Limited supply of 8-inch wafers

According to TrendForce's Display Research Division, the demand for IT panels in 2020 will benefit from remote office and teaching, which will increase the demand for large display driver ICs (LDDI) to 5.827 billion, an annual growth of 2.3%. On the other hand, 8-inch wafers on the upstream supply side are affected by the capacity crowding out of other high-margin chips, causing the supply-demand ratio of LDDI to drop from 3.3% in 2019 to 1.7% in 2020, showing a supply tightening trend.
 
In addition, TrendForce analyst Yang Qingxiang further pointed out that in the second half of this year, the LDDI market has continued to increase prices and catch up with volume. Except for the two adjustments of LDDI foundry quotations by upstream fabs, the downstream packaging and testing capacity is insufficient and IC bumping The high price of gold raw materials is the reason that led to the LDDI price increase of 10-15% in the second half of the year.
 
Looking forward to 2021, from the supply side, the capacity growth of 8-inch wafers has been limited in recent years, but the demand for image sensor chips (CIS) and power management chips (PMIC) is increasing day by day, and the margins are relative to each other in the same manufacturing process. The poor LDDI production capacity and the transfer order effect after SMIC was sanctioned will also make the overall market conditions more severe.
 
Although Nexchip in Hefei, China, will increase its 12-inch wafer production capacity and lock in the LDDI market, the supply of LDDI will not increase significantly until late 2021 at the earliest. It is estimated that the supply of LDDI will increase slightly next year. The possibility of annual growth of 1.8%.
 
From the demand side, in 2021, TV panels will move towards large size and high resolution, and the number of LDDI usage will increase simultaneously. In addition, panel makers have set aggressive shipment targets for IT panels, which will drive the overall demand for LDDI. Growth reached 2.5%.
 
There are three main reasons for panel makers to adopt an active stocking strategy for LDDI in the first half of 2021. First, there are still variables in the future trend of the epidemic. With the expected high customer demand, the stocking demand for IT panels will increase simultaneously; secondly, the third quarter is for TV panels. In the traditional peak season for shipments, the overall panel demand is less likely to reverse rapidly during this season. Finally, the supply of 8-inch wafers is clearly shrinking, and ensuring the supply of materials and parts has become the focus of the panel factory’s component procurement.
 
On the whole, terminal demand for panels in 2021 will remain high-end, which means that the supply of LDDI will become more tight. The supply-demand ratio is expected to drop from 1.7% this year to 1.1%, and it is still difficult to alleviate the supply contraction in the first three quarters.
 
Therefore, the risk of LDDI shortage not only has the opportunity to bring a certain degree of support to panel prices next year, but also supply chain management and material preparation strategies have become important business issues for panel factories.