With the surge in demand for automotive applications, the entire CIS industry chain is experiencing another boom

There is a severe shortage of eight-inch wafers, and related chips are expected to increase in price one after another, attracting funds from various parties to rush to buy the beneficiaries of the price increase, becoming one of the strong mainstreams of the Taiwan stock market. CIS, which has recently been reported to increase in price, is expected to show a rise in both price and volume in the future under the support of the huge demand opportunities of the self-driving car trend, and the related supply chain may usher in a dual engine of operational growth.

Market research firm Omdia recently stated that there is a severe shortage of low- and mid-range 5-megapixel and 5-megapixel CIS (CMOS image sensors). Samsung has raised CIS prices by 40% since December 2020, and other CIS suppliers have also raised prices by 20%. The main reason for this wave of CIS price increases is the tight capacity of eight-inch wafer foundry, which has triggered a wave of overall chip price increases. Power management ICs, driver ICs, fingerprint recognition ICs, MOSFETs and other products produced on eight-inch wafers have been out of stock and priced up since the second half of 2020.

Samsung expands its factory to grab market share from Sony

To meet customer order needs, Samsung's 11th DRAM production line in Hwaseong, South Korea has been converted into a CIS production line, increasing the total CIS production capacity by 20% and entering the mass production stage. Samsung's senior management's capacity conversion strategy can be said to kill two birds with one stone. It can not only increase DRAM prices by reducing DRAM production capacity, but also increase CIS production capacity to accelerate the grabbing of CIS leader SONY's market share (compared to SONY's CIS market share, which dropped from 48.5% to 47.6% in 2019, Samsung's increased from 18.1% to 21.6%).

Chinese mobile phone brands have launched more cost-effective high-pixel multi-lens models, which has become the biggest help for Samsung to compete with Sony for market share. Brand manufacturers still use high-pixel cameras as a marketing selling point for high-performance differentiation. As the demand for the number of lenses increases, the demand for CIS will also increase. For example, the recently launched Xiaomi 11 uses Samsung's CIS in three of the four front and rear lenses.

According to TSR's estimates, the average pixel of a smartphone will increase from 59 million pixels in 2020 to 112 million pixels in 2024, and the demand for CIS will also increase accordingly. KPMG estimates that the global CIS market size will increase from US$47 billion in 2020 to US$143 billion in 2030. Among them, automotive CIS accounts for about 14% of the overall market, and the market size is expected to increase to US$20 billion in 2030.

Huge demand for automotive CIS from innovative car manufacturers in mainland China

Not only is the production capacity of CIS limited on the supply side, but the demand side is also booming due to the accelerated arrival of future cars with autonomous driving functions. As new car manufacturers are actively installing more sensors as technological highlights, it can be expected that the above-mentioned automotive CIS has considerable potential and space for upward adjustment in the overall market share.

CIS can help autonomous driving achieve more accurate and reliable performance, ensure the safety of drivers and passengers, and meet stringent conditions such as various environments and service life, becoming an important component in the development of autonomous driving. Automobiles still emphasize multi-sensor fusion for environmental sensing, and the number of external sensors used increases with the level of autonomous driving. Lenses and millimeter-wave radars also upgrade their specifications due to high levels of autonomous driving.

In addition to the need for camera sensors outside the car, as the level of self-driving is upgraded to Level 3 to Level 4, where the driver's right to drive needs to be transferred, the driver monitoring system (DMS) in the car can directly identify the camera solution for driving. The driver monitoring system can effectively detect driver distraction and decreased attention, and give appropriate warnings and take effective actions.

Global business opportunities worth tens of billions of dollars

Currently, there are still only a few models of driver monitoring systems equipped with lens solutions, but with the development trend of traffic regulations, increased performance of advanced driver assistance systems (ADAS) and higher levels of autonomous driving, the penetration rate in new cars will increase rapidly, especially in the Chinese market where policies are actively guided. TrendForce estimates that the annual compound growth rate from 2020 to 2025 will be 92%.

Currently, CIS with lenses is a key component used by Tesla, the leader in electric vehicles, for surround detection and ADAS. As Tesla Model 3 and Model Y continue to increase in volume, demand for larger automotive CIS components using BGA packaging will continue to increase. The market estimates that Tesla's annual production will be 1 million vehicles in 2021 and will grow to 2 million vehicles in 2022, doubling and tripling from 520,000 vehicles in 2020.

In 2019, the average car was equipped with two CIS. According to estimates by China GF Securities, if the average car is equipped with six to seven lenses in the future, and the average CIS unit price is calculated at US$10, the value of each car will be about US$600,000 to US$70. With annual global car sales of 90 million, the potential market size of global automotive CIS will reach US$5.4 billion to US$6.3 billion.

The market estimates that in the future, each self-driving car will be equipped with up to 14 to 15 lenses. The ET7 model of China's new car manufacturer NIO has made this future come true ahead of time. The self-driving system is equipped with 11 8-megapixel lenses and CIS. Together with the four lenses and CIS in the car, the total number of CIS installed in a single car is 15, and the value of each car is US$150, implying that the global potential market size of automotive CIS has room to double again.

Jingxiangguang indirectly enters global automobile manufacturers

The demand for automotive lenses will grow strongly in the future, and it will not only benefit lens manufacturers and CIS chip manufacturers, but also CIS packaging and testing demand will grow. According to the Electronic Times, Taiwan's CIS packaging and testing companies said that CIS, such as BGA packaging for automotive products, wafer reorganization (RW) processes for mid-to-high-end mobile phones, have cancelled price discounts with customers, which is equivalent to a disguised price increase. International automotive IDM major customers have released long-term packaging foundry orders for about one year.

Currently, the automotive CIS supply chain in Taiwan includes IC design companies Jingxiang Optoelectronics and Pixar; wafer foundry TSMC; packaging companies Tongxin Electronics, Precision Materials, and ASE; and testing company King Yuan Electronics. Among them, the original product application of Jingxiang Optoelectronics is mainly security products. It is the third largest supplier of CIS for surveillance cameras in the world, with a market share of 16%. Its largest customer is Hikvision, the global leader in security control.

Recently, by entering the global automotive parts giant Minth Group, it has indirectly become a supplier to major car brands such as BMW, BENZ and TOYOTA. After passing the AEC Q100 automotive international standard audit, Jingxiang Optoelectronics is expected to enter the automotive OEM market, which will help increase the proportion of automotive revenue. At the same time, in response to the tight supply and demand market, it has planned to increase the price, but will not adjust the price to customers before the Chinese New Year.

After Tong Hsing Electronics acquired Shengli, it officially became the world's largest CIS packaging factory. Tong Hsing Electronics mainly manufactures CIS wafer reorganization and assembly, while Shengli focuses on COB packaging of automotive CIS. The largest customer is ON Semi, and the second largest customer is Sony. Together with the original automotive customer OmniVision, the three major automotive CIS customers have a total market share of up to 70%. Aptina, a subsidiary of ON Semi, is the world's largest automotive CIS and also the main CIS supplier for Tesla. Six of the eight CIS in the Model series are provided by Aptina, so Tong Hsing Electronics has indirectly entered Tesla's supply chain.

Tongxin Electronics and Jingcai Packaging have too many outsourcing orders to fulfill
 

Sony, which is actively planning for future cars, has recently begun to expand the proportion of outsourced packaging and testing, which is conducive to Tongxin Electronics to continue to increase the proportion of automotive revenue. The company's performance growth momentum this year is still mainly CIS packaging and RW. It is estimated that the overall supply and demand of CIS for mobile phones is in a balanced state, and the production capacity of the Hsinchu plant for automotive CIS packaging remains fully loaded.

Jingshi is a packaging and testing subsidiary of TSMC. Its CIS production line focuses on lower-end smartphones and automotive applications, with automotive revenue contributing 12% in the first three quarters of 2020. Its main customer, OmniVision, has a 30% market share in the automotive CIS market and released two new products at CES, which are currently the most advanced 8-megapixel HDR+LFM solutions for automotive use. They are expected to be adopted by new car manufacturers in mainland China, thereby increasing the value of Jingshi's business opportunities in the mainland China market.