Display driver IC shortage reaches 20%, and shortage may continue until the middle of next year

Since the beginning of this year, due to the impact of the epidemic, the demand for remote work and online education at home has increased around the world, thereby driving the market demand for products such as tablets and laptops, and the demand for display driver ICs has continued to increase; in addition, since the third quarter, the demand in the TV panel market has rebounded, resulting in a tight overall supply in the display driver IC market.

Industry insiders pointed out that due to the tight capacity of upstream 8-inch wafer foundry, the supply gap of display driver IC has reached 15%~20%, which is expected to be alleviated by mid-2021. Currently, the price increase of wafers is more than 10%, while the price increase of display driver IC depends on the ability of different manufacturers to absorb costs.

Out of stock may continue until mid-2021

As is known in the industry, the production of display driver ICs is mainly concentrated on 8-inch wafers, mainly with a 0.11-0.16 µm process, including TV, monitor and notebook screen display driver ICs. Although the demand for TV panels has decreased in the first half of this year due to the impact of the epidemic, the rise of working from home and online education has also spawned market demand for laptops, tablets, etc. Overall, the demand for display driver ICs is still maintaining a steady growth trend.

Omdia said that starting from the third quarter, the demand for TV panels began to rebound, and the demand for large-size display driver chips grew accordingly, but the global 8-inch wafer production capacity did not increase, while products such as PMIC were also growing and could obtain better turnover and profits. In this case, wafer fabs are more willing to allocate more production capacity to those products with better profits, and the wafer supply shortage of display driver chips has become more serious.

Quanta Computer's general manager Weng Zongbin said that due to strong demand, tight upstream 8-inch wafer foundry capacity, and the continued impact of the expanding epidemic in Southeast Asia on local packaging business, the supply gap of display driver ICs has reached about 15~20%, which will be difficult to resolve by the end of this year.

The secretary of the board of directors of Zhongying Electronics said that the company's chip products are produced using the foundry model, and the main wafer foundries it deals with are Hejian, Huahong Grace, etc. The foundry capacity of display driver chips in the second half of the year will restrict the supply of the company's orders.

In the case of tight supply, manufacturers have raised product prices. A person from a driver IC manufacturer told Jiwei.com, "Currently, wafer prices have increased by more than 10%, and companies are signing supply guarantees to ensure wafer supply. As for the price increase of driver ICs, it depends on the ability of different manufacturers to absorb costs."

In response to the tight supply of driver ICs due to insufficient wafer foundry capacity, Novatek General Manager Wang Shouren stated that he will communicate with customers and raise prices to reflect costs.

Industry insiders also told Jiwei.com that "there is currently a large gap in display driver chips, mainly due to the epidemic at the beginning of the year, which led to low IC expectations. At the same time, DDIC was switched in production process, and the yield was not enough after the switch, which affected the output for several months. At present, the price of wafers has risen sharply, which has affected the driver IC, and the actual cost has increased by about 10%-20%."

"The current market demand continues, and some IC manufacturers have used this to increase IC prices, thereby improving the company's performance and gross profit. The extent of the price increase transmitted to the market segment in the future will be difficult to control. It is normal for the price of scarce ICs to increase by 100% now." The above person further stated.

Zhongying Electronics also stated on the interactive platform that the entire supply chain of driver IC chips has indeed seen some price increases recently, and the price increase has generally been transmitted from upstream to downstream, and the company is no exception.

TrendForce said that with strong demand for panels, the supply of display driver ICs began to tighten in the second half of 2020. Due to the tight supply of wafer foundry capacity, foundry costs have risen, and IC manufacturers have officially increased their quotations for display driver ICs to panel manufacturers since the third quarter, and the possibility of continuing to the fourth quarter cannot be ruled out.

At present, the shortage of upstream wafers has led to a tight supply of display driver ICs, and the prices of its products have also risen accordingly. For IC manufacturers, the increase in both quantity and price of driver ICs is obviously good news, especially for merchants with a certain amount of inventory, but for panel manufacturers, the shortage of driver ICs will become the main problem in the second half of the year.

Regarding how long the shortage of display driver ICs will last, the above-mentioned manufacturer told Jiwei.com, "At present, the driver ICs are still in short supply. At this stage, it seems that the shortage will not be alleviated until mid-2021. The future market direction will gradually shift to AM-OLED."

Overall, the shortage of display driver ICs will eventually be solved, but my country's high degree of external dependence on display driver ICs needs to be urgently resolved.

Driver IC has high external dependence

After years of hard work, my country's LCD panel production capacity has ranked first in the world, its independent core technology has grown rapidly, and its global voice has continued to increase. At the same time, in the field of OLED, companies such as BOE, TCL Huaxing, Visionox, and Shenzhen Tianma have accelerated their layout, which has also caused a certain impact on Samsung.

However, although my country has become a major panel producer and exporter, display driver ICs are heavily dependent on imports. In 2019, BOE purchased display driver ICs worth more than 6 billion yuan, of which domestic chips accounted for less than 5%. This shows that my country's display driver IC domestic production rate is low, heavily dependent on imports, and the upstream material supply is controlled by others.

According to foreign media reports, under the sanctions of the United States, Samsung Display and LGD will stop supplying all display screen related components to Huawei. It is reported that the key factor of this supply suspension is not directly related to the panel itself, but to the panel driver IC. Most driver ICs use ARM architecture, which triggered the restriction. Industry insiders pointed out that "although the display driver chip has a lower technical content than other semiconductor chips, it is difficult to find a substitute in the short term."

It can be seen that as the Sino-US trade friction becomes increasingly fierce, the United States will strictly control the export of chips and technology. For panel manufacturers, not only will costs rise rapidly, but there may also be a shortage of driver IC supply. Therefore, it is necessary to accelerate the localization of display driver ICs.

At present, domestic enterprises have increased their layout in the field of display driver ICs. In addition to Chipone, Sinowin, Shenghe Micro and other companies, the industry also reported that the technology giant Huawei has increased its layout in the field of display driver chips. Recently, Huawei's Yu Chengdong issued a document titled "Notice on the Establishment of Display Driver Product Field of Terminal Chip Business Department", which shows that Huawei will set up a department to make screen driver chips and enter the screen industry.

Industry chain sources revealed to Jiwei.com that Huawei has been involved in driver chips for a long time. Currently, the mobile phone OLED driver chip is in the tape-out stage. Huawei's flagship phones in the next two years may not be equipped with self-developed OLED driver chips. The source further pointed out that Huawei's entry into the OLED driver chip market may be to improve the design and display effects of mobile phones to enhance the differentiated competitiveness of flagship phones.

Although Huawei has not responded to this matter at present, Huawei's rapid layout can not only solve the problem of its own display driver IC supply being cut off, but also bring positive confidence to domestic panel manufacturers, thereby promoting the process of localization substitution of display driver ICs and enabling panel manufacturers to get rid of the problem of dependence on imported display driver ICs from the source.

Industry insiders pointed out that with the rapid layout of domestic panel manufacturers and the trend of domestic substitution, mainland China's driver IC manufacturers will gradually grow, and it is expected that China's driver IC market share will increase by 10% in 2021.

Shi Wei, general manager of Shenghe Microelectronics, also said: "With the country's strong support for the semiconductor industry, after the problems of corporate financing and talent are solved, it is inevitable that domestic OLED driver chips will make breakthroughs in the next 3 to 5 years." It can be seen that with the improvement of domestic display driver IC technology and the opening of production capacity by more manufacturers, domestic display driver ICs will gradually get rid of foreign control, and China's panel industry will also change from "big" to "strong".