The driver chip market is hot. Novatek: The tight situation will continue until the end of the year, or the price will increase

On May 6, IC design "Second Brother" and panel driver IC leader Novatek held a seminar.

Novatek General Manager Wang Shouren pointed out that in terms of current capacity obtained, the second half will be better than the first half, and due to the limited expansion of foundry production in the past, supply and demand are expected to be tight until the end of the year, and the increase in capacity obtained next year is also quite limited.

Wang Shouren said that the current supply of 8-inch and 12-inch wafers is quite tight, mainly due to the increase in demand from various quarters. In addition, the limited increase in production capacity in the past has caused production capacity to be unable to catch up with demand. Judging from current customer orders, the tight situation will continue. By the end of the year.

In addition, due to the current tight 8-inch and 12-inch production capacity and the continuous increase in foundry prices, Wang Shouren confirmed that the cost of the second quarter continued to rise, and Novatek also followed up to increase prices. As for the second half of the year and next year, the price will be based on Adjust market conditions.

In addition, system vendors and brand customers prioritize high-end products, such as 5G mobile phones, in order to increase profitability. As customers switch to high-end products such as FHD and OLED panels, the drive chip manufacturing process is also moving to 55, 40, and 28 nanometers. The same is limited. In response to insufficient production capacity, Novatek emphasized that it will try its best to solve customer problems.

Looking forward to the second half of the year, Wang Shouren believes that due to the enthusiasm for terminal mobile phones, TVs, laptops, tablets, and automobiles, the overall demand for decline is small. In addition, the system factory will usher in the peak season in the second half of the year and the wafer supply will continue to be tight. Before restocking, the demand in the third quarter was still quite strong.

Regarding the mainland wafer foundry Jinghe Integration will open new production capacity in the second half of the year, Wang Shouren responded that although the new production capacity is opened, the overall industry is not only in shortage of driver chips, but also non-drive chips such as MCU, PMIC, MOSFET, and fingerprint recognition. And so on, all adopt mature manufacturing process, so the capacity relief will have to wait until 2022 at the fastest.

Regarding next year's production capacity, Wang Shouren believes that due to the tight supply, end customers also hope that Novatek can maintain a stable supply for a long time. Therefore, they are discussing with suppliers on the supply status in 2022, which is still in progress.

Novatek Q1 performance exceeded expectations

Benefiting from the good market conditions, Novatek also achieved good results in its first quarter financial report.

On April 26, Novatek released the first quarter report of 2021. The report showed that benefited from the rising trend of chip prices, coupled with the optimization of product portfolio, the gross profit rate and profit rate reached 43.64% and 27.35%, which were better than the financial estimates. The net profit after tax was 5.875 billion yuan (NTD, the same below), a quarterly increase of 61.22% and an annual increase of 166%. The net profit per share after tax was 9.66 yuan, a record high simultaneously.

Novatek originally estimated that revenue was estimated at 25-26 billion yuan (calculated at the exchange rate of NT$28 to the US dollar), with a gross profit margin of 38-41% and a profit margin of 22-25%. However, from the actual figures, not only The revenue slightly exceeded the high standard, and the double rate was also greatly optimized, both exceeding the financial forecast by more than 2 percentage points, showing the effect of price increases and the improvement of the product portfolio far better than originally expected.

Sitronix, Tianyu, Himax Q1 gross profit exceeds 40%

On May 6, driver chip manufacturers Sitronix, Tianyu, and Himax also released their first-quarter financial reports, benefiting from the hot panel market, coupled with tight wafer foundry capacity, limited supply, strong demand, and constant driver chip prices Soaring, the profits of related businesses in the first quarter all doubled compared with the same period last year, rewriting a record high.

Silicon Innovations’ first-quarter revenue was 4.043 billion yuan, a quarterly decrease of 2.18%, an annual increase of 28.8%, a gross profit margin of 47.17%, a quarterly increase of 8.56 percentage points, an annual increase of 14.94 percentage points, a profit margin of 28.15%, and a quarterly increase of 8.19 percentage points. An annual increase of 11.17 percentage points, a net profit after tax of 789 million yuan, a quarterly increase of 62.35%, an annual increase of 171%, and a net profit of 6.55 yuan per share after tax.

Tianyu’s first-quarter revenue was 4.004 billion yuan, a quarterly increase of 10.06%, an annual increase of 90.85%, a gross profit margin of 39.26%, a quarterly increase of 11.67 percentage points, an annual increase of 19.05 percentage points, a profit rate of 26%, and a quarterly increase of 10.95 percentage points. The annual increase was 22.98 percentage points, the net profit after tax was 792 million yuan, the quarterly increase was 79.77%, the annual increase was 1063%, and the net profit per share after tax was 4.78 yuan.

Himax’s first-quarter revenue was US$30,900, an increase of 12.1% quarter-on-quarter and an annual increase of 67.4%, gross profit margin 40.2%, quarter-on-quarter growth of 9 percentage points, and annual growth of 17.5 percentage points. After-tax net profit was US$6,700, a quarter-on-quarter increase of 96.7%. , An annual increase of 1931%, a surplus of 38.3 cents per ADS.

It is understood that in the first quarter of this year, Silicon Innovations began to increase prices to customers in order to reflect the increase in foundry costs. As the foundry prices increased again in the second quarter, Silicon Innovations followed up with an increase of about 2 Shengjia Electronics, its subsidiary, has also benefited from the rebound in sensor demand. Since this quarter, it has also raised its quotations by more than 10%, and profits have risen simultaneously.

Himax said that although the foundry capacity utilization rate exceeds 100%, the demand is still in short supply. In particular, the driver chips, PMIC, CIS, etc. must adopt mature manufacturing processes. As the demand for related applications has increased sharply, and there has been no significant increase in the past few years. Expansion has led to a serious imbalance between supply and demand. The company has confirmed that it has decided to increase production. It is expected that production capacity will grow quarterly in 2021, and will continue to strive for more production capacity. It is also actively cooperating with strategic foundry partners and will formulate a long-term capacity expansion plan.

The foundry began to "mutually benefit symbiosis" with chip manufacturers

Since the beginning of this year, the demand for foundry has exploded, but there is a shortage of existing capacity, and various chip factories have begun to "grab capacity." Due to the limited capacity of the foundry, the expansion of the new plant has also changed: the foundry business has begun to negotiate with the chip factory to start a "mutually beneficial symbiosis" business model, including UMC’s ability to provide capacity deposits from customers to build new plants, and Liji Power’s Open Foundry strategy, etc.

In view of the current shortage of foundry capacity in the semiconductor industry and the unprecedented simultaneous increase in foundry and chip prices in the industry, foundry manufacturers such as TSMC, UMC, and Power Semiconductor Manufacturing Co. agreed that the capacity of mature processes will be tight, before 2023 Will not ease.

However, in view of the high cost of fabs, which is not in the interests of manufacturers, and the expansion of new fabs, fabs often bear great financial, technical and operational risks. Therefore, compared with the mature process of industry expansion (8-inch ), the industry is more willing to expand its 12-inch production capacity.

According to statistics, an 8-inch wafer fab alone will cost US$1 billion (approximately NT$28 billion), and a 12-inch fab will invest as much as US$3 billion (approximately NT$83.7 billion). In addition, the industry is worried. After expanding the production capacity of mature processes, if there is a business reversal in the future, resulting in idle production capacity, it will suffer huge investment losses.

In order to effectively reduce the risk of expansion and solve the industry’s current capacity shortage, Power Semiconductor’s Chairman Huang Chongren has recently strongly advocated the "Reverse-Moore's Law" model. He believes that wafer manufacturing and other upstream and downstream peripheral industries, It is necessary to establish a new cooperation model of profit sharing and risk sharing, and change the unbalanced supply chain structure in order to allow the healthy development of the semiconductor industry.

Power Semiconductor Manufacturing’s new 12-inch Tongluo factory has been invested in this model. It will spend 278 billion yuan and is expected to be put into production in phases from 2023. The source of funds is not only its own funds and fundraising through stock exchange transfers, but also some manufacturers. Willing to use the Open Foundry strategy to invest in the purchase of equipment to control production capacity and increase the flexibility of operating capital scheduling for Power Semiconductor Manufacturing Co., Ltd.

Hong Jiacong, chairman of UMC, also said that the recent market developments have given the company and its customers an opportunity to further strengthen the capital expenditure strategy based on return on investment, and at the same time ease the long-term capacity constraints of the supply chain. The role and positioning of foundry services are undergoing structural changes, and an innovative win-win cooperation model is required.

As a result, UMC signed a reciprocal agreement with a number of customers for the first time to expand the production capacity of Nanke's Fab 12A P6 plant. The total investment amount of the expansion plan is about 100 billion yuan. The customer will pay the deposit in advance at the negotiated price to ensure long-term access to P6's future production capacity. Guarantee means that this fab is contracted by customers, and new capacity can maintain a healthy capacity utilization rate.

On the basis of this reciprocal agreement, UMC can not only stabilize the foundry price, reduce the risk of future changes in market conditions, but also reduce the cost pressure of building new capacity.