According to the latest investigations by the WitsView research division of TrendForce, foundries have maintained a high level of capacity utilization in 1H20 in spite of disruptions caused by the COVID-19 pandemic. In particular, the node capacities of mainstream process technologies used for DDI production are showing a tight supply situation that is unlikely to be alleviated even in 2H20. There is a high possibility for foundry capacities allocated for DDI production to be compressed by other applications in 2H20, in turn potentially resulting in a price hike for DDIs.
TrendForce indicates that demand from large-sized DDI wafer input has remained relative stable despite drastic changes in the demand for display panels since the onset of COVID-19 in early 2020. While most IC applications are produced at 8-inch fabs, specifically at their 0.1X µm process nodes, foundries have not expanded their 8-inch capacities by a significant amount. As such, DDI manufacturers had to maintain their level of wafer input orders at foundries out of necessity, driven by the possibility that, once they reduced their levels of wafer input, they would be unable to subsequently recover their originally assigned production capacity at foundries after DDI demand ramps up later on. Even so, IT panel demand underwent a sudden surge in 2Q20, and manufacturers could not supply enough DDI to meet the rising IT panel demand even though DDI manufacturers attempted to adjust their existing product mix given their assigned wafer capacities at foundries. Therefore, the issue of tight supply yet remains an unresolved problem for large-sized DDI manufacturers.
The demand for smartphones has plummeted considerably owing to the pandemic’s impact, with certain smartphone brands reacting to this market slump in the short term by extending the lifecycle of older smartphone models or expanding the lineups of entry-level and mid-range models, in turn slowing down the pace of mainstream TDDI IC process technology’s transition from the 80nm node to the 55nm node for 12 inch wafers. Case in point, most smartphone brands have decided to continue using TDDI ICs manufactured with 80nm process technology and slow down their plans of transitioning to 55nm TDDI ICs (such as high frame rate TDDI ICs) due to cost concerns and a slowdown in the mass production of new smartphone models. With regards to new specifications of 55nm TDDI ICs, although R&D and mass production plans are still underway, they have now taken a more gradual pace.
TrendForce’s observations find that, as foundries continue to scale down their 6-inch wafer capacities, client demand has been increasingly focused on 8-inch production capacities. In addition, the surging demand for emerging applications, including 5G applications, PMIC, fingerprint recognition, and CMOS sensors, has led to an increasingly tight supply situation for foundries’ 8-inch production capacity. Since wafer input for these emerging applications is much more profitable than for DDI, foundries generally prioritize the allocation of their limited production capacity for the former instead of the latter. The production capacity allocated to DDI is thus expected to become more and more compressed as a result. Additionally, as 8-inch production capacities are unlikely to be increased in the future, their tight supply may become a long-term structural issue, further compressing the production capacity of DDI and putting pressure on IC prices to go into an uptrend. In other words, the size of DDI clients’ wafer input orders and the relationship between foundries and DDI clients are both key factors determining whether DDI manufacturers can obtain a consistent supply of wafer capacity at their respective foundries.
Likewise, the 80nm node capacities of 12-inch fabs are undergoing constant cutbacks as well. Some foundries are demanding their TDDI clients to migrate their wafer input orders from the 80nm node to the 55nm node due to the latter’s superior profitability; TDDI manufacturers will thus be forced to contend with the corresponding adjustment of production capacities and seek out replacement solutions as a risk mitigation measure. However, TrendForce expects the foundries’ 80nm capacities, which are less costly and more technologically mature than 55nm ones, to remain an increasingly sought-after node for TDDI manufacturers, since smartphone brands will in the short run focus on entry-level and mid-range models, which have higher potential for sell-through in the market.