Facing the news that the supply situation of LCD driver IC market on both sides of the Taiwan Strait may be further tightened in the fourth quarter of 2017 , most Taiwanese LCD driver IC suppliers expressed the attitude that a good cook cannot cook without rice. After all, at this stage, the production capacity of 8-inch and 12-inch wafer foundries is tight, and other chip suppliers are also competing for production capacity. LCD driver IC prices have always been low, and the quotations of affordable wafer foundries are often inferior. If the demand of downstream brand mobile phone customers and TV foundries continues to strengthen in the fourth quarter, then the direction of LCD driver IC supply turning from tight to out of stock is inevitable.

Taiwanese wafer foundries even pointed out that the shortage of LCD driver ICs may be a blessing for Taiwanese factories. After all, they have been tortured by the price-cutting actions of downstream TFT panel manufacturers in recent years. It is necessary to temporarily cut off the supply in order to restore normal industry ethics and market price order. After all, panel factories on both sides of the Taiwan Strait are unable to ship goods in order to save a few cents of cost. The ones who suffer the most are definitely not the LCD driver IC suppliers.

In fact, in recent years, Taiwan-based LCD driver IC suppliers have been somewhat depressed, because most of the new customers are mainly TFT panel manufacturers in China. Unlike AUO, Innolux, Innolux, and Huaying in Taiwan in the past, they still understand the ethical order and reasonable profit margin of the upstream semiconductor industry chain, and will not cut prices at a stroke. The action of reducing prices for new and old products every quarter has made Taiwan-based LCD driver IC suppliers, whose average gross profit margin has long been less than 20%, a little bit uninterested. As a result, when competing for production capacity with upstream wafer foundries, they are always a long way behind other IC design companies. After 8-inch wafer foundry capacity continues to find the latest Internet of Things, biometrics, Industry 4.0 and automotive electronics application business opportunities, and 12-inch wafer capacity has also begun to find new chip needs such as AI and autonomous driving, LCD driver IC orders that require low wafer foundry prices but large wafer capacity seem to have become chicken rib orders in the eyes of TSMC, UMC and emerging wafer foundry operators. They will never discount orders unless it is absolutely necessary.

The production capacity of 8-inch and 12-inch wafer foundries is tight. Taiwanese wafer foundries pointed out that the shortage of LCD driver ICs may be a boon for Taiwanese foundries. AFP

Therefore, in the second half of 2017, when the global TV market demand slightly rebounded and new smartphones were launched, customers delayed until the third quarter to decide to urgently replenish LCD driver IC orders, which created a situation where the emperor was in a hurry but the eunuchs were not, because it was absolutely too late to grab upstream wafer foundry capacity now, not to mention that the orders came back with price cuts. This suicidal and money-losing business is very unwise for Taiwanese LCD driver IC suppliers whose operating performance has been poor in 2017. In addition, the operating growth in 2017 has long been pessimistic by the outside world, so there is no need to make special efforts to try to prove anything.

As Taiwan-based LCD driver IC suppliers adopt the attitude of "let the shortage last", and wafer foundries also take up the challenge and will not rush to ship without price increase, the tight supply of LCD driver ICs in the fourth quarter has become more and more serious. Moreover, this time, the shortage of LCD driver ICs may affect the progress of panel shipments, and the losses of downstream panel manufacturers will definitely be greater. It is expected that the price of LCD driver ICs will have a chance to stop falling and rebound to return to a reasonable profit margin, because this will help the healthy cooperation and tacit understanding of the upstream and downstream industry chains in the future.

Source | DIGITIMES

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