Despite the ongoing intensity of the US-China tech war, Apple has been gradually leaning towards a more diversified supply chain, especially in the production of its latest head-worn device, Vision Pro. As per a report from Commercial Times, upon examination, it is revealed that the major supplier in chip manufacturing for this device is Texas Instruments (TI).

However, other components, such as the NOR Flash memory, originate from Chinese manufacturer GigaDevice, with the assembling being shifted from Taiwan-based facilities, previously relied upon, to Luxshare Precision.

On February 7th, following an in-depth teardown of internal components by the repair website iFixit, it was discovered that within the Vision Pro main unit, speakers, and external power supply, there are not only Apple’s self-developed processor chips but also multiple Apple-designed power management chips. It’s noteworthy that TI serves as the primary chip supplier in the Vision Pro.

Yet, surprisingly, there are NOR Flash from the Chinese memory manufacturer GigaDevice. As the US-China tech war continues to escalate, Apple’s use of memory from a Chinese manufacturer raises concerns in the market about whether it may cross the red line set by the US government.

In fact, in recent years, Apple’s products such as the iPhone, MacBook, iPad, Apple Watch, and AirPods have leaned towards Chinese suppliers like Luxshare, Wingtech, BYD, and GoerTek in the assembling sector, while Taiwanese suppliers like Foxconn, Quanta, Pegatron, and Compal, which Apple used to heavily rely on, are gradually fading out of the supply chain.

The assembly for Vision Pro has also shifted from Pegatron to Luxshare. While Taiwanese suppliers are gradually reducing their reliance on Apple, they are simultaneously diversifying into emerging fields such as artificial intelligence, electric vehicles, and smart healthcare.

On the other hand, despite the strong sales of Vision Pro since its launch in the United States in mid-January, reports surfaced of a wave of returns within just two weeks. The most cited reasons by consumers include discomfort when wearing, eye fatigue, and unsatisfactory software experiences, prompting buyers to opt for returns within the 14-day return window.

Some early adopters also expressed that the current productivity and entertainment experiences offered by Vision Pro do not justify its high price point. Additionally, they find its interactive features insufficiently convenient for tasks such as programming, design, and presentation editing.

TrendForce has previously reported that one of the main issues impacting the Vision Pro is its hefty price tag. The $3499 price point, although seemingly steep, is expected to resonate with the market, especially given the promise of ample applications, a quality user experience, and Apple’s established brand loyalty.

Additionally, should Apple introduce a more budget-friendly version as speculated, the premium pricing of the Vision Pro could serve to accentuate the value proposition of the more economical model, potentially driving consumer interest towards it.

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(Photo credit: Apple)

On February 15^th, U.S. chip equipment giant Applied Materials released financial results that surpassed expectations, accompanied by an optimistic revenue forecast for the current quarter.

In the previous quarter (Q1 of the fiscal year), Applied Materials recorded a revenue decline of less than 1%, totaling USD 6.71 billion, surpassing the market anticipated USD 6.48 billion. Net profit amounted to USD 2.02 billion or USD 2.41 per share, exceeding the USD 1.72 billion or USD 2.02 per share reported in the same period last year. On an adjusted basis, earnings per share stood at USD 2.13, compared to USD 2.03 in the corresponding period last year, surpassing the previous market expectation of USD 1.90 per share.

Applied Materials forecasts sales for the current quarter (Q2) to range between USD 6.1 billion and USD 6.9 billion, with the midpoint of USD 6.5 billion exceeding market consensus projection of USD 6.34 billion.

Excluding certain items, earnings per share for the quarter ending in April are expected to be between USD 1.79 and USD 2.15. The market anticipated earnings per share of USD 1.80, is at the lower end of this range.

This optimistic outlook suggests a faster-than-expected rebound in the chip industry. As Applied Materials provides equipment to major semiconductor manufacturers, including Samsung Electronics, TSMC, and Intel, its financial forecasts serve as a crucial indicator of future demand in the semiconductor industry’s supply chain.

China emerged as a notable highlight, with sales more than doubling to USD 3 billion, comprising 45% of the company’s overall revenue. CEO Gary Dickerson attributed this surge to a rush to enhance capacity for IoT appliances, communications, the automotive industry, as well as power and sensors. In the telephone interview, Dickerson mentioned this sector as ICAPS.

Although the growth rate in this sector may not be sustained at its current level, the requirement for more chips per device will continue to propel the market forward, indicating that the current expansion is not a bubble.

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• [News] ASML Points to Chip Industry Recovery Amid Export Control Risks

(Photo credit: Applied Materials)

The demand for Dutch semiconductor equipment manufacturer ASML serves as a trend indicator for the industry. The company optimistically stated in its annual report that the chip industry has hit rock bottom and is beginning to show signs of recovery. However, it also cautioned that geopolitical tensions and the potential expansion of US export controls on China remain operational risks.

ASML’s Chief Financial Officer, Roger Dassen, stated in the annual report for 2023 released on the 14th, “We believe that the market has now reached the lowest point of the dip, and although we cannot predict the exact nature of the slope ahead, the recovery is nascent.”

He further pointed out, “The longer-term trends are unmistakable – artificial intelligence, electrification, and the energy transition are happening,” which bodes well for ASML’s business.

However, the ASML annual report mentioned, “The list of Chinese entities impacted by export control restrictions has increased since 2022,” and “The list of restricted customers and the scope of the restrictions were subject to change.”

According to TrendForce’s analysis, while Chinese semiconductor fabs will be unable to purchase NXT:2000i series tools and newer from 2024 onwards, they will still have access to older models like the NXT1980i. This allows them to continue expanding their capacity for manufacturing processes of 28nm and above.

In last month’s financial report announcement, ASML indicated that it anticipates export controls from both the United States and the Netherlands to result in a decrease of approximately 10% to 15% in sales of its mid-range DUV equipment to China this year.

Regarding the 2023 record of ASML’s DUV sales, Dassen also explained in the interview accompanying the financial report that the strong performance in China’s business in 2023 actually stemmed from orders placed at the end of 2022, with the execution of these orders taking place in 2023.

In 2023, China surpassed South Korea to become ASML’s second-largest market, accounting for 26.3% of sales, while Taiwan maintained its leading position with sales accounting for 29.3%.

Read more

• [News] Despite U.S. Semiconductor Export Restrictions, ASML Reports Doubling of Revenue Share from China in 2023
• [News] ASML Reports Partial Revocation of Export Licenses for DUV Equipment

(Photo credit: ASML)

US Commerce Secretary Gina Raimondo has announced on February 5th that the Commerce Department would distribute substantial subsidies to chipmakers investing in the US within the next two months. The subsidy recipients are expected to include companies like TSMC and Intel.

As per a report from Reuters, Raimondo discussed the progress of subsidies under the US CHIPS and Science Act. “We’re in the process of really complicated, challenging negotiations with these companies. In the next six to eight weeks, you will see several more announcements. That’s what we’re striving for,” she stated.

Raimondo did not specify which chipmakers she is negotiating with, but she mentioned in an interview cited by Reuters,”These are highly complex, first-of-their-kind facilities. The kind of facilities that TSMC, Samsung, Intel are proposing to do in the United States — these are new-generation investments — size, scale complexity that’s never been done before in this country.”

Last month, as per Bloomberg cited industry sources in a report, plans for the United States to announce substantial chip subsidies by the end of March are revealed, targeting companies such as TSMC and Intel. The US CHIPS and Science Act reportedly includes a USD 39 billion manufacturing subsidy, providing 15% of the total cost for each independent project. Each fab can receive up to USD 3 billion in subsidies, along with loans, loan guarantees, and tax exemptions.

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• [News] TSMC Reportedly Announcing Kumamoto Plant 2 in Japan, while U.S. Subsidies Expected by End of March
• [News] Subsidies from the U.S. Legislation “NAPMP” Potentially Expected to Cover IC Substrates

(Photo credit: TSMC)

Porsche’s Chief Financial Officer Lutz Meschke has stated in a media interview following the conclusion of the Macan EV unveiling on January 25, 2024, that Europe’s initial plan to ban the sale of new fuel cars by 2035 may be postponed, as reported by Bloomberg.

TrendForce’s Insights:

• Prolonging the Battle and Gradually Narrowing the Gap with Chinese Automakers through Trade Barriers

In March 2023, the European Union passed a ban on the sale of new petrol and diesel cars starting from 2035.

Due to opposition from Germany and Italy, after coordination, the European Union agreed not to ban models using synthetic fuels. Range anxiety of electric vehicles continue to affect the willingness of end consumers to purchase cars, becoming the biggest obstacle to the growth of electric vehicle sales.

Coupled with China’s electric vehicle market, which accounts for over 50% of global BEV sales, nurturing Chinese automakers led by BYD, who continuously lead in the technical level of the the battery system, the electric drive system, and the electronic control system compared to Europe, America, and Japan.

Not long ago, Tesla CEO Elon Musk stated that without trade barriers, Chinese automakers would destroy the vast majority of their competitors. Whether this statement is exaggerated or not, trade barriers currently serve as the most effective means for Europe and the United States to prevent the continued growth and expansion of Chinese automakers, as exemplified by the United States’ IRA legislation and the European Union’s anti-subsidy investigations.

Delaying the implementation of the ban on the sale of new fuel cars can synergize with trade barriers, allowing consumers to maintain distance from Chinese-made electric vehicles. This approach provides breathing space for European automakers and US and Japanese automakers in the fuel car market.

With the Dual Strategy of Western and Japanese Automakers, Taiwanese Manufacturers Need Greater Flexibility in Planning

Assuming the postponement of the ban on the sale of new fuel cars, automakers in Europe, the United States, and Japan may simultaneously pursue synthetic fuel technology based on traditional fuel car frameworks while continuing to develop electric vehicle technology.

However, this dual approach, which does not favor one technology over the other, is likely to affect the allocation of resources for electric vehicles. During the era of internal combustion engine vehicles, dominated by Western, Japanese automakers, and Tier 1 suppliers due to various constraints such as patents and technological barriers, it has been challenging for Taiwan to access system-level supply opportunities.

In the era of electric vehicles, Fukuta Elec & Mach Co.’s all-in-one electric drive and control system has entered Mazda’s range-extended electric vehicle supply chain, while Foxconn has launched an electric vehicle manufacturing platform to vie for opportunities in complete vehicle manufacturing from carmakers. Consequently, Taiwan is gradually moving from Tier 3 and Tier 2 to Tier 1.

If automakers in Europe, the United States, and Japan adopt a dual strategy, Taiwanese manufacturers’ opportunities in the electric vehicle field may face reduction or fiercer competition.

Apart from continuously strengthening relevant technologies in the electric vehicle domain, Taiwanese manufacturers also need to enhance the commonality and modularity of their product lines to adapt to the ever-changing industrial regulations under geopolitical shifts.

Read more

• [News] Six Companies, Including BYD and CATL, are Included in the U.S. Procurement Ban List
• [News] China’s New Energy Vehicle Penetration Rate Exceeds 40%, Expected Optimistic Growth by 2024

(Photo credit: Pixabay)