AGC Fine Techno Korea, which is a glass substrate manufacturing plant owned by AGC and located in the South Korean city of Gumi, suffered a furnace explosion that also led to injuries of plant personnel on January 29. TrendForce’s latest investigation projects that this incident will affect no more than 1% of the total global supply of glass substrates for display panels. However, demand is rising across the panel market. At this sensitive moment, any event that affects the supply of panel components could exert significant influence on panel prices. In the second half of 2020, glass substrate supplier NEG (that is based in Japan) experienced issues that constrained the supply and thereby fueled the rise in panel prices. TrendForce does not rule out the possibility that this latest incident will also further bolster panel prices to some degree.

Explosion Accident Exacerbates Recent Tight Supply of Glass Substrates

The high demand for various panel applications, together with the issue encountered by NEG in the respective supply of glass substrates, has resulted in the relatively strained global supply of the product. NEG had initially anticipated resuming normal supply starting from the end of 1Q21, though the furnace explosion of AGC has created new variables to the overall supply of glass substrates. The affected furnace was planned to supply substrates for the new production line of G10.5 in China; thus TrendForce believes that AGC is bound to implement scheduling and allocation of production capacity after the furnace explosion, so as to respond to the supply void created by the incident, and the major affected time point will occur during 2Q21. The analysis of TrendForce indicates that a single production line for a single supplier will be affected if the scope of impact is strictly within the supply of G10.5 glass substrates, with implicated dimension as 65” and 75”. Should a scheduling of production capacity be required, the affected range will be enlarged to G8.5, and will include Taiwanese and partial Chinese panel suppliers, where the affected dimension will also expand to below 55”.

Panel Prices Are Expected Be Maintained at a High Level

Prices of TV panels have been climbing over the past several months and are still on the upswing. The excessively high cost of panel procurement is starting to become an issue for branded TV manufacturers.  TrendForce previously forecasted that prices of TV panels would keep rising to the end of 1Q21 and then drop slightly in the second half of 2Q21 due to demand fluctuations. However, TrendForce has modified its projection on account of the furnace explosion at AGC Fine Techno Korea on January 29. Panel prices may continue to stay at a high point through 2Q21 and maintain this trend until late 3Q21 before further adjustments could take place.

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

Not only did automotive market take a downward turn starting in 2018, but the severe impact of the COVID-19 pandemic in 2020 also led to noticeably insufficient procurement activities from major automotive module suppliers, according to TrendForce’s latest investigations. However, as the automotive market is currently set to make a recovery, TrendForce expects yearly vehicle sales to increase from 77 million units in 2020 to 84 million units in 2021.

At the same time, the rising popularity of autonomous, connected, and electric vehicles is likely to lead to a massive consumption of various semiconductor components. Even so, since most manufacturers in the automotive supply chain currently possess a relatively low inventory, due to their sluggish procurement activities last year in light of weak demand, the discrepancies in the inventory levels of various automotive components, along with the resultant manufacturing bottleneck, have substantially impaired automakers’ capacity utilization rates and, subsequently, vehicle shipments.

The recent shortage situation in the IC supply chain has gradually extended from consumer electronics and ICT products to the industrial and automotive markets. In the past, manufacturers in the automotive semiconductor industry were primarily based on IDM or fab-lite business models, such as NXP, Infineon, STMicroelectronics, Renesas, ON Semiconductor, Broadcom, TI, etc. As automotive ICs generally operate in wide temperature and high voltage circumstances, have relatively long product lifecycle, and place a heavy demand on reliability as well as longevity support, it is more difficult for the industry to alternatively transition its production lines and supply chains elsewhere.

Automotive semiconductor remains in shortage as production capacities remain fully loaded across the global foundry industry

Nevertheless, given the current shortage of production capacities across the foundry industry, wafer capacities allocated to automotive semiconductor components have been noticeably crowded out by other products. Some of these examples include automotive MCU and CIS manufactured in 12-inch fabs, as well as MEMS, Discrete, PMIC, and DDI products manufactured in 8-inch fabs. TrendForce indicates that automotive semiconductor products manufactured at the 28nm, 45nm, and 65nm nodes in 12-inch fabs are suffering the most severe shortage at the moment, while production capacities at 0.18µm and above nodes in 8-inch fabs have also been in long queue by other products.

As in-house IDM fabrications have relatively high CAPEX, R&D expense, and operating overhead, automotive IC vendors have in recent years outsourced some of their products to TSMC, GlobalFoundries, UMC, Samsung, VIS, Win Semiconductor and so on. In particular, TSMC specifically indicated during its 4Q20 earnings conference that wafer starts for automotive semiconductors reached rock bottom in 3Q20, while additional orders began arriving in 4Q20. As such, the company is currently considering allocating some of its production capacities from logic ICs to specialty foundry, in order to meet sudden demand from its long-term customer relationship.

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

As various TV manufacturers such as Samsung, LG, and TCL announced their new models equipped with Mini LED backlights at CES 2021, TrendForce’s 2021 Mini LED New Backlight Display Trend Analysis report shows that total Mini LED chip revenue from Mini LED backlight TVs to potentially reach US$270 million in 2021, as manufacturers gradually overcome technological bottlenecks and lower their overall manufacturing costs, according to TrendForce’s latest investigations.

Mini LED backlight TVs possess a highly cost-effective competitive advantage, as Mini LED backlight costs for the entry-level segment are only 50% higher than traditional LCD equivalents

TrendForce further indicates that, with regards to TV backlight technologies, the cost of Mini LED solutions is about two to three times lower than that of white OLED and entry-level, direct-lit LCD solutions. This cost difference therefore serves as Mini LED technology’s competitive advantage over its competitors in display backlight adoption. At the moment, high-end TVs contain about 16,000 Mini LED chips per TV, divided into 2,000 local dimming zones.

In this market segment, PM (passive matrix) Mini LED TV panels with BLU (backlight unit) still cost about 15% less than OLED TV panels and therefore hold a cost advantage. On the other hand, in the mid-range TV segment, each TV contains about 10,000-12,000 Mini LED chips and 500 local dimming zones, meaning the cost of Mini LED backlight integration in this market segment is about a mere 50% more than entry-level, direct-lit LCD backlight units, making Mini LED a viable alternative to traditional LCD solutions in this segment too. Given the high cost-effectiveness of Mini LED backlight units, TV manufacturers are therefore likely to adopt them as a viable technology and initiate an industry-wide competition over Mini LED TV specs this year.

HDR and 8K resolution will be the two mainstream features of high-end TVs this year. With regards to Korean brands, Samsung’s Neo QLED Mini LED TV and LG’s QNED Mini LED TV, both unveiled at CES this year, are equipped with Mini LED backlights as a performance-enhancing technical feature. These TVs feature not only 8K resolution, but also Mini LED backlight units, which require more than 20,000 Mini LED chips (divided across more than 1,000 local dimming zones, with more than 1,000 nits in peak brightness), in addition to passive matrix FALD technology, which allows for contrast ratios of 1,000,000:1, a significant improvement that puts these TVs on almost equal footing with OLED TVs in terms of image quality. At the same time, China-based TCL is also set to release its OD Zero Mini LED TV, which has comparable specs with Korean offerings and is also equipped with Mini LED backlight units. Going forward, more and more TV manufacturers, such as Hisense and Xiaomi, are expected to participate in the burgeoning Mini LED backlight TV market.

The pace of optimizing Mini LED chips, backplanes, and driver ICs will be key to the Mini LED industry’s rapid expansion

As various manufacturers successively release their Mini LED backlight TVs this year, related companies in the supply chain are expected to benefit as a result. Currently, there are multiple major suppliers of Mini LED components on the market: Chip suppliers include Taiwanese (Epistar and Lextar), Chinese (San’an and HC SemiTek), and Korean (Seoul Semiconductor) companies. Testing and sorting companies include FitTech, Saultech, and YTEC. SMT companies include Taiwan-based Lextar and China-based Hongli Zhihui. Driver IC suppliers include Taiwanese (Macroblock, Elan, Parade, Himax, and Novatek) and Chinese (Chipone) companies. Backplane suppliers include Tawanese (Apex and Zhen Ding Tech) and Korean (Young Poong Group) companies. Panel suppliers include SDC, LGD, AUO, Innolux, BOE, and CSOT.

TrendForce believes that Mini LED backlight displays currently possess a competitive advantage over OLED displays due to the former’s 15% comparatively lower cost. Ultimately, the future development and profitability of the Mini LED backlight market in the long run will depend on the continued optimization of components that account for a relatively higher allocation of backlight costs, including Mini LED chips, Mini LED backplanes, and driver ICs.

For more information on reports and market data from TrendForce’s Department of Optoelectronics Research, please click here, or email Ms. Grace Li from the Sales Department at graceli@trendforce.com

While major OEMs such as Apple and Samsung prepare to release their new notebook computers, tablets, and TVs that are fully equipped with Mini LED backlights this year, various companies in the LED supply chain began procuring Mini LED chips ahead of time in 4Q20, leading to an explosive demand growth for these chips, which in turn crowded out the LED suppliers’ production capacities for other mainstream LED chips, according to TrendForce’s latest investigations. Given this structure-wide shortage of LED chips, certain LED chip suppliers have been raising the quotes on chips supplied to non-core clients and chips with relatively low gross margins. This price hike is estimated at about 5-10%.

TrendForce further indicates that companies in the downstream LED supply chain have started to aggressively procure components in order to mitigate the impending price hike on raw materials and shortage of components due to manufacturers’ tight production capacities after the Chinese New Year. However, products of certain serial numbers or specifications are already in shortage at the moment, therefore prompting these downstream companies to raise quotes first for small- and medium-size clients who place relatively low-volume orders. As for tier one clients who have relatively higher bargaining power, should they reject such a price hike, they would then need to wait for more than two months in lead times, which is significantly longer than the average of two weeks.

Epistar is currently shipping about 150,000 pcs of Mini LED wafers (4-inch equivalent) per month. As Mini LED chips yield far higher gross margins than do traditional LEDs, Epistar has reallocated some of its production capacities for the latter, less profitable products to Mini LED chip manufacturing instead. On the other hand, San’an and HC SemiTek are directly benefitting from Epistar’s order transfers. In addition to persistently growing demand for traditional LED backlights and RGB LED chips for video walls, San’an and HC SemiTek are also shipping several tens of thousands of Mini LED wafers per month (4-inch equivalent) owing to skyrocketing Mini LED demand.

Worth mentioning is the fact that HC SemiTek’s product strategy of focusing on LED chips for display applications is paying off noticeably. By leveraging its competitive advantage of highly cost-effective products, HC SemiTek’s capacity utilization rates have been fully loaded for two consecutive quarters since 3Q20. On the other hand, about 400,000 pcs in PSS production capacity was suspended last month due to the fire at GAPSS’ fab. This incident led to a 5-10% price hike in key upstream LED chip materials including sapphire wafers and PSS, likely to further exacerbate the price hike and shortage of LED chips.

TrendForce believes that the structural shortage taking place in the LED industry, which led to a price hike for LED chips, can primarily be attributed to the that fact the industry underestimated the production capacity needed for key parts of the supply chain during the infancy of pandemic-related emerging applications, in addition to the corresponding production capacity squeeze, although these issues are expected to be resolved within half a year. As well, the downturn experienced by the LED industry within the past few years led to a clearance of excess capacities and subsequently a highly concentrated supply of key materials in the upstream LED supply chain, including sapphire wafers and PSS. As a result, the suppliers of these key materials now enjoy increased bargaining power in price negotiations. Given the simultaneous increase in material costs and limited material supplies, TrendForce thus forecasts a price hike for LED chips.

For more information on reports and market data from TrendForce’s Department of Optoelectronics Research, please click here, or email Ms. Grace Li from the Sales Department at graceli@trendforce.com

Intel has outsourced the production of about 15-20% of its non-CPU chips, with most of the wafer starts for these products assigned to TSMC and UMC, according to TrendForce’s latest investigations. While the company is planning to kick off mass production of Core i3 CPUs at TSMC’s 5nm node in 2H21, Intel’s mid-range and high-end CPUs are projected to enter mass production using TSMC’s 3nm node in 2H22.

In recent years, Intel has experienced some setbacks in the development of 10nm and 7nm processes, which in turn greatly hindered its competitiveness in the market. With regards to smartphone processors, most of which are based on the ARM architecture, Apple and HiSilicon have been able to announce the most advanced mobile AP-SoC ahead of their competitors, thanks to TSMC’s technical breakthroughs in process technology.

With regards to CPUs, AMD, which is also outsourcing its CPU production to TSMC, is progressively threatening Intel’s PC CPU market share. Furthermore, Intel lost CPU orders for the MacBook and Mac Mini, since both of these products are now equipped with Apple Silicon M1 processors, which were announced by Apple last year and manufactured by TSMC. The aforementioned shifts in the smartphone and PC CPU markets led Intel to announce its intention to outsource CPU manufacturing in 2H20.

TrendForce believes that increased outsourcing of its product lines will allow Intel to not only continue its existence as a major IDM, but also maintain in-house production lines for chips with high margins, while more effectively spending CAPEX on advanced R&D. In addition, TSMC offers a diverse range of solutions that Intel can use during product development (e.g., chiplets, CoWoS, InFO, and SoIC). All in all, Intel will be more flexible in its planning and have access to various value-added opportunities by employing TSMC’s production lines. At the same time, Intel now has a chance to be on the same level as AMD with respect to manufacturing CPUs with advanced process technologies.

(Cover image source: Taiwan Semiconductor Manufacturing Company, Limited )

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