AR/VR device shipments revised up to 14.19 million units in 2022, with an annual growth rate of 43.9%, according to TrendForce research. Growth momentum will come from increased demand for remote interactivity stemming from the pandemic, as well as Oculus Quest 2’s price reduction strategy. Microsoft HoloLens 2 and Oculus Quest 2 are first in market share for AR and VR, respectively.

According to TrendForce, the topic of the Metaverse has driven brands to actively plan for and stimulate product shipment performance. However, the AR/VR device market has yet to experienced explosive growth due to two factors: component shortages and the difficulty of developing new technologies. In addition, cosmetic and size considerations have made the more optically and technically difficult Pancake design the first choice for new high-end products. Furthermore, various embedded tracking feedback technologies key to enhancing the user’s immersive experience such as eye tracking and 6DoF further affect the development progress of a new product as a whole. Since there are no new foreboding products on the horizon, TrendForce believes, no other branded products have a chance at supplanting the current mainstream status of Oculus or Microsoft until at least 2023.

The Oculus Quest 2, which costs between US$200 and US$400, is currently the most popular AR/VR device in the consumer market. TrendForce expects Oculus to launch an advanced version of the Quest product within two years, reaching a hardware performance equivalent of US$700 or down to a retail price of US$500 with discounts. This product is expected to expand the size of the high-end consumer AR/VR market. The commercial market is dominated by the HoloLens 2 which costs more than US$1,000 and upwards of US$3,500. Since the commercial market places more emphasis on the benefits of hardware and software integration, manufacturers that dominate commercial systems, software, and platforms have the advantage. Thus, Apple has become another focus in the AR/VR device market.

Strong shipments of Oculus and Microsoft products will likely force Apple to release relevant products to join the competition this year. However, TrendForce states, considering hardware performance requirements and gross profit margins, Apple will likely target the commercial market and adopt the same pricing strategy as HoloLens, hardware priced in the thousands of dollars and a monthly subscription-based software solution. Overall, TrendForce believes that the launch of new products this year by Apple, Meta, and Sony may be delayed and will not add significant growth to the overall AR/VR market for the time being.

Ukraine is a major supplier of raw material gases for semiconductors including neon, argon, krypton, and xenon, according to TrendForce’s investigations. Ukraine supplies nearly 70% of the world’s neon gas capacity. Although the proportion of neon gas used in semiconductor processes is not as high as in other industries, it is still a necessary resource. If the supply of materials is cut off, there will be an impact on the industry. TrendForce believes that, although the Ukrainian-Russian conflict may affect the supply of inert gas regionally, semiconductor factories and gas suppliers are stocked and there are still supplies from other regions. Thus, gas production line interruptions in Ukraine will not halt semiconductor production lines in the short term. However, the reduction in gas supply will likely lead to higher prices which may increase the cost of wafer production.

Inert gases are primarily used in semiconductor lithography processes. When the circuit feature size is reduced to below 220nm, it begins to enter the territory of DUV (deep ultraviolet) light source excimer lasers. The wavelength of the DUV light generated by the energy beam advances circuit feature sizes to below 180nm. The inert gas mixture required in the DUV excimer laser contains neon gas. Neon gas is indispensable in this mixture and, thus, difficult to replace. The semiconductor lithography process that requires neon gas is primarily DUV exposure, and encompasses 8-inch wafer 180nm to 12-inch wafer 1Xnm nodes.

TrendForce research shows, in terms of foundries, global production capacity at the 180~1Xnm nodes accounts for approximately 75% of total capacity. Except for TSMC and Samsung, who provide advanced EUV processes, for most fabs, the proportion of revenue attributed to the 180~1Xnm nodes exceeds 90%. In addition, the manufacturing processes of components in extreme short supply since 2020, including PMIC, Wi-Fi, RFIC, and MCU all fall within the 180~1Xnm node range. In terms of DRAM, in addition to Micron, Korean manufacturers are gradually increasing the proportion of 1alpha nm nodes (using the EUV process) but more than 90% of production capacity still employs the DUV process.  In addition, all NAND Flash capacity utilizes DUV lithography technology.

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

WDC recently stated that certain materials were contaminated in late January at NAND Flash production lines in Yokkaichi and Kitakami, Japan which are joint ventures with Kioxia, according to TrendForce’s investigations. Before this incident, TrendForce had forecast that the NAND Flash market will see a slight oversupply the entire year and average price from Q1 to Q2 will face downward pressure. However, the impact of WDC’s material contamination issue is significant and Samsung’s experience during the previous lockdown of Xi’an due to the pandemic has also retarded the magnitude of the NAND Flash price slump.  Therefore, the Q1 price drop will diminish to 5~10%. In addition, according to TrendForce, the combined WDC/Kioxia NAND Flash market share in the 3Q21 was as high as 32.5%. The consequences of this latest incident may push the price of NAND Flash in Q2 to spike 5~10%.

The contaminated products in this incident are concentrated in 3D NAND (BICS) with an initial estimate of 6.5exabytes (approximately 6,500M GB) affected. According to TrendForce, damaged bits account for 13% of the group’s output in 1Q22 and approximately 3% of the total output for the year. The normal production schedule for the entire line has yet to be confirmed. It is worth noting that the damages announced by WDC likely do not account for total losses stemming for this event and the number of damaged Kioxia parts has not been aggregated, so the total number of affected bits may increase further.

Production primarily focused on Client SSD and eMMC, subsequent spot pricing may climb

Currently, WDC and Kioxia are focused on supplying PC client SSD and eMMC products. Since WDC is the number two and number one supplier in the client SSD and eMMC markets, respectively, subsequent supply will inevitably be hampered. Therefore, even if production demand for PC OEM is revised downward in Q2, client SSD prices may remain resistant to decline. In terms of enterprise SSD, Kioxia PCIe 4.0 has been verified by a number of customers and the company’s market share in 2022 was originally forecast to increase. However, this incident will impact Kioxia’s ability to ship product and further affect subsequent customer procurement. Therefore, in order for buyers to satisfy their own production requirements, a Q2 decline in enterprise SSD product pricing will be largely restrained.

In addition, as buyers and sellers in the spot market are still clarifying events and incident assessments, they mostly responded by suspending quotations, with no new quotations having been generated. However, TrendForce’s assessment indicates that subsequent events will obviously stimulate spot price appreciation. Judging from contract pricing, any orders negotiated on a whole quarter basis should be unaffected in the near-term but there may be an immediate price increase in wafer quotations this February and March.

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 of February 8, 2022, it has been 3 months since Russia began amassing troops on its border with Ukraine and tensions have yet to ease. Since Ukraine is a major producer of gases required for semiconductor manufacturing, once the two sides go to war, some gases may be in short supply.

Ukraine primarily produces neon, krypton, and xenon, which are key materials for exposure and etching processes

According to TrendForce research, Ukraine supplies approximately 70% of the world’s neon gas. In the semiconductor manufacturing process, neon gas can be used in KrF lasers utilized during exposure. In addition to neon gas, Ukraine also supplies approximately 40% of the world’s krypton gas. Krypton gas is also used in KrF lasers and both neon and krypton gas are closely tied to the exposure process. Furthermore, Ukraine produces xenon which can be used in semiconductor etching processes, accounting for approximately 30% of the world’s supply. Since Ukraine is a major supplier in the neon, krypton, and xenon markets, if a war breaks out, shortages of neon, krypton, and xenon are likely to follow. Even if the market is quick to find new gas suppliers or expand gas production capacity, product certification will take several months or even more than half a year, plunging the supply of electronic gas required for semiconductor manufacturing processes into scarcity.

A shortage of neon and krypton due to the war will affect the shipment of mature process products

TrendForce indicates, the large supply of neon and krypton in Ukraine is primarily used in KrF lasers and KrF lasers are utilized in mature 8-inch wafer 250-130nm nodes. At present, products manufactured at the 250-130nm nodes include power management chips (PMIC), micro-electromechanical systems (MEMS), and power semiconductor components such as MOSFET components and IGBTs. Once Ukraine and Russia go to war and the war expands into a stalemate, the shortage of neon and krypton will affect shipments of the aforementioned products to varying degrees. From the perspective of end-user products, the automotive industry, which requires large quantities of power management chips and power semiconductors, will face a new wave of material shortages.

（Image credit: iStock）

Undaunted by deadlocked US-Sino relations, the great pandemic of 2020, and the US Department of Commerce’s ban on Huawei’s use of software and equipment produced by US manufacturers in the same year, China’s packaging and testing industry has, instead, used these factors as stimulus get back on track. Faced with these three major challenges, the Chinese government has responded with policies such as domestically producing both equipment and semiconductors, allowing China’s packaging and testing industry to buck the trends set in 2020. According to TrendForce statistics, industry revenue in 2020 reached US$7.02 billion and approximately US$9.53 billion in 2021.

A brief summary of China’s packaging and testing industry in recent years is as follows: the US-Sino trade war has been raging since 2018 and, due to tariff issues and the gradual rise in personnel salaries, terminal manufacturers whom had already established plants or subsidiaries in China were forced to gradually relocate relevant factories to SE Asia and India in order to avoid growing overhead costs, moreover impacting the revenue performance of China’s packaging and testing industry. As of June 2019, the tariff issue remained unresolved due to dubious US.-Sino relations but this issue could no longer impede the revenue recovery momentum of China’s packaging and testing industry.

Packaging and testing and localized equipment skirts bans and a moderate threshold for technology research and development attracts overseas manufacturers

After the U.S. Department of Commerce imposed export control bans on Huawei, HiSilicon, and SMIC, the market mostly predicted that China’s packaging and testing industry would be hit next but this did not happen. According to TrendForce, the primary reason for this is that the nature of current back-end packaging and testing technology is relatively crude compared to front-end wafer manufacturing and, considering Chinese government’s recent policy of localizing equipment and the degree of substitutability of non-US equipment manufacturers, even if the U.S. Department of Commerce proposes further bans against the industry, its effects will be limited.

In response to the US-Sino trade conflict, the Chinese government has proposed relevant measures such as semiconductor autonomy which has driven a gradual mainstreaming of domestic equipment production plans. In addition, national funds have been continuously injected into semiconductor equipment manufacturers, even though the level of technological development at this stage remains inferior to major manufacturers in Europe, the United States, and Japan. However, for those with modest requirements for back-end process conditions, testing, and testing equipment, China’s domestic packaging and testing equipment does have a certain proportion and scale.

For example, relevant companies such as Hangzhou Changchuan and Shanghai Raintree have invested in the automatic optical inspection instruments (AOI) and testing equipment that are required in the latter stage of packaging and testing. On the other hand, due to the relatively low threshold for research and development of back-end packaging and testing equipment, many international companies such as Japan’s Advantest and Singapore’s Besi have also set up shops in China. Chinese packaging and testing and their equipment manufacturers are essentially unaffected by relevant export bans, so the industry can still anticipate technological and revenue performance in the next few years.

（Image credit: Pixabay）