Shipments of CPUs, GPUs, and chipsets have been falling due to the weakening demand for PCs, gaming devices, and cryptocurrency mining machines. This recent development has also constrained the growth of the market for ABF substrates. Currently, the demand situation for this material is exhibiting signs of uncertainty.

Regarding the distribution of the demand for ABF substrates, applications that are driving growth are cloud services, AI, and automotive electronics. CPUs, GPUs, FPGAs, and switch ICs are chips that are deployed in servers purposed for a wide range of applications related to cloud services and endpoint AI technologies. Meanwhile, other AI-related applications require high-end ASICs. At the same time, more and more high-end SoCs and MCUs are embedded in vehicles. All in all, these aforementioned applications will spur the demand for ABF substrates. Additionally, package size continues to increase for high-performance ICs. This trend, too, will sustain the demand for ABF substrates over the long haul. By contrast, the PC market has matured, so the related demand is shrinking. From a long-term perspective, the influence of the PC market on the demand for ABF substrates will gradually wane.

TrendForce forecasts that the scale of the global market for ABF substrates will expand from US$9.3 billion in 2022 to US$17.1 billion in 2026, thus showing a CAGR of 16.4%. Due to the influence of the US technology export restrictions against China, the demand for ICs purposed for HPC will be higher than expected for the period from 4Q22 to 3Q23. This, in turn, will also further raise the demand for ABF substrates.

Then, starting from 4Q23, exports of HPC chips to China will start to slow down. However, demand will continue to grow for ASICs, AI chips, SoCs, and MCUs at that time. The growth in these application segments will offset some of the negative effect of the US export restrictions on the market for ABF substrates. In terms of the supply-demand dynamics of ABF substrates, a balance will gradually be attained in 2024. However, demand will get stronger in 2025 and 2026, so supply could tighten during that two-year period.

Current U.S. sanctions on China have extended their reach to strike at HPC and sectors such as aerospace, automotive market, and military industry. TrendForce indicates, the market for high-end computing chips (including CPU, GPU, etc.) has borne the brunt of these restrictions at this stage, while those providing related storage such as DRAM and NAND Flash also face potential supply disruption. At present, this not only includes domestic companies in mainland China but also extends to related US-based suppliers. Among them, server companies that rely on high-intensity computing will face greater scrutiny.

Impact analysis on server terminal shipments

In terms of server terminal shipments, since relevant component suppliers have not yet been able to confirm whether services provided by the four major cloud service providers (CSPs) in China, Baidu, ByteDance, Alibaba, and Tencent, involve military use, before CSPs sign MOUs (memoranda of understanding), component manufacturers may temporarily delay shipments to the Chinese market. However, TrendForce believes, due to the fact that current CSP buyers’ component inventories remain sufficient, the short-term impact on global server market shipment performance is relatively low and long-term impact depends on the evolution of the US Department of Commerce’s rules.

Huawei and Sugon, two companies that have received attention at this stage due to the US ban, have previously withdrawn from the x86 server market and turned into cloud business providers and whole server delivery has been transferred to other domestic OEMs and outsourced computing power leasing, so as not to be affected by sanctions. However, due to the previous CPU ban, Sugon has turned to AMD to obtain authorization for localized chips, which may be significantly curtailed by this ban. In 2022, Sugon’s market share in the overall server market will be approximately 2.3% and 8.5% of the Chinese market.

TrendForce believes, it cannot be ruled out that relevant Chinese OEMs may have server products that may be rendered to government supercomputing centers in the future. Inspur, H3C, and Lenovo will face more exacting future scrutiny and, if consequences intensify, the mainland Chinese industrial chain may feel direct effects. Although commercial servers are not currently on the list of directly restricted items, if friction between the United States and China intensifies in the future, it cannot be ruled out that the U.S. Department of Commerce will add more potentially risky Chinese server OEMs and CSPs onto the UVL list. If certification cannot be realized within 60 days of being included in the UVL list, these entities will be included on the entity list. The worst case scenario will be a future trend of negative growth in Chinese server demand.

Since the restrictions enumerated in this ban are primarily concentrated in the HPC field, the greatest factor affecting Sugon is the company largely providing server OEM to government departments including in supercomputers, military aerospace, and government server farms. At present, there are 8 national-level supercomputing centers in mainland China and the supercomputer located in the center of Wuxi is the headquarters of China’s self-developed chips including the self-developed Sunway TaihuLight. As the U.S. Department of Commerce continues to strengthen its sanctions, China’s supercomputing technology and domestic research capabilities will be severely damaged in the future.

Impact analysis on GPU and CPU sectors

At present, companies utilizing high-end graphics cards are primarily concentrated in the HPC sector. In terms of CSPs, Alibaba and Baidu are the largest companies in mainland China. These two CSP companies account for up to 60% of the market share of GPU usage in China. Before the previous ban at the end of August, Chinese CSP operators had to submit purchase applications before procurement but they could not apply at all after the ban. However, based on the premise that buyer inventory levels on hand remain high and the supply of goods through distribution channels is sufficient, no effect on demand is forecast until 1H23. Nonetheless, it will be a challenge in the long-term. Since the ban expressly prohibits supercomputing center applications such as HPC, TrendForce assesses that GPU servers used by supercomputing centers will be directly affected, which accounts for up to 30% of China’s GPU market.

In terms of chip computing performance control, ECCNs 3A090 and 4A090 are newly added sanctioned items and chips with a total processing performance of more than 4,800 (inclusive) calculated by TOPS will be restricted. GPUs are usually used to directly assist in performing complex operations. Basically, NVIDIA’s A100 PCIe Gen4 and AMD’s MI250 OAM Module exceed the 4,800 limit. With new high computing performance products restricted in the future, development of server acceleration computing in China will take a hit.

However, the computing performance of most server CPU products is generally lower than the provisions of the ban. Only Chinese-made chips such as Tianjin Haiguang face direct restrictions and other CPUs such as Intel and AMD servers will not be subject to prohibition. At this stage, Intel and AMD will sign MOUs with relevant mainland Chinese manufacturers to ensure that related products cannot be used in military and supercomputing fields before shipment. In today’s server CPUs, the computing performance of the commonly used Intel Ice Lake CPU series does not reach the limit imposed by U.S. sanctions.

Impact analysis on the memory sector

At present, Samsung and SK hynix have also suspended their supply of product to Sugon. If Sugon can clarify procured memory is not used for supercomputing, domestic server products, etc., the parties will be able to reach a consensus for shipment. In the long run, Korean companies are evaluating whether they need a written commitment from each customer to disavow using purchasing memory products in supercomputers. Therefore, some memory shipments may be affected before documents are signed. The industry generally believes that market inventory remains relatively abundant and there will be no substantial damage to the market in the short term. As far as SSD is concerned, the greatest utilization remains in the category of AI/DL (Deep Learning), since most of the data trained from DL must be stored in faster and more convenient SSDs for use in inference scenarios. If the suspension of shipments caused by the current ban cannot be rectified by relevant buyer agreements, the development of Chinese server manufacturers in related AI/DL fields may be hamstrung and a calamitous decline in the market penetration rate of enterprise SSDs from international manufacturers cannot be ruled out.

Impact analysis on the networking sector

There are three reasons for a relatively minor impact assessment on the well-connected suppliers in the networking sector. First, there are numerous networking suppliers and many of them are in China. Since the demand for key components is relatively small, Chinese suppliers should be able to keep up. Second, the mainstream process in this field is a mature process and future expansion is less restricted. Third, from the perspective of supplier shipments, after foundry assembly, packaging, and testing, there are multiple distribution channels for the circulation of the final product and it will be difficult to determine whether terminals are military use. However, from the perspective of long-term impact, there is a high probability that Chinese manufacturers will give priority to China’s local supply chain in the future to ensure future supply. This move will undoubtedly deepen the resistance of other suppliers’ shipments to China, so it is necessary to open up multiple shipping channels to stabilize market share.

（Image credit: iStock）

In recent years, notebook computer (laptop) brands and processor suppliers alike have been actively adjusting their product strategies and business operations in response to behavioral shifts in the way consumers purchase and use computing devices. While notebook brands jostle for superiority in industrial design with improvements to their product appearances every year, competition in the processor industry has been even fiercer. TrendForce’s investigations indicate that the current competitive landscape in the processor industry consists of three developments, indicated below:

First, competition between AMD and Intel. Not only are both companies focused on expanding their respective ecosystems, but they have also been aiming to conquer the gaming market by releasing new products aimed at gamers this year. Apart from making headways in the PC processor market, AMD has introduced the AMD Advantage Design Framework.

AMD Advantage gaming notebooks are certified to meet standards of performance set by the company. AMD hopes that this certification system will allow it to generate a more consolidated gaming ecosystem while raising its brand equity. Intel, on the other hand, has been cultivating its presence in the creator and 5G notebook markets in an attempt to become the primary driver of digital transformation in the post-pandemic era.

Second, the Nvidia-Arm collaboration. This collaboration took place for the purpose of establishing an AI-enabled reference platform for notebook computers. More specifically, Arm’s CPU/NPU/GPU product stack delivers such wide-ranging AI solutions as real-time recognition, vibration detection, and keyword spotting. Following Arm’s successful foray into the PC segment, Nvidia will speed up its release of notebook products, including CPUs based on the Arm architecture.

Third, Qualcomm’s cross-sector ambitions. By architecting always connected notebooks* with Microsoft and Google, Qualcomm is now leveraging its advantages in 5G technology to prepare for upcoming competition with Intel in the 5G services market.

As the aforementioned companies’ presentations at Computex 2021 would suggest, not only do these processor suppliers possess their own competitive technological advantages, but they also share the common goal of upgrading their gaming competencies, including graphics cards, graphics technologies, and cooling performances.

Some of their current offerings aimed at the gaming market include the AMD RX 6000M, Nvidia RTX 3080 Ti/RTX 3070 Ti GPU, and Intel 11^th Gen Core H45. Interestingly, the AMD Advantage Design Framework, which certifies OEMs’ gaming notebooks based on the AMD platform, represents the company’s intention to challenge Nvidia’s dominance in the gaming market.

After Nvidia announced its US$40 billion acquisition of Arm last September, the partnership is expected to yield considerable technological synergies by way of the two companies’ AI collaboration. TrendForce believes that, in the long term, Arm Cortex CPUs based on the Armv9 architecture will allow Nvidia to break free from the dominance of Intel and AMD in the notebook CPU market. In particular, Nvidia will be able to cultivate its presence in the high-performance notebook market by combining its existing graphics technology with Arm Cortex CPUs.

Qualcomm’s main impetus for entering the notebook market can be attributed to the fact that the pandemic has brought about a new normal in which consumer adherence to notebook products has become increasingly strong. On the whole, Qualcomm’s cross-sector ambition appears to be on the cusp of victory, given the company’s preexisting 5G competencies and its experience in always-connected applications, advanced camera technologies, immersive audio/visual and display experiences, AI acceleration, and power efficiency for smartphones. As a case in point, Qualcomm is set to release Windows on Snapdragon notebooks as its own 5G *always connected PC platform.

It should be noted that Intel has also adopted MediaTek’s 5G chip technology in 5G connected notebooks featuring “Intel 5G Solution 5000”. On the other hand, Qualcomm is also developing mobile processors aimed at the entry-level always connected 4G/5G notebook market. TrendForce expects competition in the always connected market to generate a fresh wave of replacement demand in the mobile computing market.

*Always connected laptops (notebooks): notebooks that feature modem chips and have a constant internet connection much like smartphones. These notebooks can connect to the internet using 4G/5G networks without the need for Wi-Fi.

（Cover image source: Pixabay）

Enterprise SSD procurement has been rising on the back of growing server shipments since 2Q21, according to TrendForce’s latest investigations. In particular, the share of 8TB products in shipments of SSDs to data centers has shown the most noticeable growth, which is expected to persist through 3Q21. However, certain SSD components and parts may be in shortage due to insufficient foundry capacity. TrendForce is therefore revising the QoQ hikes in contract prices of enterprise SSDs for 3Q21 to 10-15% from the previous projection of 5-10%.

TrendForce further indicates that the high demand for enterprise SSDs in 3Q21 is attributed to several factors. First, North American cloud service providers (hyperscalers) have pretty much completed their inventory adjustments and now continue to expand their storage capacity. Second, the flow of incoming orders to traditional server brands is getting stronger over the quarters as government agencies and SMBs increase their budgets for IT infrastructure. Third, Intel and AMD are ramping up production for server CPUs based on their respective new processor platforms. Following the adoption of new CPUs, the overall demand for enterprise SSDs has also shifted to higher-density products because clients want to upgrade their computing power and storage capacity. Specifically, demand is mainly trending toward 4/8TB SSDs since raising NAND Flash density can lower the cost of SSD deployment.

Supply leader Samsung will likely gain control over enterprise SSD pricing in the market

Regarding the supply end, Samsung has a higher flexibility in supplying SSDs compared to the other suppliers because it has a higher share of in-house components for its storage products. Therefore, in view of the possible shortage in certain SSD components, Samsung will likely be able to further expand its market share for enterprise SSDs. Furthermore, Samsung’s products are expected to account for more than 50% of enterprise SSDs (in terms of bits) shipped to data centers in North America in 3Q21. This dominance will likely further Samsung’s ability to dictate market prices going forward.

Intel, on the other hand, has been constrained in its ability to manufacture enterprise SSDs due to a shortage of PMICs. In addition, Intel has mostly been fulfilling orders for QLC products. As a result, Intel’s market share may potentially decrease in the TLC-dominant enterprise SSD sector. Regarding other suppliers including Kioxia and SK Hynix, although they have been able to raise their market shares due to gradual adoption of their products by clients, they are unlikely to catch up to Samsung for the time being.

On the PC client SSD front, at the moment, demand for notebook computers has remained strong, while the supply of SSD controller IC is still relatively tight. TrendForce therefore forecasts a slight 3-8% QoQ increase in client SSD contract prices for 3Q21. Regardless, suppliers will not slow down their process migrations. Starting from 3Q21, 176L PC client SSDs will be available on the market, with a corresponding increase in supply bits in the upstream SSD supply chain.

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 the global economy enters the post-pandemic era, technologies including 5G, WiFi6/6E, and HPC (high-performance computing) have been advancing rapidly, in turn bringing about a fundamental, structural change in the semiconductor industry as well, according to TrendForce’s latest investigations. While the demand for certain devices such as notebook computers and TVs underwent a sharp uptick due to the onset of the stay-at-home economy, this demand will return to pre-pandemic levels once the pandemic has been brought under control as a result of the global vaccination drive.

Nevertheless, the worldwide shift to next-gen telecommunication standards has brought about a replacement demand for telecom and networking devices, and this demand will continue to propel the semiconductor industry, resulting in high capacity utilization rates across the major foundries. As certain foundries continue to expand their production capacities this year, TrendForce expects total foundry revenue to reach a historical high of US$94.6 billion this year, an 11% growth YoY.

TrendForce’s latest analysis also finds that shipments and production volumes of end products will continue to grow in the post-pandemic period. Regarding host computers, the total (or global) shipments of servers and workstations are forecasted to undergo a yearly growth mainly driven by applications that are enabled by 5G and HPC. As for various types of client (or end-user) devices, the annual total production volume of 5G smartphones, in particular, is forecasted to increase by around 113% YoY. The penetration rate of 5G models in the smartphone market is also forecasted to rise to 37% in the same year. Turning to notebook (or laptop) computers, their total shipments in 2021 will register a YoY growth rate of about 15% thanks to the proliferation of the stay-at-home economy.

Finally, the governments of many countries introduced consumption subsidies during the pandemic so as to stimulate the domestic economy. Video streaming services have also grown dramatically with respect to content and demand because of the pandemic. As a result, the TV market is seeing a wave of replacement demand as consumers want to purchase the latest models that offer higher resolutions (e.g., 4K and 8K) and network connectivity (i.e., smart TVs). The total shipments of digital TVs in 2021 are forecasted to undergo a YoY growth rate of around 3%.

The high demand for the aforementioned end devices has therefore resulted in a corresponding surging demand for various ICs used in these devices, including CIS, DDI, and PMICs. In addition, the increasing adoption of cloud services, including IaaS, PaaS, and SaaS, has also generated a massive demand for various high-end CPUs and memory products used in the HPC platforms that power said cloud services.

On the whole, TrendForce believes that, with demand maintaining a healthy growth momentum for many kinds of end products, semiconductor components that are manufactured with the same foundry nodes will be competing for production capacity. Some categories of ICs will therefore experience a more severe capacity crunch due to the product mix strategies of respective foundries. In the short term, no effective resolution is expected for the undersupply situation in the foundry market.

Certain foundries will continue to expand their production capacities in 2021 as the semiconductor industry undergoes a structural change

With regards to the expansion plans of various foundries this year, tier-one and tier-two foundries will prioritize the development of different process nodes. More specifically, tier-one foundries, including TSMC and Samsung, will focus on the R&D, fab build-out, and capacity expansion for the 5nm and below nodes in response to the growing chip demand for HPC-related applications. On the other hand, tier-two foundries, including SMIC, UMC, and GlobalFoundries will primarily focus on expanding their production capacities of the 14nm to 40nm mature process nodes in order to meet the massive demand for next-gen telecom technologies (such as 5G and WiFi6/6E) and other diverse applications (such as OLED DDI and CIS/ISP).

Incidentally, it should be pointed out that SMIC’s capacity expansion plans have been constrained after the US Department of Commerce added SMIC to the Entity List, which prohibited the company from procuring US semiconductor equipment. However, SMIC still possesses enough funds for procuring non-US equipment and building new fabs, as the company is not only actively expanding its existing 8-inch and 12-inch wafer capacities, but also proceeding with the construction of its new fab in Beijing.

Apart from the aforementioned companies, other foundries, including PSMC, Tower Semiconductor, Vanguard, and HHGrace, will prioritize the capacity expansion of their 8-inch wafers (which are used for the 55nm and above nodes) to meet the demand for large-sized DDI, TDDI, and PMICs. These foundries, in contrast with their larger competitors, are primarily focusing on 8-inch capacity expansion due to the relatively high cost of DUV immersion systems used for the 40/45nm and below processes. For these companies, it is much more economically feasible to instead undertake capacity expansions for the 55/65nm and above nodes.

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