Samsung recently announced that they will ahead of TSMC in the foundry market within 5 years. At the same time, Intel also claimed to become the second-largest player in the market before 2030. Currently, both Samsung and TSMC are adapting 3nm process to do the chip manufacturing, with the technology of GAA(Samsung) and FinFET(TSMC) respectively.

Samsung sees GAA technology as a crucial key to surpassing TSMC. Currently, Samsung’s 4nm lags behind TSMC by about 2 years, and its 3nm is about a year behind. However, this situation will change when TSMC turns to 2nm. Industry insider sources indicate that TSMC plans to use GAA technology in 2nm process, and Samsung believes that they can seize the chance to catch up with TSMC since TSMC may have a hard time when turning to 2nm process.

Industry insiders have revealed that AMD has shifted some of its 4nm CPU chip orders from TSMC to Samsung. It is reported that AMD has signed an agreement with Samsung to manufacture some of its mobile SoC by using Samsung’s 4nm node, and Samsung may also manufacture AMD’s Chromebook APU.

The Fight in the Foundry Market is On

According to TrendForce, the top 10 global foundry players in 4Q22 with TSMC account for 58.5% of market share by revenue, far ahead of Samsung’s 15.8%. Industry insiders suggest that Samsung still has a long way to go to catch up with TSMC. Some sources say that TSMC’s 2nm process will be mass-produced as scheduled in 2025, while Samsung’s plans are still to be observed.

Intel is also striving for the top spot in the wafer foundry market. Since the beginning of 2021, Intel has implemented a series of measures in its foundry business after announcing its “IDM 2.0” strategy. Last July, Intel stated that it will manufacture chips for MediaTek, and the first batch of products will be produced within the next 18 to 24 months using more mature manufacturing technology (Intel 16). In addition, Intel said that Qualcomm and Nvidia are also interested in having them manufacture their chips. To regain its leading edge in chip manufacturing, Intel has unveiled its 5 process technology stages to be launched in the next few years, including 10nm, 7nm, 4nm, 3nm, and 20A.

And TSMC has no competitive relationship with their clients by not doing the wafer design, apparently, this is also a significant advantage for TSMC and other foundry manufacturers. In recent years, more companies have recognized the importance and highly profitable nature of foundry manufacturing, leading to the independent establishment of foundry manufacturing operations. Samsung and Intel have also followed this trend, as foundry manufacturing can optimize production technology and provide major companies with more opportunities for trial and error.

The US ban on Chinese industries has left China struggling with a seemingly severe shortage of chips. However, China’s tech giants refuse to surrender; instead, they’re pivoting quickly to survive the game.

Since 2019, the US Department of Commerce has added Chinese leading companies like Huawei to its entity list. Restrictions were expanded in 2020 to include semiconductor manufacturing, making a huge impact on SMIC’s advanced processes below 14nm.

Starting in 2021, the US has been intensifying its control by placing more IC design houses on the list, which include Jingjia (GPU), Shenwei (CPU), Loongson Tech (CPU), Cambricon (AI), Wayzim (RF&GPS), and Yangtze (NAND Flash). Furthermore, the export of advanced EDA tools, equipment, CPUs, and GPUs to China has also been banned.

The goal of such measures is to hinder China’s progress in high-tech fields such as 5G/6G, AI, Cloud computing, and autonomous driving by eroding the dominance of its tech giants over time.

China has been aggressively pursuing a policy of domestic substitution in response to the US’s increasing control. As part of this effort, leading domestic IC design companies like Horizon, Cambricon, Enflame, Biren, Gigadevice, and Nations Technologies have been ramping up their efforts for comprehensive chip upgrades in a variety of applications.

Chinese Brands Ramping up for ASICs

There is a particularly intriguing phenomenon in recent years. Since 2019, China’s leading brands have been venturing into chip design to develop highly specialized ASICs (Application Specific Integrated Circuits) at an unprecedented speed. This move is aimed at ensuring a stable supply of chips and also advancing their technical development.

A closer look at how top companies across diverse application fields integrate ASIC chips into their technology roadmap:

• AI Cloud computing: Alibaba, Baidu, Tencent

China’s tech giants are leveraging advanced foundry processes, such as TSMC’s 5nm and Samsung’s 7nm, to produce cutting-edge AI chips for high-end applications like cloud computing, image coding, AI computing, and network chips.

Alibaba launched its AI chip, Hanguang 800, and server CPU, Yitian 710, in 2019 and 2021, respectively. Both chips were manufactured at TSMC’s 5nm process and are extensively used on Alibaba’s cloud computing platform.

In December 2019, Baidu released its AI chip, Kunlun Xin, which uses Samsung’s 14nm process, followed by its 2nd generation, which uses a 7nm process, for AI and image coding.

• Smartphone: Xiaomi, Vivo, OPPO

Due to the high technical threshold of SoC technology used in smartphones, mobile phone brands mainly develop their own chips by optimizing image, audio, and power processing.

In the year of 2021, Xiaomi released the ISP Surge C1, followed by the PMIC Surge P1. Vivo first released the ISP V1 in September 2021, followed by an upgraded product, V1+, in April 2022, and then V2 in November 2022.
OPPO, on the other hand, unveiled the MariSilicon X NPU in December 2021, which enhances the image processing performance of smartphones, using TSMC’s 6nm process, and later revealed the MariSilicon Y Bluetooth audio SoC TSMC’s 6nm RF process later in 2022.

• Home appliance: Konka, Midea, Changhong, Skyworth

The brands are focusing primarily on MCU and PMIC chips that are essential to a wide range of home appliances. They’re also incorporating SoC chips into their smart TVs.

For example, Hisense has jumped into the SoC game in January 2022 by releasing an 8K AI image chip for their smart TVs. Changhong manufactured an MCU with RISC-V architecture and a 40nm process in December 2022.

• Autonomous driving: NIO, Xiaopeng, Li Auto, BYD

The leading companies are developing ISP and highly technical SoC chips for autonomous driving, which has resulted in a slower development process.

In 2020, NIO formed a semiconductor design team for Autonomous driving chips and ISP. Xiaopeng started its Autonomous driving and ISP chip R&D project in the first half of 2021. Li Auto established two subsidiaries in 2022, with a primary focus on power semiconductors and ISP chips.

Finally, BYD, which has a long history of working on MCU and power semiconductor components, also announced its entry into the autonomous driving chip market in 2022.

Navigating the US’ Tech Crackdown

So why are these brands investing so heavily in self-developed ASICs?

One reason is to avoid the risks associated with export control policies from the US and its allies. Developing their own chips would mitigate the risk of supply chain disruptions caused by potential blockades, ensuring a stable supply and the sustainability of their technology roadmap.

In addition, there are many internal incentives for these brands – for instance, companies that have self-developed chips will be eligible for more government subsidies, as this aligns with the government’s aggressive policy to foster the semiconductor industry. Brands can also reduce their reliance on external suppliers by using their own ASIC chips, which can further lower the operating costs.

Technology wise, ASIC chips allow brands to enhance the features they require and enable better integration with the software, which could provide efficiency gains at system level – similar strategies are also being employed by Google and AWS with their AI chips, as well as by Apple with its M1 SoC.

With all things considered, it is certainly possible that we will see a persistent trend of more self-developed ASIC chips made by Chinese brands, which could potentially lead to significant changes in China’s semiconductor supply chain from the ground up.

In May, TV panel prices are expected to continue rising due to strong inventory momentum and dynamic operating capacity utilization by panel manufacturers. Especially Chinese manufacturers aim to restore TV product profits to above break-even points by the end of Q2, so the price increase of TV panels in May is significant. Full-size TV panel prices are expected to increase by 1~10 USD, which are all predicted to rise above cash costs in May.

VA panels are in higher demand than IPS panels for monitors currently, and Open Cell panel prices have slightly risen in recent months. The monitor panels are expected to continue to rise by 0.3~0.5 USD in May. Module product demand outlook is uncertain, with limited price increase space, so prices will likely remain stable in May. Taiwanese panel manufacturers have released information on price increases for monitor panels, and their impact on the market atmosphere and price trends needs to be observed still.

Demand momentum for notebook panels is slowly increasing, but the overall demand outlook is unclear, so the NB brands remain conservative attitude on their panel inventory. Meanwhile, the NB brands are expected to be high-maintenance while dealing with the tentative messages about raising the NB panel prices from panel manufacturers. Therefore, TrendForce believes that notebook panel prices are expected to remain stable in May.

Due to geopolitical and pandemic, Apple has been accelerating the diversification of its supply sources, with India being the most well-known case for such transfer. According to TrendForce, India’s Tata Group is expected to become the fourth iPhone assembler for Apple. Following Apple’s pattern, new suppliers receive smaller orders for lower-end models, which means Tata Group will initially get only small orders for the iPhone 15 and iPhone 15 Plus.

TrendForce thinks the small order has 3 implications in Apple’s relocation plan:

First, Tata, the largest conglomerate in India, has received orders for iPhone 15 and iPhone 15 Plus, indicating that India will become the first wave of shipments for new iPhone series.

Second, the reason why Tata is able to produce iPhone is due to the acquisition of Wistron’s Indian production line. Therefore, Tata’s entry also means Wistron’s exit from the iPhone assembly business.

Last, Tata is the fourth company to undertake iPhone assembly business after Luxshare joined in 2020 for iPhone 12 Pro Max assembly.

TrendForce emphasized that although Tata’s share of assembly orders for various iPhone models is only 5% in 2023, it still shows an accelerating trend of Apple’s production relocation.

As smartphones have entered a mature phase, the pace of innovation has slowed down. Additionally, the hardware and software of smartphones have reached a certain level, leading to longer lifespans and indirectly causing longer replacement cycles. On the other hand, to boost sales, brands and retailers have opened up old-for-new exchange programs, which has helped stabilize the growing market for second-hand and refurbished phones. Furthermore, the recent global economic downturn and consumer spending constraints have further driven the growth of this market.

The second-hand and refurbished phone market has been gradually strengthening, even eroding the performance of the new smartphone market. According to MediaTek, a major mobile chipmaker, the total volume of the iPhone second-hand and refurbished market is estimated to be around 50 million to 100 million units annually.

TrendForce estimates that the sales volume of this second-hand and refurbished market will be between 150 million to 200 million units this year, accounting for approximately 10-15% of the overall handset sales.

Looking ahead to 2024, due to the global economic situation not being overly optimistic, as well as the increased demand for smartphones in emerging regions, the market is expected to continue to contribute to growth. We estimate that the second-hand and refurbished market will reach a sales performance of over 200 million units in 2024.

On the other hand, the second-hand and refurbished market is still mainly dominated by high-end phones from Apple and non-Apple brands with higher resale value. Among them, Apple accounts for about 50% of the market, followed by Samsung.