Automobile and IT Set Players Reducing Semiconductor Usage
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
Amid an ongoing semiconductor supply shortage, demand side players such as automakers and IT set makers are attempting to reduce chip usage via product design changes. Some smartphone makers have begun to make adjustments to their inventories, which they had previously been building up out of fears of a worsening in the US-China trade dispute. Also spurring inventory adjustment activity is the fact that foundry capacity is set to increase in earnest from 2H21.
Automobile and IT set players reducing semiconductor usage via design changes
Recently, some automobile and IT set companies that are no longer able to withstand the ongoing semiconductor supply shortage situation are planning to reduce semiconductor usage through product design changes. These design changes are to reduce the number of MCU chips per product unit.
In particular, automakers are trying to change to a domain control unit (DCU) using a 20nm or smaller process by integrating several MCU products using a 55nm-or-higher process (which is currently experiencing a severe supply-demand imbalance). Moving ahead, it is highly likely that a large amount of inventory held by automobile semiconductor distributors (who had previously boosted their inventories out of fear of price hikes) will appear in the market.
Some smartphone makers beginning to make inventory adjustments
Chinese smartphone makers, who had significantly upped their semiconductor inventories in 1H21 in preparation for a potential worsening in a trade dispute between the US and China, are also starting to adjust their inventories. Recently, they have been cutting back their new parts orders. And, due to the spread of Covid-19 in India, they have been trimming down their 2021 smartphone shipment targets for the mid-end segment.
We believe foundry players’ aggressive capacity investment announcements have slowed set makers’ orders to secure inventory. In detail, Taiwan’s UMC has decided to expand the capacity of its 12-inch fab P6, using advance payments it received from clients such as Samsung Electronics (SEC) and Qualcomm. UMC plans to invest NT$100bn to expand its 28K wpm capacity, aiming to use the higher capacity UMC to produce 28nm OLED DDI, among other products. Meanwhile, TSMC plans to invest in 40K wpm worth of new capacity in Nanjing, China. And, Powerchip has announced plans to invest in 25K wpm.