Industry trend & Price trend

IT panel industry is expected to see a peak season in the second half of the year. Indicators such as channel inventory and brand inventory have improved from the slump last year, and a rebound in demand can be expected in the second half of the year. However, commercial IT panels are being purchased quite cautiously due to high inflation and economic uncertainties, while consumer IT panels can be expected to perform better.

In the display sector, there has been an observed increase in prices for gaming monitors, but it is unlikely to see a large-scale replenishment like in the TV market due to sufficient supply of IT panels and increasing production capacity in China. There is limited room for a significant price increase, but consumer displays may experience a small rebound, unlike commercial displays.

As for TVs, it is expected that the cost of production will surpass cash cost in May and June, leading panel manufacturers to increase their production rates. The extent of this increase will be crucial, as it could potentially drive panel prices higher or stall the price increase altogether. Production increase poses a significant uncertainty for supply and price hikes, with the third quarter remaining a key period that will depend on demand. If China returns to cash levels, higher production rates could be a potential risk.

Utilization rate

According to TrendForce, global panel manufacturers had a production capacity utilization rate of around 67%-68% in the first quarter, which is expected to increase to 73%-74% in the second quarter. The third quarter is conservatively estimated to reach utilization rate of nearly 80%.

China Dominates the LCD Market

As Samsung and LG Display gradually withdraw from the LCD market, Chinese panel manufacturers continue to expand their market share. This year, the global shipment volume for TV panels is expected to reach 70% market share.

Amid a prolonged market downturn and persistent weakness in end demand, the world’s top three memory chipmakers – Samsung, SK Hynix, and Micron – have implemented production cuts in an effort to control the continuing decline in memory prices through supply management. Recently, news emerged in the memory channel market that Micron had notified its customers that starting in May, it will not accept inquiries for DRAM and NAND Flash below current market prices.

According to TrendForce, the situation is not widespread at the moment, but is limited to low-priced memory chips. As for other product categories with high inventory levels, they still cannot avoid the situation of falling prices.

Contract market:

Although DRAM suppliers have actively reduced production, the output bit volume has not yet reached an effective convergence in 2Q23, so the quarterly contract price decline will be greater than originally expected, with an expected drop of more than 15%. TrendForce has observed that there is a strong wait-and-see atmosphere on the OEM side. While the willingness to purchase DRAM has increased, the premise of the deal is that low-priced quotes are attractive enough to OEMs. Due to poor demand prospects, the purchasing behavior of buyers still appears to be passive.

Spot market:

TrendForce pointed out that Micron’s subsidiary brand, Spectek, has slightly raised prices for its products this week, especially in the low-priced chip segment, indicating a reluctance to further reduce prices. Therefore, trading in the spot market appears stagnant, similar to the strong wait-and-see attitude mentioned in the contract market.

As suppliers have already entered a stage of significant losses, it is necessary to continue to expand production cuts to avoid prices from collapsing again. Among them, DDR4 still has a price decline due to high inventory levels and weak demand, while the supply of DDR5 is limited by the PMIC compatibility issue, resulting in an upward trend in spot prices.

Polysilicon

Polysilicon prices had enlarged in reduction this week, where mono-Si compound feedings and mono-Si dense materials were concluded at a respective mainstream price of RMB 178/kg and RMB 175/kg under an average drop of roughly 7.8%. The drop of polysilicon prices had somewhat widened this week alongside the continuous release and ramp-up of polysilicon capacity, as well as the depleted procurement from crystal pulling plants.

Low-quality polysilicon continues to diverge in prices from mainstream products, and has been seeing a low level of purchases, while most businesses that are procuring frequently at small batches amidst the continuous reduction of polysilicon prices had contributed to the finalization of several new orders this week. Some businesses have started negotiating for their May orders, and prices are expected to continue fall with the arrival of the new round of order signing. An observation on the production and operation of the polysilicon segment this week indicates that two businesses are currently under overhaul. Polysilicon supply should continue to climb as businesses, including Daqo New Energy, GCL, Dongli, Runergy, and East Hope, release capacity and initiate production between May and June.

Wafers

Wafer prices had slightly fluctuated this week, where M10 and G12 were concluded at a respective mainstream price of RMB 6.25/pc and RMB 8/pc. M10 mono-Si wafers had maintained a slow reduction due to insufficient demand, while G12 mono-Si wafers were largely stabilized in prices thanks to lingering support from demand.

The successive port arrival of imported quartz sand is able to fulfill full-load production among wafer businesses, though downstream cell businesses have not been aggressive in inventory pulls alongside the continuously rising level of wafer inventory, and are relatively resistant towards high-priced resources, which amplify the degree of wafer shipment on a continual basis, while second and third-tier businesses are also constantly lowering their prices in order to fight for orders.

Current mainstream concluded prices have fallen below that of prices previously announced by LONGi and Zhonghuan, and await the new round of prices that will soon be announced by leading businesses.

Cells

Cell prices were essentially stabilized this week, where M10 and G12 cells were concluded at a respective mainstream price of RMB 1.07/W and RMB 1.13/W. Supply and demand from upstream and downstream cell sectors have been relatively sturdy lately, with no significant changes to the level of overall inventory.

As demand for TOPCon cells increases, a segment of P-type production lines are currently being upgraded to N-type amidst continuous release and ramp-up of partial new capacity. The significantly risen supply of TOPCon cells could further widen the price difference between P-type and N-type cells. With upstream wafers dropping in prices and climbing in production, the cell segment has welcomed a recovery in profitability, though module makers are also amplifying in sentiment towards suppressing cell prices.

Modules

Module prices continued to maintain stability this week, where 182 and 210 mono-Si single-sided PERC modules were respectively concluded at RMB 1.67/W and RMB 1.68/W, while 182 and 210 bifacial double-glass mono-Si PERC modules sat on RMB 1.69/W and RMB 1.7/W respectively.

The continuous price drop from the upstream polysilicon and wafer segments has yet to be effectively transmitted to the module segment, and the end sector remains relatively anticipative towards dropping module prices, where some businesses of integrated production are generating orders by offering lower prices in order to bring up their shares in the domestic market. Integrated module makers are likely to carry on with their increase of demand during May, while the transmittance of price reduction from midstream and upstream sectors are also expected to further pull up end demand.

In terms of auxiliary materials, glass prices were seen with robustness this week, where 3.2mm and 2.0mm were respectively priced at RMB 26/㎡ and roughly RMB 18.5/㎡. As the new round of centralized order signing arrives soon, some module makers have been comparatively cautious on procurement by adequately digesting their previously accumulated inventory, and had thus led to a marginal drop of glass shipment this week compared to that of last week.

According to TrendForce’s research, the global production volume of smartphones in 2022 is projected to reach 1.192 billion units, a YoY decrease of 10.6%, exceeding even the decline seen in the pandemic year.

However, the market for refurbished smartphones is a completely different story. Research institutions have pointed out that Apple’s sales of refurbished smartphones have grown by 16%, and the company now holds nearly half of the refurbished phone market.

The thriving market for refurbished and second-hand smartphones has ignited demand for touch and display integration IC (TDDI) from the repair market since 2H22, and this demand is expected to double to 200 million units in 2023.

But why is the demand for refurbished and second-hand smartphones increasing year after year? There are two possible reasons based on the current overall environment:

The price of refurbished and second-hand smartphones is lower than that of new smartphones.

Most refurbished and second-hand smartphones are refurbished before being sold back to the market. Their functionality and appearance are mostly normal, and unless the user mentions it, it is difficult to tell if it is a second-hand smartphone.

When purchasing refurbished smartphones, most people prioritize high-end models with high price points, regardless of the brand. However, the entry threshold for high-end new smartphones is often high, but this type of smartphone can be obtained at a cheap price in the second-hand market.

Why iPhone is the preferred choice?

• Brand recognition: Consumers of all ages may immediately think of Apple/iPhone when they hear the words “smartphone brand,” and iPhone can become a faction in its own right compared to Android smartphones.
• Operating system support: For smartphone users, the biggest fear when using the same smartphone for a long time is encountering the problem of the operating system no longer being supported. Although the smartphone can still be used when the operating system cannot be upgraded, security is no longer guaranteed.

However, the support and fluidity of the operating system are often advantages of Apple, and the iOS update support period is quite long, up to 6 years. Although 6 years may not sound long, statistics show that the average device usage cycle for an iPhone user is 3 years, and a support period of 6 years is actually a very long time. Even if you take over someone else’s second-hand smartphone, you don’t have to worry too much about the operating system not being supported.

While the growth of the refurbished smartphone market is good news for consumers, how much benefit does it bring to smartphone manufacturers?

For smartphone manufacturers, most of the profits come from the sale of new smartphones. When consumers purchase second-hand smartphones, the profit margins for manufacturers are reduced. However, manufacturers can still benefit from the demand for refurbished smartphones by participating in the refurbishment process or selling refurbished smartphones themselves.

In the post-Moore’s Law era, chiplet design has been burgeoning as the mainstream architecture.

With the widespread adoption of EUV technology by foundries on process nodes of 5nm and below, the cost of semiconductor fabrication has skyrocketed. The cost of the 5nm process has grown by almost 1x compared to the 7nm process, and the 3nm process is expected to increase by almost 1x compared to the 5nm process.

To address this issue, IC design companies have started to split chip components or connect multiple chips and adopt advanced packaging such as 2.5D/3D IC to integrate multiple chips together.

Compared to traditional chip design methods, chiplet design has superior characteristics such as shorter upgrade cycles, lower costs, and higher yields, which is one of the reasons why chiplet technology is gaining popularity.

AMD’s chiplet design is a representative example. Through close collaboration with TSMC, AMD has fully transitioned its CPUs to chiplets since the 7nm process, with the Ryzen 7000 series CPU and Radeon RX 7000 series graphics cards released in 2022. The latter uses the RDNA 3 architecture and integrates the GCD and MCD produced by the 5nm and 6nm processes respectively, as a result improving overall performance, with a 54% increase in RDNA 3’s Performance per Watt.

Under the leadership of industry leaders such as AMD and Intel, chiplet design has had a significant impact on the entire semiconductor industry – substrates manufacturers in particular.

ABF Substrates Set to Soar

Aside from CPUs, developments in AMD and Intel’s server platforms indicate that the trend towards higher-layer-count and larger-area ABF substrates is expected to continue.

Given the server shipment volume is expected to remain stable and grow steadily in the mid to low single digits for the next 3-5 years, the growth momentum of ABF substrates mainly comes from the increase in layer count and area brought by 2.5D/3D packaging adoption in servers.

Starting in 2020, ABF substrates saw a surge in demand due to the pandemic. The supply-demand gap peaked in 2021, and in the first half of 2022, ABF substrate prices increased while volume increased and gross profit margins hit new highs.

Due to the impact of shortage in ABF substrates in 2020-2021, major substrate manufacturers have initiated large-scale expansion plans, with the expectation that demand for ABF substrates would continue to grow with the upcoming releases of new server platforms and the integration of 2.5D packaging for PC CPUs.

Growing demands with Some Hiccups

However, the moves have been put on hold for now. Since the second half of 2022, due to inventory correction in the overall semiconductor industry and the delayed production time of Intel’s new server platform, there’s been a supply glut in ABF substrates.

Therefore, Unimicron has taken the lead in adjusting its capital expenditure plans, reducing its planned capacity increase for 2023 from about 20% to only 3.5%. AT&S has also tentatively postponed the significant increase in capacity planned for the end of 2024. It is unclear when the expansion will resume or whether the expansion will be scaled back.

This indicates that current substrate manufacturers have not only lowered their demand projections for 2023, but also for 2025-2026. Further adjustments to the expansion plans of other manufacturers will also affect the future market supply-demands dynamics.

Back on Track for Major Growth in 2024

Looking into the future, things are looking up for the ABF substrate industry. In the second quarter of 2023, we can expect the release of new server platforms from AMD and Intel, as well as the completion of PC inventory adjustments.

With expansion plans in place, it’s predicted that global ABF substrate production capacity will only increase by 15-20% in the latter half of 2023, continuing to put pressure on substrate manufacturers, according to TrendForce.

Things are expected to pick up in 2024 with the release of AMD and Intel’s next-generation server platforms, Zen 5 and Birch Stream. Plus, the anticipated introduction of 2.5D packaging for PC CPUs will drive a new wave of demand for ABF substrates. All in all, we can expect a significant rebound for the ABF substrate industry in 2024.