022, following their introduction in 2014. The shift towards these new TV standards has been fueled by ongoing price cuts in the retail sector and the growing demand for larger screen sizes.

The scale of promotions during China’s 618 and Double Eleven shopping festivals could be affected by the upward trend of larger screen sizes and the rise in panel prices in 2023. As a result, brands are expected to shift their promotional strategies towards larger TVs, particularly 75-inch and 85-inch models, which generate more revenue. Consequently, TV sales in China for this year are predicted to decline further by 1.7%, with an estimated sales volume of approximately 30 million units.v

TrendForce’s latest research indicates that, as production cuts to DRAM and NAND Flash have not kept pace with weakening demand, the ASP of some products is expected to decline further in 2Q23. DRAM prices are projected to fall 13~18%; NAND Flash is expected to fall between 8~13%.

On the other hand, based on the weekly updates on the DRAM and NAND flash spot markets by TrendForce, the spot markets for DRAM and NAND flash continued to decline this week. Details are as follows.

DRAM Spot Market

Spot prices of DDR4 products have been dropping incrementally for several consecutive days, and buyers in the spot market are mostly waiting for further developments. However, there are more quote inquiries for DDR5 products because the supply gap hasn’t been bridged. As a result, there is now an uptick in spot prices of DDR5 products, and the divergence between DDR4 and DDR5 products in terms of price trajectory is expected to continue for several weeks. Nevertheless, spot prices of DDR4 products are showing no sign of rebounding in the near future. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) fell by 0.74% from US$ 1.618 last week to US$ 1.606 this week.

NAND Flash Spot Market

European and American spot markets have yet to recover in purchase sentiment, while some Asian markets, due to the recuperation of the Chinese market, have slightly risen in purchase willingness. Overall spots have not experienced any apparent fluctuations from South Korean suppliers’ announcement of production cuts, despite sellers aggressively adjusting their prices and pursuing orders, which led to a restricted level of overall transactions and a small drop in prices. 512Gb TLC wafer has dropped by 0.35% in spot prices this week, arriving at US$1.431.

Onsemi, a semiconductor manufacturer, announced at the end of April that it had signed a Long-Term Supply Agreement for SiC power components with Zeekr, a subsidiary of Geely Auto Group. Geely Automotive will use Onsemi’s EliteSiC power components to optimize energy conversion efficiency in its electric drive system. This move signals Onsemi’s aggressive expansion in the automotive SiC market, catching up to leading manufacturers STMicroelectronics and Infineon.

In the SiC semiconductor market for electric vehicles, STMicroelectronics and Infineon have maintained their market leadership by entering the market early, while Wolfspeed and ROHM have gained traction through their vertical integration technology for SiC. On the other hand, Onsemi still lags behind in terms of market share for SiC power semiconductors, even though it acquired GT Advanced Technologies in 2021 and mastered the most difficult wafer growth and production equipment technology in SiC manufacturing. Before 2023, Onsemi was only used in small and medium-sized vehicle models such as NIO and Lucid.

However, Onsemi’s benefits begin to materialize in 2023, thanks to the industry maturity built by early players such as Infineon and STM, combined with Onsemi’s early deployment of SiC-related technology. Onsemi’s SiC product EliteSiC has obtained LTSA from Zeekr, BMW, Hyundai and Volkswagen in the form of discrete and modules. Its CEO, Hassane El-Khoury, has stated that the SiC business will generate $4 billion in revenue over the next three years compared to the total revenue for the 2022 SiC market of approximately $1.1 billion. These factors have made Onsemi the most talked-about semiconductor company in the SiC market this year.

However, the intense competition in the SiC market will test the endurance of resource input sustainability. The rapid growth in SiC demand over the past five years is mainly due to high battery costs and the development of energy density having reached its limit. Car manufacturers have switched to using SiC chips in their electronic components to increase driving range without increasing the number of batteries.

As a result, car manufacturers are aggressively pushing semiconductor companies to accelerate their research and development of SiC technology. This has resulted in a significant reduction in R&D time, but also an increase in R&D costs. Coupled with the impact of intense market competition on profits, the ability to sustain R&D resource input and overall profitability performance will be the key indicators of semiconductor companies’ competitiveness.

Onsemi has successfully improved its profitability performance by streamlining its product lines over the past few years, ranking at the top with a 49% gross margin, according to the financial reports of various semiconductor companies in 2022. This profitability performance allows Onsemi to meet car manufacturers’ cost requirements and secure orders, thereby achieving economies of scale in SiC product growth.

However, in terms of R&D costs as a percentage of revenue, Onsemi ranks last at 7%, compared to its main competitors Wolfspeed (26%), Infineon (13%), STM (12%), and ROHM (8%). With semiconductor companies investing more in technologies such as reducing on-resistance and improving yield rates, how to maintain a balance between profitability performance and resource expenditure while achieving revenue goals through intense market competition will be an important challenge for Onsemi after securing orders from car manufacturers.

(Source: Zeekr)