Recently, it is reported that after UMC, World Advanced, Power Semiconductor Manufacturing Co., Ltd., the unbearable TSMC will increase its driver chip foundry quotation from April, and the driver chip price increase will further upgrade, and panel manufacturers and terminal manufacturers will Understand greater operating pressure.

Isaiah’s survey pointed out that as of March, 8-inch wafer foundry prices have risen by 5-10%, and TSMC plans to increase foundry prices, which may drive the price of driver chips up to the third quarter. Panel manufacturers and terminal manufacturers will Faced with the risk of shortage of stock.

Picture 8 inch wafer capacity is in short supply, driving chip foundry prices to rise by 5-10%

Since the third quarter of last year, 8-inch wafer production capacity has been in short supply, and low-profit chips such as power management chips and driver chips have been left out by foundries. At the same time, with the recovery of the application market, the driver chip demand is extremely strong, and the driver chip market has seen an imbalance between supply and demand, and even fell into a state of shortage.

Up to now, the imbalance between supply and demand in the driver chip market has not been completely alleviated, so that foundries that determine capacity allocation have absolute voice and drive chip foundry prices to continue to rise. Isaiah research pointed out that as of March, the foundry prices of manufacturers such as Foundry World, UMC, and Power Semiconductor have all increased by 5-10%.

The driver chip design vendors caught between the foundries and the application vendors passed on the rising foundry prices to the application vendors, resulting in a substantial increase in the price of driver chips. Isaiah's research pointed out that the supply of driver chips, especially TDDI, is in short supply. Prices in the fourth quarter of last year have risen 15%-20%, and prices are expected to continue to rise in the second and third quarters. Xu Jingjing, senior analyst of Qunzhi Consulting Semiconductor Devices, believes that due to the continuous price increase of driver chips, the demand gap between panel and terminal vendors will be even greater.

Picture of TSMC's increase in foundry prices, driving chip shortages worsened

The driver chip foundry profit is relatively low, which is like a chicken rib for TSMC, which has been pursuing high profits. Although TSMC has slightly increased the planned capacity of drive chips with the increase in the demand for driver chips, the demand for 8-inch wafers has surged and the planned capacity cannot meet market demand, so TSMC has to increase the foundry price of driver chips.

According to Xu Jingjing, a senior analyst at Qunzhi Consulting Semiconductor Devices, the recent increase in demand for CIS, PMIC, and Soucing IC has made TSMC’s 8-inch wafer production capacity rapidly full. Among them, the 8-inch 110nm process (2/5M CIS) is in high demand and the process is not high-voltage. It is relatively simpler and has a better profit margin than the display driver chip, occupying most of the 8-inch 110nm production capacity; power management on the 8-inch process Chips (PMIC), due to the positive factors brought about by 5G, the demand for PMICs has increased by 4-5 times compared with the 4G era, increasing the consumption of 8-inch capacity; the demand for Soucing ICs with large-size displays has surged and the number of chips has increased. And these three kinds of chips are more profitable than driver chips, and TSMC will tilt its 8-inch wafer production capacity to them.

At the same time, in addition to Jinghe and SMIC, foundry manufacturers such as UMC and Power Semiconductor Manufacturing Co., Ltd. seem not to try to significantly increase the planned production capacity of drive chip foundries. At present, under the premise of full orders from the foundry, chip design manufacturers and application manufacturers can only strive to drive chip production capacity through price increases.

In addition, the expansion of drive chip packaging and testing capacity cannot keep up with the growth of market demand. The panel industry is a cyclical industry with a certain degree of volatility. Packaging and testing manufacturers are cautious about expanding production. At present, they have not kept up with the sudden increase in demand for driver chip packaging and testing, which has also driven the price of driver chips.

Picture-driven chip prices continue to rise, how will mid- and downstream manufacturers respond?

The shortage of driver chips has continued to expand the demand gap for panel and terminal manufacturers, which has caused the prices of panels, mobile phones, and TVs to rise, which has brought greater market pressure to panel manufacturers, mobile phone manufacturers, and TV manufacturers.

In order to obtain more orders, driver chip design manufacturers are actively looking for new production capacity. According to Isaiah’s survey, since Taiwan’s wafer foundries are not as powerful as mainland wafer foundries, drive chip design manufacturers such as Novatek, Duntech, and Ruiding have begun to seek help from mainland wafer foundries such as SMIC and Jinghe. . Jinghe plans to increase its production capacity to 45K/M by the end of this year, which will help slightly ease the tight supply of TDDI at that time.

Panel manufacturers are striving for more supply of driver chips to gain the advantage of panel shipments. It is understood that in order to ensure a stable monthly supply of driver chips, panel manufacturers have signed two- to three-year contracts with driver chip design manufacturers. For example, Tianyu has signed long-term cooperation with Innolux, AUO and Ruiding.

In order to cope with the price increase of driver chips, terminal manufacturers are also adjusting the cost of different materials to reduce the increase in overall costs. Xu Jingjing said that the terminal has a large number of devices, and the driver chip is only one of the components. The terminal manufacturer can slow down the upgrade progress of non-critical materials or use lower-spec components to maintain the overall cost balance.