According to TrendForce research, corporate demand for digital transformation including artificial intelligence and high-performance computing has accelerated in recent years, which has led to increasing adoption of cloud computing. In order to improve service flexibility, the world’s major cloud service providers have gradually introduced ARM-based servers. The penetration rate of ARM architecture in data center servers is expected to reach 22% by 2025.

In the past few years, ARM architecture processors have matured in the fields of mobile terminals and Internet of Things but progress in the server field has been relatively slow. However, companies have diversified cloud workloads in recent years and the market has begun to pay attention to the benefits ARM architecture processing can provide to data centers. TrendForce believes that ARM-based processors have three major advantages. First, they can support diverse and rapidly changing workloads and are more scalability and cost-effective. Second, ARM-based processors provide higher customization for different niche markets with a more flexible ecosystem. Third, physical footprint is relatively small which meets the needs of today’s micro data centers.

Influenced by geopolitics and the strengthening of data sovereignty in various countries, major cloud service providers and telecom operators are actively developing micro data centers which will further drive the penetration of ARM-based processors. At the same time, from the perspective of cloud service providers currently adopting ARM-based processors, Graviton, led by AWS, has the largest market scale and began encroaching gradually into the market in 2021. TrendForce also observed that AWS’s deployment of ARM-based processors in 2021 reached 15% of overall server deployment and will exceed 20% in 2022. This forces other major cloud service providers to keep up by initiating their own projects at various foundries. If testing is successful, these projects are expected to start mass introduction in 2025.

In addition, according to the Neoverse Platform plan previously released by ARM, its Platform Roadmap will also be one of the key drivers of penetration. This product line is set up to target ultra-large-scale data centers and edge computing infrastructure. However, it is worth mentioning, since x86 is still mainstream in the market and ARM-based server CPU suppliers only maintain small-batch production orders at this stage and primarily focus on ultra-large-scale data centers, introduction of ARM-based servers into enterprise data centers will be slow going. Thus, TrendForce believes that it will still be difficult for ARM-based servers to compete with x86-based servers before 2025.

According to TrendForce forecasts, average overall DRAM pricing in 2Q22 will drop by approximately 0~5%, due to marginally higher buyer and seller inventories coupled with the demand for products such as PCs, laptops, and smartphones being influenced in the short-term by the Russian-Ukrainian war and high inflation weakening consumer purchasing power. At present, the only remaining source of demand is on the server-side, so overall DRAM stocks will remain oversupplied in 2Q22.

In terms of PC DRAM, PC OEMs are adopting a conservative stocking strategy for orders in 2Q22 due to the Russian-Ukrainian war, which may continue affecting orders during peak season in 2H22, and revising 2022 shipment targets downwards. Additionally, the overall supply of bits is still growing, so the PC DRAM price slump in 2Q22 will further expand to 3~8% and may continue to deteriorate.

In terms of server DRAM, the current server DRAM inventory level held by cloud service providers and enterprise clients is roughly the same as the amount held in 1Q22, and this relatively high inventory level is not enough to support a price reversal. The supply rate of server DRAM, of which there is still an oversupply, remains higher than 100% and this situation will continue into 2Q22. However, a price decline in 2Q22 is expected to converge at 0~5%, coinciding with the peak seasonal stocking surge.

In terms of Mobile DRAM, due to a number of factors such as high inflation, changes in the pandemic situation in various countries, and the Russian-Ukrainian war, it cannot be ruled out that the production volume of smartphones may continue to decline while smartphone brands will surely be more careful when planning production and material preparation. On the supply side, technology migration in manufacturing has offset the shift of DRAM production to the server DRAM field beginning in 2H21, maintaining the level of the mobile DRAM bit supply. For this reason, since the production targets of smartphone brands have fallen and the average memory capacity of a single device has not significantly improved, oversupply is forecast to continue in 2Q22, with pricing set to decline approximately 0~5%.

In terms of Graphics DRAM, the demand side has been affected by weak virtual currency prices in recent months which has gradually started to assuage demand for graphics cards. The supply side is facing supply constraints and a vendor shortage since Micron will withdraw from the GDDR6 8Gb supply in 2Q22. This will cause a temporary supply-demand imbalance for Graphics DRAM as the capacity allocation of Korean manufacturers fail to immediately fill the above-mentioned shortfall. Even if terminal demand slows down, considering GDDR6 8Gb remains mainstream in the current market, it will take time for manufacturers to convert specifications to 16Gb. Pricing is forecast to increase by 0~5% in 2Q22.

In terms of consumer DRAM, demand for DDR3 from specific products such as WiFi 6 and 5G base stations remains robust. The quantity of DRAM supplied to the market varies from manufacturer to manufacturer. Samsung and SK Hynix have gradually reduced production of DDR3, while Taiwanese firm Nanya Tech has recently shifted production to DDR3, owing to DDR3’s higher gross profit margin. Due to relatively stable demand and limited shipments from Korean manufacturers, the price of DDR3 will increase by 3~8% in 2Q22 with DDR4 maintaining a downward price trend.

According to TrendForce research, due to lower-than-expected sales in 4Q21, the smartphone market in 1Q22 not only needed to adjust its accumulated inventory of finished products, but it was also affected by  sluggish seasonal demand, resulting in relatively weak 1Q22 production performance. Coupled with the impact of recent events such as the Russian-Ukrainian war and lockdowns of Chinese cities, overall production performance in 1H22 will weaken, affecting total production in 2022. The original forecast of 1.38 billion units produced will be downgraded to 1.366 billion units, with annual growth rate slipping to 2.5%. Neither the COVID-19 pandemic nor the shortage of wafer production capacity has been significantly alleviated. This coupled with serious issues involving geopolitics, inflation, and energy shortages this year will generate variables in the smartphone market for 2022. Therefore, further downward revision of total 2022 production volume cannot be ruled out.

There are two key observations regarding the impact of the war on the smartphone market. First, brand sales have been suspended or have dropped sharply. According to TrendForce statistics, mobile phone sales in Russia and Ukraine account for approximately 3-4% of global market share, 85% of which are in the Russian market, with Samsung, Xiaomi, and Apple as the top three Russian mobile phone brands. Since Apple and Samsung announced the suspension of all exports to Russia, vacated market share will migrate to Chinese brands. If the war can be brought under control before the end of April, estimated impact on the smartphone market in 2022 will be approximately 20 million units.

Second, the war has exacerbated global inflation, which is strongly affecting energy and food prices in particular and is rapidly spreading from Europe to the world. This also implies that personal disposable income will shrink simultaneously, resulting in a prolonged replacement cycle in the smartphone market and phenomena such as falling budgets for stand-alone purchases. Due to inflation’s broad and profound influence, it is not yet possible to determine the extent of its impact on the global smartphone market but there is indeed a high risk of downward revisions in the future.

It should be noted, in addition to the war, the pandemic will continue to affect smartphone market trends in 2022. China, the world’s largest smartphone consumer market, is still adopting a dynamic zero-COVID policy. Not only will this policy exacerbate manpower and material shortages in the intricate smartphone supply chain, pandemic prevention activities will also throw cold water on demand. TrendForce believes, given China’s short-term economic growth rate, the current forecast for China’s smartphone market shipments will drop from approximately 325 million units last year to 300 million units, representing an annual decline of approximately 7.7%, and a possibility of a continued downturn.

According to TrendForce research, due to the vigorous stocking of various terminal applications causing a shortage of wafers in 2021, the global IC industry was severely undersupplied. This, coupled with spiking chip prices, boosted the 2021 revenue of the global top ten IC design companies to US$127.4 billion, or 48% YoY.

TrendForce further indicates three major disparities from the 2020 ranking. First, NVIDIA surpassed Broadcom to take the second position. Second, Taiwanese companies Novatek and Realtek rose to sixth and eighth place, respectively. Originally ranked tenth, Dialog was replaced at this position by Himax after Dialog was acquired by IDM giant Renesas.

Qualcomm continues its reign as number one in the world, primarily due to 51% and 63% growth YoY in sales of mobile phone SoC (System on Chip) and IoT chips, respectively. The addition of diversified development in its RF and automotive chip businesses was key to a 51% increase in revenue. NVIDIA implemented the integration of software and hardware, demonstrating its ambitions in creating a “comprehensive computing platform.” Driven by the annual growth of gaming graphics card and data center revenue at 64% and 59%, respectively, NVIDIA successfully climbed to second place. Broadcom benefited from the stable sales performance of network chips, broadband communication chips, and storage and bridging chips, with revenue growing 18% YoY. AMD’s computer and graphics revenue grew by 45% YoY due to strong sales of the Ryzen CPU and Radeon GPU and rising average selling price. Coupled with accelerating demand from cloud companies, the annual revenue of AMD’s enterprise, embedded, and semi-customized divisions increased by 113%, driving annual growth of total revenue to 68%.

In terms of Taiwanese firms, MediaTek’s strategy of focusing on mobile phone SoC has produced miraculous results. Benefiting from an increase in 5G penetration, the sales performance of MediaTek’s mobile phone product portfolio surged by 93% and the company has committed to increasing the proportion of high-end product portfolios, resulting in 61% annual revenue growth. Novatek’s two major product lines of SoC and display driver IC have both grown significantly. Due to improved product specifications, increased shipments, and beneficial pricing gains, revenue grew by 79% YoY, the highest among the top ten. Realtek has been driven by strong demand for Netcom and commercial notebook products, while the performance of audio and Bluetooth chips remains quite stable, conferring an annual revenue growth of 43%. Himax joins the top ten ranking for the first time in 2021. Due to significant annual revenue growth in large-sized and medium/small-sized driver IC of 65% and 87%, respectively, and the successful introduction of driver IC into automotive panels, total revenue exceeded US$1.5 billion, or 74% YoY.

Looking forward to 2022, after AMD completes the acquisition of Xilinx, other players will fill out the rankings. In the broader picture, intensifying demand for high-specification products such as high-performance computing, Netcom, high-speed transmission, servers, automotive, and industrial applications will create good business opportunities for IC design companies and drive overall revenue growth. However, terminal system manufacturers face the correction of component mismatch issues. In addition, growing foundry costs, intensifying geopolitical conflicts, and rising inflation will all be detrimental to global economic growth and may impact an already weakened consumer electronics market. These are the challenges IC design companies face in 2022 and by what means can product sales momentum be maintained within existing production capacity, R&D efficacy strengthened, and chip specifications upgraded, will become the primary focus of development in 2022.

Due to the Russian-Ukrainian war, automotive factories currently located in Russia have shut down successively and stopped importing vehicles, TrendForce asserts. In addition, Russia has stated that if foreign-funded enterprises choose to permanently suspend business or withdraw from the market during this period, the Russian government will nationalize their business assets. Most automotive brands have factories in Russia and now face the dual pressures of international public opinion and corporate losses. According to TrendForce investigations, after Renault-Nissan acquired the Russian brand LADA, its market share reached 32%, making it the largest automotive brand in Russia followed by Hyundai-Kia at 23% and Volkswagen at 12%.

According to TrendForce, since Renault is the largest shareholder of local automaker AVTOVAZ and Russia is the company’s second largest market, whether AVTOVAZ is nationalized or sales are lost, the overall impact on Renault cannot be underestimated. In addition, even if production can continue, the depreciation of the ruble will greatly increase the cost of importing components.

Soaring costs not conducive to automotive industry recovery

The large number of components and the long supply chain inherent in the automotive industry makes mitigating geopolitical risk difficult. Almost all international or regional events will affect the normal operation of this industry. The Russian-Ukrainian war will not only affect automaker assets, supply chains, sales, and revenue in Russia and around the world in the short term but, in the long term, geopolitics will influence business planning, competiveness, and technology options. More broadly, geopolitical and economic conflicts are derailing automakers’ plans to recover from the pandemic and chip shortages.

According to TrendForce, there are three major factors impeding the recovery of the automotive industry and these factors will further affect automobile sales in 2022. First, the production of vehicle components in Ukraine has halted, affecting the production of complete vehicles. Volkswagen indicated that it intends to move production capacity to North America and China due to the shortage of vehicle wiring harnesses. Second, Russia produces various upstream raw materials such as nickel and palladium for vehicle manufacturing. Due to supply constraints, various costs have risen sharply and some car manufacturers have begun to increase the price of complete vehicles. Third, inflationary pressures have risen sharply, leading to rising costs of living and a reduction of consumer spending power.