By Miranda Li

The demand for automotive and industrial grade chips has become the new driving force for the growth of the IC market in China against the backdrop of consumer chip price drop, according to a JW Insights report released in early July.

The price of driver IC has gradually decreased by 10%~15% in the second quarter of this year. Xie Qinyi, director of display research at research firm Omdia, forecasted an over 20% price drop of driver IC in the third quarter. He said the wafer production capacity was not so much in short supply now and that the panel factories had reduced production, following a significant drop in demand.

In addition, as noted by industry sources, some driver IC suppliers have slashed the wafer production quantity by as high as 30%. Powerchip Semiconductor Manufacturing Corp (PSMC力积电), a wafer foundry, pointed out that fabs for panel driver IC were willing to release some production capacity now rather than scramble for production capacity as in the past, but there is no adjustment in the long-term contract.

Chinese chip companies need to seize a new market opportunity in emerging sectors, such as automotive panel and flat panel markets.

The analog chip market has been developing rapidly in the past two years in the country. Most domestic analog chip suppliers mainly focus on power management chips, including SG Micro Corp (圣邦股份), Etek Microelectronics (力芯微), Chipown (芯朋微), Kiwi Instruments (必易微), Bright Power Semiconductor (BPS晶丰明源), Shenzhen Sunmoon Microelectronics (明微电子), and Silergy Corp. (矽力杰). Few companies focus on signal chain devices, mainly due to the high threshold of weak signal and high-frequency signal processing technology. Chinese startups in this area are still at the initial stage.

The market scale of power management chips is expected to continue to grow in the country, offering more opportunities for local analog IC companies.

Over the last two years, IC dealers in the Chinese mainland hoarded consumer MCUs, causing price hikes and inventories that could support three to four months.

However, due to the uncertain demand outlook, dealers have recently started to reduce consumer MCUs prices.

Research firm Trendforce report indicated that the prices of 8, 16, and 32-bit MCUs used by cars are relatively stable currently.

Since most 4-bit MCUs are used in consumer electronics devices, it has seen a significant decline of 15.9% per month in April, 10.4% in May, and 11.3% in June, totaling a 40% decrease in the three months.

But as the trade press in the Taiwan region reported, the continued strong demand for 32-bit MCU tightens the current supply, and the product unit price remains high.

In the DRAM market, the Trendforce data shows that the total output value of DRAM in the first quarter of 2022 amounted to $24.03 billion, down by 4% compared with the previous quarter.

The price fall is attributed to weakened demand and geopolitical tensions. With still rising inventory, destocking is becoming the primary goal now. Gartner forecasts that DRAM supply will be excessive in the second half of 2023 and the same for NAND supply in the fourth quarter of 2022.

Despite the slump with these chips in consumer electronics, the automotive and industrial grade applications show strong demands. Chinese chip companies have grown rapidly in these markets for chips of TDDI, power management, and consumer MCUs in the past few years.

Competition in these fields will intensify under overall strong market demand. More related Chinese suppliers will offer domestic substitution, the JW Insights report concludes. (校对/WM Zhang)