The U.S. Department of Commerce has initiated the “National Advanced Packaging Manufacturing Program (NAPMP) ,” with materials and substrates being the first subsidized areas. Due to the close collaboration between IC testing and IC substrates, it is not ruled out that the IC substrate industry could be the next recipient of subsidies under the U.S. chip legislation.

However, according to Commercial Times’ report, there is a lack of interest among Taiwanese PCB manufacturers in establishing facilities in the U.S., and there are three main reasons for this. 

Firstly, the PCB industry thrives on economies of scale, and the production costs in the U.S. are too high. Taiwanese manufacturers have recently responded to the China Plus One Strategy by establishing facilities in Southeast Asia, making it unlikely for them to set up operations in the U.S.

Secondly, the U.S. is not particularly welcoming to polluting industries, making pure substrate manufacturers more likely candidates. 

Thirdly, domestic PCB manufacturers in the U.S. are also relocating their production lines. If seeking a partnership is necessary, Japanese manufacturers may present a more viable option.

As for potential subsidy recipients, industry experts speculate that one of the more likely beneficiaries could be TTM Technologies, a major PCB manufacturer in the United States. TTM announced in 2023 the establishment of a new facility in the state of New York dedicated to producing HDI PCBs, primarily for military applications in line with U.S. strategic requirements.

The United States plans to invest USD 3 billion in three main areas: an advanced packaging piloting facility, workforce training programs, and funding for projects. The funding is derived from the CHIPS and Science Act, and detailed information on the subsidy program is expected to be announced in early 2024.

In response to this news, the Taiwan Printed Circuit Association pointed out that the conditions for subsidies under the CHIPS and Science Act are stringent. In the past year, the semiconductor supply chain-related companies, led by foundry outsourcing, have started to establish a production presence in the U.S. This includes not only foundries such as TSMC, Samsung, and Intel but also packaging and testing facilities like Amkor and ASE Group.

The association highlighted that IC substrates are part of the semiconductor supply chain, but the more immediate impact is on packaging and testing facilities. If global packaging and testing facilities also take concrete actions to establish operations in the U.S. following the “whole chip” production mindset, the pressure on IC substrate manufacturing will undoubtedly increase. It is not ruled out that the IC substrate industry could be the next focus of the U.S. government’s attention.

While the production scale of IC substrates (or the overall PCB) in the U.S. may not be significant, once categorized as a strategic material, even small-scale production becomes meaningful.

In other words, establishing operations in the U.S. is not solely about scale but rather about companies having the “capability” to produce locally. Reportedly, the industry should pay attention to the future developments in U.S. policy in this regard.

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• IMPACT 2023 – Asia’s Largest Industry Event for IC Packaging and PCB Technologies – Highlighted Advanced Packaging, Substrates, and Latest Trends in AI

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In the wake of a semiconductor shortage, Chinese automakers have veered onto the path of self-developed chips over the past two years. Recently, Changan Automobile, in collaboration with the Chongqing High-Tech Industrial Development Zone and the Intelligent Manufacturing Industrial Research Institute, established Chongqing Xinlian Integrated Circuit Co., Ltd. This venture, boasting a considerable registered capital of 8.7 billion yuan, signifies a substantial investment from Chongqing’s state-owned entities and major automobile manufacturers. It is dedicated to advanced production of 12-inch large-scale integrated circuits.

Changan is not alone in this endeavor; companies like Geely, GAC, BAIC, BYD, and others have embarked on self-development plans or have chosen to enter the chip manufacturing domain through partnerships. Emerging forces in the automotive industry like XPeng, NIO, and Li Auto are also opting for self-developed chips.

The Rise of Self-Developed Chips

Tesla stands as the pioneering automaker in developing its self-driving chips. Industry insiders suggest that their decision was fueled by the inadequacy of chip suppliers like NVIDIA and the ample funds generated from Tesla’s surging sales. Their approach has been widely recognized by the market, prompting others to explore this direction.

In the realm of self-developed chips, different car manufacturers adopt diverse strategies. Companies like Tesla, XPeng, and NIO, renowned for their self-developed algorithms, focus on high-performance chips.

An industry source emphasized that car manufacturers prefer to stress full-stack self-development, but off-the-shelf chips cannot fully leverage the advantages of self-developed algorithms. Thus, powerful companies opt for customized chips to align with their proprietary algorithms. This underscores the need for automakers to possess robust capabilities in autonomous driving software and algorithms.

Notably, NIO has assembled a 300-member chip team, focusing on self-driving and LiDAR chips. XPeng’s chip team is developing high-computing power self-driving chips similar to Tesla’s FSD chip. Furthermore, Li Auto expanded its chip team and collaborated with Sanan Optoelectronics to establish a power semiconductor production line in Suzhou.

In contrast, traditional domestic auto manufacturers often commence their self-developed chip ventures with power semiconductors due to their higher onboard usage and relatively lower development complexity. Several carmakers have partnered with chip companies for mass production collaborations. Horizon Robotics, for instance, has signed mass production agreements with mainstream auto manufacturers like BYD, Great Wall, Li Auto, and Changan.

(Photo credit: Changan Automobile)

Among the various display technologies used for smartphones in 2021, AMOLED models are expected to account for a 39% penetration, thanks to smartphone brands’ increasing adoption of this technology, according to TrendForce’s latest investigations. In the entry-level and mid-range segments, the smartphone demand for a-Si LCD models remains strong, although this technology’s penetration rate is expected to undergo a slight decrease to 28%. On the other hand, LTPS LCD models are continuing to lose market share to competing technologies, resulting in a 33% penetration rate, while LTPS HD LCD models will occupy a growing share of this segment.

TrendForce indicates that smartphone brands’ procurement activities for components in 2H20 will persist throughout 2021 for two reasons: First, the industry on the whole expects demand for smartphones to ramp up considerably this year. Second, production capacities across the entire semiconductor supply chain have been tight, with some segments even showing severe shortage, thus prompting downstream clients such as smartphone brands to stock up on certain components in order to mitigate the potential risk associated with component shortages.

With regards to the development of smartphone display technologies, panel suppliers have been regaining client orders for rigid AMOLED panels through aggressive pricing since 2H20. Owing to increased adoption by smartphone brands this year, rigid AMOLED models are expected to maintain a strong market presence in the mid-range and premium mid-range segments. Flexible AMOLED models, on the other hand, will likely dominate the high-end and flagship segments. Going forward, AMOLED models will gradually cannibalize the market shares of LTPS LCD models in the mid-range and premium mid-range segments, in turn forcing LTPS LCD models into a lower price segment.

Market demand for entry-level and mid-range smartphones, especially for HD models, has remained strong since 2020, due to the impact of the COVID-19 pandemic. However, the supply of key components in these smartphones (including a-Si LCD panels as well as DDI and TDDI ICs) has been in shortage in light of the foundry industry’s tight production capacities. As prices of a-Si LCD panels and ICs spiked, panel suppliers saw this upturn as the perfect opportunity to fulfill the existing demand for a-Si products with LTPS products and in turn expend their production capacity for LTPD LCD panels. Smartphone brands began adopting a-Si HD and LTPS HD LCD panels interchangeably in an increasing number of models, thus giving TDDI ICs flexibility to be used in a greater number of compatible handsets.

At the moment, IC supply remains the greatest bottleneck in the overall smartphone supply chain; case in point, TDDI supply is tight to the point of shortage. TrendForce believes that two key factors will exert significant influence over the smartphone panel industry going forward: First, Chinese IC design companies are likely to obtain wafer input priorities in Chinese foundries thanks to government policies. These IC design companies may potentially experience considerable growth as a result and disrupt the predominant oligopoly of Taiwanese IC design companies in the smartphone panel market. Second, once the ongoing capacity expansion effort of Chinese foundries concludes, their additional production capacities will alleviate the current shortage of IC supplies, with IC prices subsequently entering a downward trajectory. As a result of lowered IC prices, the relationship between LTPS HD panels and a-Si HD panels will likely shift from complementary to competitive, with both product categories struggling for dominance in the HD smartphone model segment.

For more information on reports and market data from TrendForce’s Department of Display Research, please click here, or email Ms. Vivie Liu from the Sales Department at vivieliu@trendforce.com