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Demand in the foundry market has remained strong in 4Q20, as production capacities across the industry remain fully loaded, with the tight supply of wafer capacities leading to a price hike in foundry services and subsequently driving up total quarterly industry revenue, according to TrendForce’s latest investigations. The top 10 foundries’ revenues for 4Q20 are expected to exceed US$21.7 billion, an 18% increase YoY, with TSMC, Samsung, and UMC respectively taking the top three largest market shares.
On December 3, the U.S. Department of Defense announced its latest sanctions against four Chinese companies, including SMIC, which is the leading foundry in China, according to TrendForce’s latest investigations. While the U.S. government had imposed sanctions on SMIC with the EAR (Export Administration Regulations), the DoD is now including the foundry on its list of Chinese military companies. Not only will this move threaten SMIC’s upstream supply of semiconductor equipment and materials, but its R&D of advanced processes as well as China’s attempt at semiconductor independence will also be severely impacted as a result. Furthermore, SMIC will be barred from receiving any U.S. investments going forward.
Contract prices of mainstream products generally held steady in November following their stabilization in the prior month, according to TrendForce’s latest investigations. However, contract prices of low-density products (including DDR2 and DDR3 1/2/4Gb) rallied in advance due to the sentiment of tightening supply, with DDR3 4Gb seeing the most widespread adoption. Specifically, there are not many DRAM suppliers that provide low-density chips for specialty (or consumer) applications. On the other hand, the average and high prices of DDR3 2Gb chips, which were primarily promoted by Taiwan-based suppliers, crept up 1% from October, due to the gradual cutbacks in the two major Korean manufacturers’ supplies.
Total NAND Flash revenue reached US$14.5 billion in 3Q20, a 0.3% increase QoQ, while total NAND Flash bit shipment rose by 9% QoQ, but the ASP fell by 9% QoQ, according to TrendForce’s latest investigations. The market situation in 3Q20 can be attributed to the rising demand from the consumer electronics end as well as the recovering smartphone demand before the year-end peak sales season. Notably, in the PC market, the rise of distance education contributed to the growing number and scale of Chromebook tenders, but the increase in the demand for Chromebook devices has not led to a significant increase in NAND Flash consumption because storage capacity is rather limited for this kind of notebook computer. Moreover, clients in the server and data center segments had aggressively stocked up on components and server barebones during 2Q20 due to worries about the impact of the pandemic on the supply chain. Hence, their inventories reached a fairly high level by 3Q20. Clients are now under pressure to control and reduce their inventories during this second half of the year. With them scaling back procurement, the overall NAND Flash demand has also weakened, leading to a downward turn in the contract prices of most NAND Flash products.
Owing to the shipment restrictions imposed by the U.S. government, Huawei announced on November 17 that it will sell its subsidiary Honor, including all business units and assets, in order to protect Honor’s brand equity and the livelihood of its employees, according to TrendForce’s latest investigations. Despite the change of ownership, however, “new Honor” still has to cope with the shortage of foundry capacity in 2021, leading to a forecasted market share of 2%, while Huawei’s market share is expected to reach 4%. It should be pointed out that Apple is expected to capture some demand that was previously aimed at Huawei’s high-end smartphones. At the same time, Huawei’s Chinese competitors Xiaomi, OPPO, and Vivo are expected to ramp up device production. Hence, the volume of new smartphones coming from these sources will exceed the estimated market share gap left by Huawei. Also, if the smartphone market does not have sufficient demand to accommodate the overly inflated production plans in 2021, then brands may have to readjust their production targets.
