TrendForce’s investigations show that, among the three categories in the upstream semiconductor supply chain, which consist of semiconductor manufacturing equipment, materials, and EDA, China made the most progress regarding self-sufficiency in semiconductor equipment, followed by materials, with EDA coming in last, in 2020. In other words, Chinese companies are relatively slow to develop EDA solutions.

The EDA market is relatively oligopolistic and involves two US companies. That means once the US implements more stringent controls over the export of EDA technologies and products to China, China’s development of semiconductor self-sufficiency will most likely suffer dire consequences as a result. Even if Chinese domestic companies are able to supply semiconductor equipment for mature process nodes as well as technologies for chip design, manufacturing, and packaging/testing, these things are essentially inoperable without EDA software and technical support. That is to say, the EDA industry remains the final piece of the puzzle for China’s quest for semiconductor self-sufficiency. Since China’s new IC policies (termed the Policies for Promoting the High-Quality Development of the Integrated Circuit Industry and the Software Industry in the New Era) place more emphasis on semiconductor equipment, materials, and software, compared to past policies, EDA (for which China’s self-sufficiency rate is lower than 10%) will likely become the top developmental priority within the software category in the new IC policies.

Chinese EDA suppliers are likely to provide domestic substitute solutions for mature process nodes

As the Chinese semiconductor design and manufacturing industries continue to expand, the Chinese EDA software market is expected to grow at a 15.1% CAGR across 2020-2024, which is faster than the global average of 10.3%. Although Synopsys, Cadence, and Siemens still account for an approximately 80% share in the Chinese EDA market, domestic companies in China have been accelerating their pace of development in recent years. For instance, companies that have more than 10 years of experience developing EDA software, including S2C, Empyrean, Primarius, Xpeedic, NineCube, and Cellixsoft, are gradually making waves in the industry, while many other emerging companies, such as X-EPIC, Arcas, LEDA, and AMEDAC have also been attracting more attention in the EDA market recently. Now that China-US trade tensions have yet to be resolved, and China continues to proceed with its new IC policies, Chinese EDA suppliers will likely experience rapid growth going forward, especially in their attempt to create domestic substitutes for 28nm and other mature process technologies.

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This year sees the continuation of the persistent chip shortage, which entails a shortage of production capacity for not only 12-inch wafers fabricated with mature process technologies but also 8-inch wafers in particular. The shortage of 8-inch wafer production capacity initially began gestating in 2H19, owing to emerging demand from structural changes in the semiconductor industry, with 5G smartphones and PMICs used in new energy vehicles as two examples of such demand. At the same time, the consumption of semiconductor production capacity has also increased multiplicatively in recent years as a result of the aforementioned structural changes. TrendForce expects demand for semiconductor capacity from emerging applications to continue rising in the coming years.

In response to this emerging demand, foundries such as TSMC, UMC, and SMIC are currently expanding their investment in mature process technologies. TrendForce expects the industry’s total 8-inch wafer capacity to grow at a 3-5% CAGR from 2019 to 2023, while 12-inch wafer capacity is expected to grow at an 11-13% CAGR across the same period. It should be pointed out that production capacities allocated to the 0.18-0.11µm process nodes（for 8-inch wafer fabrication） and 55nm-12nm nodes（for 12-inch wafer fabrication）represent the most severe shortage among all process nodes. Hence, certain foundries are expected to gradually install additional production capacities for mature process technologies in 2H22-1H23. These installations will likely help address the ongoing chip shortage.

In addition, several foundries are focusing on expanding their 28nm manufacturing capacity, primarily because transistor architecture below the 20nm node requires a transition to FinFET architecture, which is relatively costly. The 28nm node represents the sweet spot in terms of cost/benefit and is widely used for manufacturing such mainstream products as notebook Wi-Fi chips, smartphone OLED driver ICs, automotive MCUs, and image signal processors. Furthermore, chips used for IoT applications, including smart home appliances and set-top boxes, as well as other products currently manufactured at the 40nm node will likely be migrated to 28nm manufacturing, meaning the demand for 28nm capacity will continue to grow going forward.

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As growing vaccination rates worldwide starting in July lead to a gradual easing of lockdowns, the overall demand for notebook computers has also experienced a corresponding slowdown, with Chromebook demand dropping by as much as 50%, according to TrendForce’s latest investigations. However, factors such as a wave of replacement demand for commercial notebooks in Europe and North America due to the return to physical workplaces, as well as brands’ aggressive efforts to rush out their 4Q21 shipments ahead of time due to global port congestions, became the primary drivers of notebook demand in 3Q21. Hence, annual notebook shipment for 2021 will likely reach 240 million units, a 16.4% YoY increase.

TrendForce further indicates that 4Q21 will welcome both the gradual release of new models equipped with Intel’s next-gen CPUs and a wave of replacement demand for notebooks featuring Windows 11. Even so, overall notebook shipment in 4Q21 will depend on the status of the COVID-19 pandemic and the demand for commercial notebooks. As vaccinations become even more widespread in 2022, pandemic-related spending is expected to decline as a result. TrendForce therefore expects global notebook shipment to decline by 7-8% YoY next year and reach approximately 220 million units, although this still represents a growth of 60 million units over the shipment volume for 2019, prior to the emergence of the pandemic.

Annual Chromebook shipment for 2021 is expected to reach about 36 million units in light of waning demand, while HP and Samsung suffer the brunt of the decline

Chromebook became the primary driver of overall notebook shipment in 1H21. Nevertheless, increased vaccinations in Europe, North America, and Japan in 2H21 have led to a slowdown of Chromebook demand, which mostly arose in response to the needs of distance education. Furthermore, given the relatively high penetration rate of Chromebooks, Chromebook shipment subsequently fell by more than 50% within a single month in 2H21. In particular, as Chromebooks occupy a relatively high share of notebook shipments by HP and Samsung, these companies’ notebook shipment is expected to decline by 10-20% in 2H21 compared to the first half of the year. However, the US FCC released the Emergency Connectivity Fund, which totals US$7.17 billion, in July in order to facilitate the purchase of such equipment as notebooks, tablets, and network connectivity devices by schools and libraries. This fund will likely sustain the demand for Chromebooks for the next year. For 2021, Chromebook shipment is expected to reach 36 million units.

As the workforce in Europe and North America returns to physical workplaces in 2H21, a wave of replacement demand for commercial notebooks is expected to emerge as well, with Dell benefitting the most, since commercial notebooks occupy a higher share of Dell’s notebook portfolio compared to any other brand. Dell’s average monthly shipment of commercial notebooks in 2H21 is expected to surpass 1H21 figures by about 20%. As previously mentioned, it remains to be seen whether the demand for commercial notebooks will persist in 4Q21. Furthermore, the release of new models featuring Windows 11 support and Intel’s next-gen CPUs will also generate yet another wave of replacement demand. Taking these factors into account, TrendForce expects overall notebook shipment for 4Q21 to remain relatively unchanged from 3Q21 figures in the best-case scenario, and momentum driving notebook shipment will likely persist through the end of the year.

It should be noted that the availability of semiconductor components throughout the supply chain remains limited. For instance, the persistent shortage of Wi-Fi module IC, Type C PD IC, and PMIC has created a bottleneck for notebook manufacturing, while mainstream 14-inch and 15.6-inch FHD IPS panels are also in tight supply. Conversely, demand for entry-level and mid-range 14-inch and 15.6-inch HD TN panels is gradually being met, and 11.6-inch notebook panels are starting to experience a price drop due to oversupply. As notebook demand plateaus while panel supply increases, the supply and demand of notebook panels is expected to reach an equilibrium in 4Q21.

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

As seen from the market, components of power semiconductors are mostly used in industrial fields, including motor control, rail transit, wireless power supply, energy control, and smart grid, which occupy more than 30% in the long run that is expected to arrive at 35% in 2021, followed by automotive applications at 29% that will gradually expand the automotive and high voltage MOSFET markets alongside the development of NEVs and EVs. In addition, consumer electronics also account for 18% of the elevated demand for notebooks, smartphones, wearable, and quick chargers. Communication and computing each take up 10% and 7%.

Demand for Consumer Electronics Applications: Quick Charging

The faster transmission of 5G smartphones compared to that of 4G requires additional radio frequency components, thus an increase in power consumption and the speed of battery drainage becomes inevitable. Brands have been releasing USB-PD quick charging products that are currently most adopted with Type-C under the rising requirements of consumers in charging efficiency, and a support of transmission voltage from higher specifications will require an integration with synchronous rectification MOSFET that is essential in adjusting optimization, as well as an increase in the quantity of MOSFET. In terms of materials, small chargers of high power density are steadily becoming market mainstream amidst the development and popularization of GaN technology, as well as the ever-changing market of USB Type-C PD chargers, and GaN that has a low calorific value and small dimension has become the optimal material for MOSFET pertaining to quick charging.

Demand for Communication Applications: 5G Base Station

5G base stations, adopted with the Massive MIMO technology, and require multi-channel architectures such as 32 channels (32T32R) and 64 channels (64T64R), are the core equipment of 5G network, and an increase in channel density will also lead to an increment in power consumption and cost for 5G base stations at the same time. 5G base stations consume double the power than 4G, while the demand for lowering power consumption has risen the demand for low depletion and high thermostability. In addition, the establishment of 5G network has elevated the scale of data centers and cloud services, while the installation of servers has also stimulated the demand for power management modules such as AC/DC converters and DC/DC converters. Hence, communication MOSFET is now one of the major demands.

Demand for Automotive Applications: NEV

The transition of the existing automotive industry that marches from traditional fossil fuel vehicles to NEVs requires extra power semiconductor components such as MOSFET to operate synergistically. For traditional fossil fuel vehicles, various power supply components are powered by the battery, which usually comes in either 24V or 12V. The voltage for the power battery of NEVs is usually 336V or 384V and can go up to 580-600V for large electric passenger cars, which is why power semiconductor components are necessary between high and low voltage systems of NEVs to implement voltage adjustments and achieve flowing of current between two systems that allow each electronic component to function.

The electronic components that complement the battery system of a NEV operate at different voltage levels, so voltage conversion is required as electric power moves through different components. As a MOSFET continuously switches, it gradually raises or lowers the voltage. Hence, the important considerations in MOSFET designs include current strength and withstand voltage. Additionally, different applications have their own design needs with respect to switching frequency, switching noise, oscillation damping, and DPM.

As the number of electronic components in a car increases, the number of automotive applications grows for power semiconductor components such as MOSFETs. Originally, a car with a traditional ICE has at least 90 MOSFET chips. As for NEVs, the number of MOSFET chips per vehicle is usually around 200 but can reach up to around 400 for high-end models. With more functions and features being added into a NEV, the chip number is expected to rise further in the future.

Demand for Industrial Applications: Automation and Charging Piles for NEVs

The industrial segment of the market for power semiconductor components has the widest range of applications. Most kinds of industrial equipment contain MOSFETs. At the same time, many manufacturing and processing sectors are adopting automation technologies in order to shorten process cycle time, reduce production costs, and minimize equipment idling. Besides the ongoing trend toward Industry 4.0, the shock of the COVID-19 pandemic has accelerated the progress in industrial automation during recent years because manufacturers have been compelled to find ways to keep their production lines running with limited manpower.

Compared with traditional Si-based MOSFETs and IGBTs, SiC-based MOSFETs have significant advantages in the industrial segment of the power semiconductor market because they are able to withstand higher voltages, perform faster switching, and offer lower on-resistance. Furthermore, the adoption of SiC can contribute to a reduction in power consumption and a more compact system. Hence, SiC-based solutions have become the focus of product development for power component suppliers.

Regarding charging piles for NEVs, these are considered industrial equipment and therefore have to conform to the certifications of the major industry bodies. Playing a key role in the proliferation of NEVs, charging piles are being developed to provide a shorter charging period as well as higher-power charging in different scenarios. In this application field, power semiconductor components are essential to electric power conversion. Electromechanical devices including AC/DC converter and DC/DC converter are the key parts of a charging pile because they perform voltage and frequency conversions. Due to the demand for an ever shorter charging period, power components have to achieve a higher standard in terms of withstand voltage. Hence, SiC-based MOSFETs are trickling into the charging pile market as component suppliers develop solutions that minimize both thermal resistance and switching loss that occurs during high-frequency switching.

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The latest analysis of the NAND Flash market from TrendForce finds that shipments have been below expectations for consumer electronics such as smartphones, Chromebooks, and TVs during this second half of the year. At the same time, demand remains sluggish for retail storage products including memory cards and USB drives. Data centers and enterprise servers represent the only applications that show relatively strong demand. With the inventory level of the demand side steadily rising, the procurement momentum of NAND Flash buyers will become more constrained going forward. The gradual weakening of demand is also relieving the shortage of NAND Flash controller ICs. Taking account of these factors, TrendForce forecasts that quotes for NAND Flash products will begin to fall in 4Q21, and NAND Flash contract prices will register QoQ declines of 0-5% for that period.

For 4Q21, Contract Prices of Client SSDs Will Drop by 3-8% QoQ, Whereas Contract Prices of Enterprise SSDs Will Rise Slightly by 0-5% QoQ

Countries in North America and Europe are gradually lifting COVID-19 restrictions as their vaccination rates rise. Consequently, schools and businesses in those countries have also reopened and resumed normal operation. Due to this development, the demand for Chromebooks, which are mainly purchased by academic institutions, has started to slide rapidly. The demand for consumer notebook (laptop) computers has slowed down as well. Among different types of notebook computers, only commercial models continue to experience growing demand. On the side of device manufacturers, the shortages of other types of non-memory ICs are disrupting the operations of ODMs. In particular, the prolonged nationwide lockdown in Malaysia has aggravated the undersupply situation for PMICs. This problem not only impacts the production of PCs and notebook computers but also affects the product assembly capacity of some SSD suppliers.

Additionally, NAND Flash suppliers are rapidly raising production capacity for NAND Flash products that are 128 or higher in layer count. As a result, supply is gradually outpacing demand for SSDs. TrendForce believes that suppliers will become increasingly proactive in pricing in order to raise the consumption of their production output by customers and thus prevent excess inventory. Hence, contract prices of client SSDs are forecasted to make a downward turn in 4Q21 and register QoQ declines of 3-8%.

Regarding enterprise SSDs, customers in the data center segment have raised the volumes of their orders for two quarters straight, and their inventories have been climbing steadily as well. Therefore, the demand for enterprise SSDs will start to weaken in 4Q21. The procurement of enterprise SSDs by server OEMs will continue to be sustained by server shipments to medium and small enterprises in 4Q21. However, the total server shipments for the same period will be impacted by the ongoing IC shortage. Server shipments are forecasted to drop by nearly 9% QoQ for 4Q21, and the demand bits related to enterprise SSDs will also fall by 7% QoQ for the same period.

Turning to the supply side of the enterprise SSD market, lead time has been prolonged for the enterprise SSD controller ICs from Intel because Intel’s main base for packaging and testing this kind of chip is located in Malaysia, which is now a COVID-19 hotspot. The situation is not expected to improve in 4Q21, so bit shipments of enterprise SSDs from Intel will shrink from 3Q21. Since Intel’s market share for enterprise SSDs is fairly large, the effect of the recent COVID-19 outbreaks in Malaysia on contract prices of enterprise SSDs will be significant. TrendForce currently forecasts that contract prices of enterprise SSDs will rise by 0-5% QoQ for 4Q21. The hike will be mainly caused by the lack of components on the supply side rather than an increase in demand.

5-10% Reduction Projected for eMMC Prices amidst Significant Drop of End Demand

The demand for major consumer products, such as TVs and tablets, has started to weaken after the conclusion of the traditional peak season of stocking, as well as the gradual withdrawal of subsidization policy from the US. The continuous elevation of the vaccination rate in European and American countries, followed by a progressive mitigation of lockdown measures in various countries and successive resumption of school operations, have yielded an apparent impact to the demand for notebooks and tablets related to education purposes, while the aggravated stocking from the buyers during 1H21 in fear of shortages in NAND Flash controller IC has increased the inventory level and further suppressed eMMC orders. Despite stable capacity for low density 2D MLC NAND, as well as confined supply of NAND Flash controller due to the full load capacity of 28/40nm processes from foundries, the prices have been deprived of support owing to the sizable depletion in end demand, where a prominent decrement of 5-10% is expected for relevant products during 4Q21 after the substantial increase in 2Q21.

0-5% Reduction Projected for UFS Prices amidst Enhanced Supply and Diminished Demand

TrendForce has downward revised the projections to the annual production of smartphones under the fluctuating COVID-19 pandemic status in Southeast Asia. In addition, the stocking demand for new iPhones and flagships of various brands will gradually decelerate upon entering 4Q21, while the peak season of stocking is soon to be transitioned to the imminent off season. Purchase dynamics of UFS are expected to further subside. Regarding supply, mobile clients are currently using similar layers in products to that of PC OEMs after the spontaneous incorporation of 1xxL by different brands during 1Q21, and the provision of products with higher layers is expected to amplify under PC products’ expansion of market satisfaction and the unmitigated component gaps of ODMs. UFS quotations are estimated to deteriorate by 0-5% in 4Q21 under enhanced supply and diminished demand.

NAND Flash Wafer Prices to Sustain the Largest Quarterly Decrease of 10-15% amidst Subsided Demand for Major Applications

The demand performance for retail end products has been sluggish since the beginning of 2021 aside from the temporal nourishment from the related demand for a storage-based cryptocurrency (Chia) between April and May. Memory cards and USB flash drives have been sluggish in sales since 2Q21 due to the successive exacerbation of the pandemic status in India and Southeast Asia, and the sales of retail SSD from channels have been impeded owing to the shortages of graphics cards, which obstructs the bundling with assembled computers. The fluctuation of cryptocurrency prices, for which the plummeting had slightly improved the shortages of graphics cards at one time, has triggered another recovery in the demand for mining, and further inhibits the sales volume of SSD. It is worth noting that the diverted tendency between end products and upstream components has manifested considerable pressure to module houses.

Pressure from the sales of NAND Flash wafer inventory is expected to gradually magnify for suppliers under the worse-than-expected demand for products such as notebooks, smartphones, and TVs. Few suppliers have signaled their willingness in active provision during 4Q21, though the continuously enlarging void of PMIC has instead entangled the shipment of finished enterprise SSD, which intensifies the sales pressure of NAND Flash wafer. Furthermore, YMTC, WDC, and Micron have initiated an active supply of 128, 112, and 176L product samples to module houses for testing and incorporation. The incorporation of higher layers will further refine shipment cost that will obtain additional room in price reduction for suppliers. 3D NAND wafer is expected to sustain the largest depletion among all product categories at 10-15% during 4Q21.

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