© TrendForce Analysis | January 06, 2021
Tight LDDI supply expected to continue in 2021
Demand for IT panels skyrocketed in 2020 due to the rising popularity of WFH and distance education, in turn propelling large-sized display driver IC (LDDI) demand to 5.827 billion units, a 2.3% growth YoY, according to TrendForce’s latest investigations.
In the upstream semiconductor supply chain, various foundries’ 8-inch wafer capacities have mostly been allocated to other chips with higher profit margins, in turn lowering the glut ratio of LDDI from 3.3% in 2019 to 1.7% in 2020, representing a tightening supply. On the other hand, TrendForce analyst Jeff Yang indicates that the LDDI market has been exhibiting increased prices as a prerequisite for ensuring increased supply in 2H20. LDDI prices rose by 20-30% QoQ throughout the two quarters in 2H20 due to developments in both the upstream and downstream semiconductor supply chain: In the upstream, foundries increased quotes for LDDI manufacturing on two separate occasions. Conversely, in the downstream, OSAT capacities have been insufficient, and prices for gold used in IC gold bump connectors have been trending high as well. With regards to LDDI supply, there has been very limited growth in 8-inch wafer capacities in recent years, whereas demand for CMOS image sensors (CIS) and power management ICs (PMIC) has been consistently soaring in comparison. Since LDDIs are manufactured with the same process technology as the aforementioned chips but are less profitable, chips such as CIS and PMICs have crowded out LDDI manufacturing in foundries. This, in addition to U.S. sanctions against SMIC, which led suppliers to reassign their LDDI manufacturing orders to other foundries instead, resulted in a major supply crunch for LDDI. Although Nexchip, a foundry based in Hefei, China, is expanding its 12-inch wafer capacities in response to LDDI market demand, total LDDI supply will not undergo a noticeable increase until 2H21 at the earliest. LDDI supply is thus likely to rise slightly next year, with a 1.8% growth YoY. With regards to LDDI demand, the trend for TV panels to move towards larger sizes and higher resolutions in 2021 will also drive up LDDI consumption. Furthermore, as panel manufacturers have set an aggressive shipment target for IT panels next year, total LDDI demand is expected to increase by 2.5% YoY in 2021. These manufacturers will aggressively procure LDDIs in 1H21 primarily for the following three reasons: First, while the movement of COVID-19 pandemic remains uncertain, IT panels will represent a major source of LDDI demand given the expected high demand for IT panels. Secondly, as third quarters are traditionally a period of cyclical upturn for TV panel shipment, the possibility that the overall panel demand enters a rapid downturn in 3Q21 is relatively low. Finally, ensuring a healthy supply of components will become a top priority for panel manufacturers because the tightening supply of 8-inch wafer capacities has become increasingly noticeable. On the whole, end-product demand for panels will remain high in 2021, meaning LDDI supply will likewise become an even more pressing issue. The glut ratio of LDDIs is expected to drop even further next year, from 1.7% in 2020 down to 1.1% in 2021, with the supply crunch remaining unalleviated throughout the first three quarters of the year. As such, the risk posed by LDDI shortage will potentially generate a certain degree of support for panel prices next year, while supply chain management and inventory management will become key to panel manufacturers’ success in the industry.