After the Chinese holidays, solar-related materials continued to decline, with the exception of module prices which remained nearly flat. Prices for other materials such as cells, wafers, and polysilicon all decreased.

Polysilico

Polysilicon prices have continued to decline since the Labor Day holiday, with mono-Si compound feedings and mono-Si dense materials now priced at RMB 158/kg and RMB 155/kg, respectively. Downstream wafer businesses are trying to reduce their polysilicon inventory to avoid further losses from price drops. The increase in polysilicon output is weakening price protection for polysilicon companies, with some dumping their stocks, further accelerating the price drop. The ramp-up phase has resulted in lower quality polysilicon, creating an apparent price difference compared to high-quality polysilicon. The drop in prices is expected to continue.

Wafers

Wafer prices have dropped for nearly two weeks, guided by leading wafer businesses. M10 and G12 now cost a respective mainstream price of RMB 5.4/pc and RMB 7.4/pc. Zhonghuan recently announced a more than 8% reduction in its wafer prices following LONGi’s announcement of an approximate 3% drop in wafer prices. The cautious attitude towards procurement in response to falling prices has led to sluggish market transactions. The cell segment’s reluctance to purchase has led to shipment difficulties and an inventory build-up. Combined with the ongoing decline in polysilicon prices, wafer prices are expected to continue to fall in the short term.

Cells

Cell prices have dropped slightly following the Labor Day holiday, with M10 and G12 cells now priced at RMB 1.04/W and RMB 1.1/W respectively. The reduction in upstream polysilicon and wafer prices, along with price suppression from downstream module makers, contributed to the decrease. However, the balanced supply and demand of cells prevented a significant drop, allowing cell businesses to maintain partial profitability. Further reductions in cell prices may occur due to ongoing cost reductions upstream and price pressure from module makers, but the equilibrium between upstream and downstream sectors could slow the decrease. M10 mono-Si TOPCon cell prices have increased due to a gradual rise in market transactions, now priced at RMB 1.18/W.

Modules

Module prices are holding steady in the short term, with 182 & 210 mono-Si single-sided PERC modules priced at RMB 1.67/W and RMB 1.68/W respectively, and 182 & 210 bifacial double-glass mono-Si PERC modules at RMB 1.69/W and RMB 1.7/W. Upstream price reductions have yet to affect the module segment due to the retention of profitability for the cell segment and the traditional peak season for the PV industry. Despite the price-suppressing approach from the end sector, first-tier module makers are stabilizing their prices, and overseas demand is strong. Overall, module prices are expected to remain sturdy in the short term. (Image credit: EnergyTrend)

Samsung recently announced that they will ahead of TSMC in the foundry market within 5 years. At the same time, Intel also claimed to become the second-largest player in the market before 2030. Currently, both Samsung and TSMC are adapting 3nm process to do the chip manufacturing, with the technology of GAA(Samsung) and FinFET(TSMC) respectively.

Samsung sees GAA technology as a crucial key to surpassing TSMC. Currently, Samsung’s 4nm lags behind TSMC by about 2 years, and its 3nm is about a year behind. However, this situation will change when TSMC turns to 2nm. Industry insider sources indicate that TSMC plans to use GAA technology in 2nm process, and Samsung believes that they can seize the chance to catch up with TSMC since TSMC may have a hard time when turning to 2nm process.

Industry insiders have revealed that AMD has shifted some of its 4nm CPU chip orders from TSMC to Samsung. It is reported that AMD has signed an agreement with Samsung to manufacture some of its mobile SoC by using Samsung’s 4nm node, and Samsung may also manufacture AMD’s Chromebook APU.

The Fight in the Foundry Market is On

According to TrendForce, the top 10 global foundry players in 4Q22 with TSMC account for 58.5% of market share by revenue, far ahead of Samsung’s 15.8%. Industry insiders suggest that Samsung still has a long way to go to catch up with TSMC. Some sources say that TSMC’s 2nm process will be mass-produced as scheduled in 2025, while Samsung’s plans are still to be observed.

Intel is also striving for the top spot in the wafer foundry market. Since the beginning of 2021, Intel has implemented a series of measures in its foundry business after announcing its “IDM 2.0” strategy. Last July, Intel stated that it will manufacture chips for MediaTek, and the first batch of products will be produced within the next 18 to 24 months using more mature manufacturing technology (Intel 16). In addition, Intel said that Qualcomm and Nvidia are also interested in having them manufacture their chips. To regain its leading edge in chip manufacturing, Intel has unveiled its 5 process technology stages to be launched in the next few years, including 10nm, 7nm, 4nm, 3nm, and 20A.

And TSMC has no competitive relationship with their clients by not doing the wafer design, apparently, this is also a significant advantage for TSMC and other foundry manufacturers. In recent years, more companies have recognized the importance and highly profitable nature of foundry manufacturing, leading to the independent establishment of foundry manufacturing operations. Samsung and Intel have also followed this trend, as foundry manufacturing can optimize production technology and provide major companies with more opportunities for trial and error.

According to TrendForce research, driven by strong demand for 5G mobile phones, base stations, automobiles, and HPCs, the global output value of packaging and testing (including foundry and IDM) reached US$82.139 billion in 2021, or 25.83% YoY. This upward momentum is forecast to continue in 2022, taking output value to US$101.185 billion in 2022, or 23.19% YoY. From the perspective of regional distribution, China’s IC packaging and testing output value in 2021 was approximately US$39.443 billion, increasing 31.7% compared with US$29.941 billion in 2020, becoming the world’s fastest-growing major market in terms of packaging and testing output value.

Shanghai pandemic lengthens overall lead time, hinders China’s packaging and testing growth in 2Q22

In 2Q22, Shanghai was locked down due to the COVID-19 pandemic. Although wafer fabs and packaging and testing plants were still operating normally, the pandemic hindered logistics and the materials required for packaging could not be effectively shipped from Shanghai, affecting transportation efficiency and logistics costs to a certain degree. Overall, China’s packaging and testing industry was not significantly affected by the pandemic in 1Q22 but, in 2Q22, the industry will bear the brunt of the COVID-19 situation, with packaging and testing companies experiencing prolonged overall lead times and sluggish revenue growth.

NEVs and HPCs to become new growth drivers, fabs and packaging and testing companies accelerate deployment

The growth rate of smartphones, a core driving force behind IC packaging and testing output value, is slowing down. Since smartphone shipments peaked at 14.575 million units in 2017, volume has not surpassed this number in the ensuing years. Even though the upgrade from 4G to 5G brought about a wave of replacements, the overall smartphone market has reached maturity, with slowing growth or even negative growth, so its demand on wafer manufacturing and packaging and testing is likewise slowing down.

Aside from mobile phones, growth in HPC and new energy vehicles (NEV) is becoming a new revenue engine. At present, the world’s major automobile production countries are accelerating the penetration rate of NEVs, and packaging and testing companies are also accelerating their investment in the automotive and HPC sectors. From the perspective of fabs, TSMC’s HPC revenue accounted for 41% of total packaging and testing revenue in 1Q22, surpassing mobile phones for the first time and becoming the largest source of the company’s packaging and testing revenue.

（Image credit: Unsplash）

According to TrendForce research, looking at NAND Flash wafers, the pricing of which more sensitively reflects the market, suppliers are increasingly motivated to cut prices in exchange for sales due to weak retail demand since March and a more conservative outlook for shipments of other end products. The price of NAND Flash wafers is expected to begin falling in May and the supply of NAND Flash will gradually overtake demand in 2H22. The price decline of NAND Flash wafers in 3Q22 may reach 5~10%.

At the same time, TrendForce indicates that February’s contamination incident at Kioxia was expected to tighten the market in 2Q22 and 3Q22. However, as a consequence of rising inflation and the war between Russia and Ukraine, market demand for consumer products in the traditional peak season of the second half of the year is trending conservative and the prices of client SSD, eMMC, and UFS in 3Q22 will be flat compared to 2Q22, breaking from the original expectation that prices may rise. In terms of enterprise SSDs, as demand for data centers remains strong, no significant correction in demand has yet been observed. However, as the overall NAND Flash market gradually moves into oversupply, prices will only grow slightly by approximately 0~5% in 3Q22.

Weakening demand in a period of unabated production expansion, NAND Flash may face oversupply in 2H22

From the perspective of demand, due to the war between Russia and Ukraine, rising inflation, and the pandemic in China, overall demand for consumer electronics is weak. Demand for Chromebooks dwindled rapidly at the beginning of 2022 as exogenous demand from the pandemic disappeared. In terms of conventional notebooks, the situation with commercial models and consumer models present a divergence. Demand for commercial notebooks is benefiting from a return to the office occurring in many countries, while the opposite is true for consumer notebooks. Therefore, overall demand for notebooks in 2022 will be lower compared to demand in 2021. In terms of smart phones, the production volume of Chinese brands has been suppressed due to China’s flailing against the pandemic and government lockdowns stemming from a continued insistence on a dynamic zero-COVID policy, resulting in continuous downward revisions of global smart phone production for 2022.

In terms of supply, Samsung is focusing on substantial future growth in the enterprise SSD sector and continues to maintain its original capacity expansion plan, especially after its NAND production line was derailed due to the Xi’an lockdown at the end of last year. In order to stabilize future plant operations, the capacity of its P2L fab in South Korea continues to increase. Yangtze Memory Technologies (YMTC) will also expand its wafer input plan in 2H22. Since the 128L yield rate has reached the company’s goal and it had successfully broken into the tier 1 smartphone supply chain in 1H22, YMTC will also accelerate production at its second factory in Wuhan. Therefore, TrendForce indicates, since an overall weakness in demand will linger in 2022 yet certain manufacturers will maintain a pattern of expanding production, the NAND Flash market will face oversupply in 2H22. As mentioned above, the prices of various products will be flat or experience reduced growth in 3Q22.

The inclusion of certain Chinese semiconductor companies on the US Commerce Department’s Entity List in the past few years has created repercussions throughout industries and markets, with the semiconductor industry coming under heavy scrutiny by both China and the US. After SMIC was hit with a string of sanctions last year, including the EAR and the NS-CCMC List, recent rumors of further US actions on China are now once again making the rounds on social media platforms.

In particular, there have been rumors saying that the US has prohibited TSMC and UMC from importing 28nm process technology equipment into China for their fabs there. Conversely, some industry insiders from China point out that, although the US did not impose such prohibition, the export approval process for the aforementioned equipment has been conspicuously lengthy.

In reality, the Department of Commerce has levied procurement restrictions on SMIC specifically, while foundries unspecified on the Entity List have not been explicitly barred from importing semiconductor equipment for use in their China-based fabs. Although some are noting that the approval processes for semiconductor equipment exported to fabs located in China have been unusually lengthy recently, these processes are not specifically aimed at equipment for the 28nm process technology.

Instead, they apply to all semiconductor equipment exported from the US to China. It should also be noted that the approval processes for some exported equipment are currently progressing well, and foundries have already taken the extended lead times into account, according to TrendForce’s latest investigations. Hence, the lengthy approval processes have not been observed to have any negative impact on the semiconductor industry at the moment.

（Cover image source: ASML）