As the pace of electrification accelerates in the global automotive market, and various governments worldwide implement subsidy policies that encourage consumer EV purchases, sales of new energy vehicles（NEV, which includes BEV/PHEV/FCV）are continuing to rise as well. NEV sales for 2021 are projected to reach 4.35 million units, a 49% increase YoY.

Due to the vast scale of the Chinese market, as well as domestic policies favorable for the growth of BEV/PHEV/FCV, various NEV brands have quickly emerged in China in recent years, such as BYD Auto, Aion（formerly GAC NE）, and BAIC BJEV. At the market’s peak, NEV manufacturers in China once numbered in the hundreds, although that number has since dwindled somewhat, as the intense competition resulted in declining sales and market shares for many automakers, including BAIC and JAC.

Four rising stars among emerging NEV manufacturers in China include NIO, XPeng, Lixian（or Li Auto）, and Weltmeister, all of which have been shipping tens of thousands of mass production vehicles each year. In particular, while NIO, XPeng, and Lixiang registered significant growths in the past few years, Weltmeister also ranked number two in terms of sales in 2019, though it fell to fourth place in 2020 as it delivered fewer vehicles compared to the top three competitors last year.

In light of the aforementioned four automakers’ current expansions, TrendForce has summarized several key aspects of their growths, including the following:

1. Autonomous Driving Technologies: Autonomous driving is not only part and parcel of these automakers’ core competencies but also a reflection of what consumers and investors expect of the automotive industry. In pursuing advanced autonomous driving technologies, the four automakers have been adopting increasingly powerful processors and computing platforms, with Nvidia being the most common partner among emerging NEV manufacturers. Remarkably, XPeng stands out as the only player making a noticeable effort to develop in-house chips.

2. LiDAR: LiDAR is integrated into an increasing number of vehicles in response to the growing demand for advanced self-driving functionalities. Although LiDAR remains out of reach for vehicles in certain price segments, autonomous driving sensors including LiDAR are no longer limited to flagship models since new NEV models’ E/E architectures are expected to be compatible with OTA updates.

LiDAR sensor demand from NEV manufacturers has significantly increased because only by pre-installing  hardware ahead of time in their vehicles can automakers enable autonomous driving functionalities as a paid subscription service through OTA updates later on.

3. Battery-swapping: Battery-swapping are relatively attractive for the Chinese NEV industry for several reasons: First, battery-swappable vehicles are excluded from China’s NEV subsidy limits*; second, automakers can now afford to lower the retail price of vehicles by turning batteries into a subscription service; finally, it’s much convenience for driver because battery swapping is faster than battery charging.

For instance, NIO’s entire NEV lineup is compatible with both battery charging and battery swapping. NIO has been pushing its BaaS（battery as a service）and  second-gen battery swap stations since 2020. On the other hand, Weltmeister and XPeng are also making their respective battery-swapping strategies.

4. Capacity Expansion and Overseas Strategies: The aforementioned four automakers all place a heavy emphasis on both expanding their production capacities and growing their overseas market shares. Their capacity expansion efforts include building in-house production lines, acquiring other facilities, or jointly funding automotive production with OEMs/ODMs. Regarding overseas expansion, their primary destination is the European market, which is relatively favorable to NEVs.

For instance, NIO and XPeng choose Norway as their first target market in Europe. However, while the European automotive market is conducive to the growth of NEVs in terms of both policies and cultures, competition among automakers is also correspondingly intense. In addition, most European countries prefer either domestic brands or other European brands. Therefore, Chinese automakers must prioritize gaining consumer trust via establishing a trustworthy brand image.

*China’s subsidies for NEV purchases are restricted to NEVs with a retail price of CN¥300,000 and under. However, NEVs with swappable batteries do not fall under this restriction.

（Cover image source: Unsplash）

As the Taiwanese IPC (industrial PC) market suffered from deferred orders due to supply chain and logistical disruptions that took place in 1H20, total domestic IPC revenue for 1H20 reached NT$105.4 billion, a 4.7% YoY decrease, according to TrendForce’s latest investigations. However, given that the pandemic was gradually brought under control in 1H21, the market was able to benefit from strong demand from China’s 5G infrastructure rollout, as well as from expanded investments by Europe and the US in public infrastructures such as roads and railways aimed at facilitating an economic recovery. Hence, Taiwan’s IPC revenue for 1H21 reached NT$115.1 billion, a 9.2% YoY increase.

Regarding the financial performances of the top 10 IPC suppliers in Taiwan for 1H21, Ennoconn secured first place with a revenue of NT$42.95 billion, a 16.7% YoY increase. After its acquisition spree that began in 2010, Ennoconn is currently attempting to integrate its various subsidiaries’ technologies and resources in order to make headways in certain emerging technologies, including industrial automation, machine vision, HMI, and cloud services. Going forward, Ennoconn will cultivate its presence in the EV, smart healthcare, and smart retail sectors.

For 1H21, runner-up Advantech posted a revenue of NT$27.37 billion, an 8.2% YoY increase. While Advantech previously favored an acquisition-driven strategy, the company is now expanding into the smart healthcare, smart manufacturing, and smart city sectors primarily through technological partnerships and equity investments. Backed by its WISE-PaaS platform, Advantech continues to expand into the global markets by investing in overseas ISV (independent software vendors) and SI (systems integrators) in the aforementioned sectors.

DFI earned a third-place ranking in 1H21 with a revenue of NT$5.28 billion, a 25.2% YoY increase. After becoming part of the Qisda fleet in 2017, DFI subsequently went on to acquire telecom and information security solutions supplier AEWIN as well as industrial automation vendor Ace Pillar in 2019. These activities culminated in an annual revenue of NT$8.35 billion, an 18.8% YoY increase, for DFI in 2020. DFI currently specializes in smart manufacturing, smart healthcare, and intelligent transportation systems/infrastructures.

AI accelerator suppliers and IPC suppliers work in tandem to clearly define the AI value chain

IPC products have been widely used in AIoT and IIoT applications in recent years due to the proliferation of edge computing. As such, these products have also become the key determinant of how rapidly industries can adopt AI technologies such as machine vision. At the same time, IPC suppliers’ unique position in the mid-stream AI value chain means they are responsible for bridging the gap between upstream AI accelerator suppliers (including Intel, AMD, and Nvidia) and downstream ISV/SI.

With regards to the upstream AI value chain, Intel and AMD acquired independent FPGA suppliers Altera and Xilinx, respectively, in order to achieve more comprehensive heterogeneous computing competencies via horizontal integration. On the other hand, midstream IPC suppliers have been vertically integrating with downstream ISV/SI either independently or collectively through JVs, technological collaborations, strategic alliances, or M&A. For instance, Advantech and ADLINK are now operating on multi-strategy models as well as strategic collaboration models respectively, while Ennoconn and DFI are operating on M&A-oriented models.

On the whole, TrendForce expects that, as AI accelerator suppliers and IPC suppliers push integration forward in the AI value chain, not only will an increasing number of IPC products based on heterogeneous computing platforms be released to market, but emerging AI technologies such as machine vision will also see increased penetration in industrial automation applications. Hence, TrendForce expects annual machine vision revenue to reach US$86 billion in 2025.

In recent years, notebook computer (laptop) brands and processor suppliers alike have been actively adjusting their product strategies and business operations in response to behavioral shifts in the way consumers purchase and use computing devices. While notebook brands jostle for superiority in industrial design with improvements to their product appearances every year, competition in the processor industry has been even fiercer. TrendForce’s investigations indicate that the current competitive landscape in the processor industry consists of three developments, indicated below:

First, competition between AMD and Intel. Not only are both companies focused on expanding their respective ecosystems, but they have also been aiming to conquer the gaming market by releasing new products aimed at gamers this year. Apart from making headways in the PC processor market, AMD has introduced the AMD Advantage Design Framework.

AMD Advantage gaming notebooks are certified to meet standards of performance set by the company. AMD hopes that this certification system will allow it to generate a more consolidated gaming ecosystem while raising its brand equity. Intel, on the other hand, has been cultivating its presence in the creator and 5G notebook markets in an attempt to become the primary driver of digital transformation in the post-pandemic era.

Second, the Nvidia-Arm collaboration. This collaboration took place for the purpose of establishing an AI-enabled reference platform for notebook computers. More specifically, Arm’s CPU/NPU/GPU product stack delivers such wide-ranging AI solutions as real-time recognition, vibration detection, and keyword spotting. Following Arm’s successful foray into the PC segment, Nvidia will speed up its release of notebook products, including CPUs based on the Arm architecture.

Third, Qualcomm’s cross-sector ambitions. By architecting always connected notebooks* with Microsoft and Google, Qualcomm is now leveraging its advantages in 5G technology to prepare for upcoming competition with Intel in the 5G services market.

As the aforementioned companies’ presentations at Computex 2021 would suggest, not only do these processor suppliers possess their own competitive technological advantages, but they also share the common goal of upgrading their gaming competencies, including graphics cards, graphics technologies, and cooling performances.

Some of their current offerings aimed at the gaming market include the AMD RX 6000M, Nvidia RTX 3080 Ti/RTX 3070 Ti GPU, and Intel 11^th Gen Core H45. Interestingly, the AMD Advantage Design Framework, which certifies OEMs’ gaming notebooks based on the AMD platform, represents the company’s intention to challenge Nvidia’s dominance in the gaming market.

After Nvidia announced its US$40 billion acquisition of Arm last September, the partnership is expected to yield considerable technological synergies by way of the two companies’ AI collaboration. TrendForce believes that, in the long term, Arm Cortex CPUs based on the Armv9 architecture will allow Nvidia to break free from the dominance of Intel and AMD in the notebook CPU market. In particular, Nvidia will be able to cultivate its presence in the high-performance notebook market by combining its existing graphics technology with Arm Cortex CPUs.

Qualcomm’s main impetus for entering the notebook market can be attributed to the fact that the pandemic has brought about a new normal in which consumer adherence to notebook products has become increasingly strong. On the whole, Qualcomm’s cross-sector ambition appears to be on the cusp of victory, given the company’s preexisting 5G competencies and its experience in always-connected applications, advanced camera technologies, immersive audio/visual and display experiences, AI acceleration, and power efficiency for smartphones. As a case in point, Qualcomm is set to release Windows on Snapdragon notebooks as its own 5G *always connected PC platform.

It should be noted that Intel has also adopted MediaTek’s 5G chip technology in 5G connected notebooks featuring “Intel 5G Solution 5000”. On the other hand, Qualcomm is also developing mobile processors aimed at the entry-level always connected 4G/5G notebook market. TrendForce expects competition in the always connected market to generate a fresh wave of replacement demand in the mobile computing market.

*Always connected laptops (notebooks): notebooks that feature modem chips and have a constant internet connection much like smartphones. These notebooks can connect to the internet using 4G/5G networks without the need for Wi-Fi.

（Cover image source: Pixabay）

The recent wave of COVID-19 outbreaks in India has weakened sales of retail storage products such as memory cards and USB drives, according to TrendForce’s latest investigations. However, demand remains fairly strong in the main application segments due to the arrival of the traditional peak season and the growth in the procurement related to data centers. Hence, the sufficiency ratio of the entire market has declined further. NAND Flash suppliers have kept their inventories at a healthy level thanks to clients’ stock-up activities during the past several quarters. Moreover, the ongoing shortage of NAND Flash controller ICs continues to affect the production of finished storage products. Taking account of these demand-side and supply-side factors, TrendForce forecasts that contract prices of NAND Flash products will rise marginally for 3Q21, with QoQ increases in the range of 5-10%.

NAND Flash suppliers’ push for higher-layered SSD products will likely limit the growth of client SSD contract prices in 3Q21

Several developments are expected to drive up client SSD demand in 3Q21. First of all, high demand for notebook computers at the moment has prompted notebook brands to maximize their production. Furthermore, the release of CPUs based on Intel’s new Ice Lake platform is pushing up the SSD adoption rate. At the same time, the average memory density of SSDs is increasing as NAND Flash suppliers experience tightening supply of SSD controller ICs. On the supply side, as server shipments regain their former momentum and thereby significantly expand enterprise SSD procurement, the supply of NAND Flash will likely further tighten as a result, with NAND Flash suppliers now less willing to lower their prices when negotiating quarterly contracts. On the other hand, NAND Flash suppliers also launched SSDs with higher-layered NAND Flash in 2Q21 in order to capture market share. For instance, their main offerings have rapidly transitioned to 128L NAND Flash. As suppliers raise production capacity for higher-layered products, the downward pressure on contract prices also becomes greater. Hence, TrendForce forecasts that contract prices of client SSDs will rise by around 3-8% QoQ for 3Q21, showing a more moderate increase compared with 2Q21.

Average contract prices of enterprise SSDs are expected to increase by 15% QoQ in view of price hikes across two consecutive quarters

Stock-up activities for enterprise SSDs rebounded in the data center segment in 2Q21 after nearly three quarters of inventory adjustments. The overall server procurement has also been growing over the quarters as government agencies and SMBs release tenders related to digital infrastructure. Moreover, TrendForce has observed that the market release of server CPUs based on Intel’s new Ice Lake platform has led to an increase in the procurement capacity for enterprise SSDs. Quotes for enterprise SSDs are expected to rise again for 3Q21 contracts. NAND Flash suppliers are carrying just around 4-5 weeks of inventory and face short supply for other types of semiconductor components. At the same time, server shipments are climbing. These factors will raise quotes for the second consecutive quarter. It should be noted that, among suppliers, Samsung has more flexibility in supplying SSDs due to having a higher share of in-house components for this category of storage product. Therefore, Samsung will be dominant in influencing price negotiations over enterprise SSD contracts for 3Q21. In particular, the average contract prices of PCIe 4/8TB SSDs are expected to undergo a 15% QoQ increase in 3Q21, representing the largest price hike among all NAND Flash products for the quarter.

Contract prices of eMMC products are projected to rise by a modest 0-5% as low-density eMMC prices remain high

With regards to eMMC products, the demand for consumer products such as TVs and tablets will grow further in 3Q21 because of the effect of the traditional peak season. Additionally, sales of Chromebook devices are still fairly robust. Hence, the demand for eMMC products will remain strong through 3Q21. Nonetheless, the shortage of NAND Flash controller ICs persists as foundries are still operating at a fully-loaded capacity. Furthermore, eMMC production relies on older process technologies. Therefore, low- and medium-density eMMC products are still in limited supply, and contract prices for this category of storage products are expected to keep climbing. It should be pointed out that low-density eMMC products already underwent a considerable price hike that bordered on what the purchasing side considered unacceptable in 2Q21, so the room for further price hikes is limited. TrendForce projects that contract prices of eMMC products will rise by 0-5% QoQ for 3Q21.

Weaker than expected demand for smartphones portends a slight QoQ increase of 0-5% in UFS prices

The recent spread of the COVID-19 pandemic in Southeast Asia has led several smartphone brands (including OPPO, Vivo, and Xiaomi) that manufacture and sell a considerable share of smartphones there to lower their annual production targets. On the other hand, Apple is stocking up on components as it prepares for the release of the next iPhone series. The iPhone-related demand, together with the traditional peak season for retailers in the second half of the year, will sustain the overall smartphone production and the demand for mobile storage, including UFS products. NAND Flash suppliers have shifted their attention to the demand related to data centers and enterprise servers. Their inventories are also at a relatively low level due to the strong growth in the procurement of enterprise SSDs. Additionally, there is the ongoing shortage of controller ICs. Hence, contract prices of UFS products are forecasted to rise again by 0-5% QoQ for 3Q21.

Limited supply will likely lead to an 8-13% QoQ increase in NAND Flash wafer prices

The mining of Chia has been pushing up the demand for high-performance and high-capacity SSDs (i.e., channel-market products) since the second half of April, although the effect of the recent cryptocurrency craze has also been gradually waning. Secondly, the latest wave of COVID-19 outbreaks in India has noticeably impacted domestic sales of memory cards and USB drives. In addition, the demand for channel-market SSDs from the DIY PC market has been constrained as the ongoing shortage of graphics cards affects the production of customized PCs. Finally, memory module houses are unable to increase NAND Flash procurement as well because of the undersupply of controller ICs. The demand for NAND Flash wafers from module houses will become more limited due to the impact of component gaps on the production of finished storage products.

NAND Flash suppliers are giving priority to the demand related to data centers and enterprise servers. Furthermore, NAND Flash bit consumption has increased significantly because the share of 4/8TB products in shipments of enterprise SSDs is growing rapidly. Additionally, NAND Flash suppliers are maintaining a low level of inventory as the demand situation is healthy in the major application segments such as notebooks and smartphones. Owing to these factors, NAND Flash suppliers have no inclination to expand the supply of NAND Flash wafers. Even if demand starts to weaken, suppliers will continue to raise contract prices of NAND Flash wafers on a monthly basis for the sake of extending their gross margins. TrendForce therefore projects that contract prices of NAND Flash wafers will rise by 8-13% QoQ for 3Q21.

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

TrendForce’s latest investigations indicate that China has recently announced two additional investments funded via phase two of the CICF (China Integrated Circuit Industry Investment Fund, better known as the “Big Fund”). The first of these investments was announced on June 8, 2021 and totaled CN¥1.65 billion, which has been used to establish a joint venture called Runxi Microelectronics, co-funded with CR Micro and the Xiyong Micro-Electronics Industrial Park.

Runxi will operate a semiconductor fab specializing in 12-inch wafer fabrication, with a production capacity of 30K/M (that is, 30,000 wafer starts per month). The second investment, announced on July 2, 2021, will total about CN¥2.5 billion and be put towards AMEC’s efforts to raise capital for establishing an industrial center, a headquarter located in the Shanghai Lin-Gang Special Area, and an R&D headquarter.

Now that the Big Fund Phase 2 has invested in semiconductor equipment for the first time, more equipment suppliers are expected to receive investment capital from Big Fund Phase 2 going forward

Established in October 2019, Phase 2 of the Big Fund consists of CN¥204.15 billion in capital, some of which was subsequently invested into 12 companies across the IC design, IC fabrication, package testing, and equipment sectors, as of July 5, 2021. In terms of funding allocation, IC fabrication take the lion’s share with 78.2% of the aforementioned investment, followed by IC design at 11.6%, equipment at 7.7%, and package testing at 2.6%. To date, about CN¥36.6 billion of the Big Fund Phase 2 has been invested.

Investment in AMEC marks the first time that the Big Fund Phase 2 has purchased shares in domestic suppliers of semiconductor fabrication equipment. As fabrication equipment is the key determinant of whether China can achieve its goal of semiconductor independence, suppliers that previously received Phase 1 funding (including Naura, ACM Research, Piotech, Sky Technology Development, and Shanghai Wanye Enterprises), as well as those that have yet to receive investment from the Big Fund (including SMEE and Hwatsing), are likely to receive Phase 2 funding for their expansion projects going forward.

China’s Big Fund provides the domestic semiconductor industry considerable leverage against US sanctions as AMEC receives financing unaffected by US blacklist

As a major supplier of semiconductor etching equipment in domestic China, AMEC specializes in substrate etching technologies. The company provides products which are used for 8-inch/12-inch wafer fabrication and are compatible with 65nm-5nm process technologies. In addition, AMEC has also been actively developing CVD (chemical vapor deposition) equipment, making it an indispensable part of the Chinese semiconductor supply chain.

AMEC effectively had its overseas financing sources cut off after being blacklisted by the US Department of Defense in January 2021. Now that the Big Fund Phase 2 has infused AMEC with CN¥8.207 billion of investment capital, the company is no longer threatened by its inclusion on the economic blacklist. Hence, the substantial Big Fund Phase 2 has also become an important instrument in China’s fight against US sanctions amidst a persistent trade war currently taking place between the two countries.

（Cover image source: Unsplash）