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2022/12/12
Geopolitical tensions have been rising as the US-China trade dispute escalates, and the global server supply chain has undergone notable changes as a result With regard to L6 server motherboard production, the first notable wave of relocation since the start of the trade dispute in 2018 involved server ODMs moving their production lines from Mainland China to Taiwan Then, due to the construction of data centers across the Asia-Pacific region and ODMs’ need to increase their STM lines, Southeast Asian countries such as Malaysia and Thailand also came under consideration for capacity expansion More recently, the trade dispute has taken another significant turn with the US Commerce Department further broadening the semiconductor technology export rules In view of this development, some US-based cloud service providers (CSPs) have been conducting more internal discussions about adding server production lines outside Taiwan as a precautionary measure Hence, from a longer-term perspective, TrendForce believes the core parts of the server supply chain will eventually shift to Southeast Asia and the Americas
To Meet Demand from US Clients, ODMs Are Building Production Lines Outside China and Aim to Activate Them in 2023
According to TrendForce’s research, Taiwan-based ODMs now account for about 90% of global server motherboard production With respect to L6 server motherboards, the shares of global production belonging to Taiwan and Southeast Asia have also increased slightly this year, whereas Mainland China’s share has shrunk by around 62 percentage points To meet the demand from US clients, ODMs are ramping up production at their operations in Taiwan and expanding existing server assembly sites to include motherboard production For example, Inventec will be adding three new motherboard production lines near its assembly site in Mexico Wistron (which encompasses Wiywnn) also plans to set up a production base in Malaysia at the start of next year in order to have some reserved production capacity that can be deployed immediately in any given situation Likewise, the other major ODMs such as Foxconn and Quanta have added new production capacity in the US, Mexico, Vietnam and Thailand so that they can maintain production flexibility
In addition to these recent developments, TrendForce especially points out that the relocation efforts taking place across the server supply chain are expected to bring about a lot more changes in the future On the demand side, the major North American CSPs such as Google, AWS, Meta, and Microsoft have not only moved most of their ODM partners’ L6 server production lines to Taiwan but also made plans to set up production capacity in Southeast Asia in order to further minimize geopolitical risks Moreover, their ODM partners have begun building “buffer lines” (or backup production lines) at locations along the US-Mexico border On the other hand, these same CSPs have also allowed their ODM partners to maintain existing production plans for servers deployed in regions outside North America and keep some production lines in Mainland China running
Furthermore, TrendForce wants to bring attention to “fragmentation” as an emerging model in the management of the server supply chain For example, Microsoft and AWS have further segmented the server production plus assembly process that used to be streamlined because it was handled entirely by ODMs In the future, the assembly task of a server project will be given to not only an ODM partner but also a system integrator Again, the intent behind seeking a system integrator’s assistance is to enhance the stability of the supply chain and hedge the risk of a shortage caused by a geopolitical crisis
In conclusion, TrendForce believes China’s and Taiwan’s shares of L6 server production lines will shrink over the long term Instead, these production lines will be more geographically dispersed and more regionalized in terms of operation Such development will allow clients to effectively spread risk and meet specific local demands Moreover, moving server production lines may not be enough, and a corresponding shift in the sourcing of components and materials may be required as well Therefore, TrendForce is not ruling out the possibility of relocation efforts taking place further upstream in the supply chain
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2022/12/07
According to TrendForce’s research, the scale of the global market for military unmanned aerial vehicles (military UAVs, also known as military drones)will expand at a CAGR of 276% during the 2022~2025 period, from US$165 billion to US$343 billion This growth is the result of countries worldwide engaging in the R&D, procurement, and deployment of this kind of military equipment The rising demand for military UAVs is also expected to bring more business opportunities to technology companies in Taiwan as the extent of their specialties not only encompasses components and parts but also whole vehicle systems Going forward, Taiwan-based companies that offer solutions in the field of military UAVs will benefit from domestic demand generated by government policies They will also have a chance to enter the international market for this kind of hardware
TrendForce points out that the Russia-Ukraine conflict has demonstrated the effectiveness of military UAVs in combat Besides providing immense capability for asymmetrical warfare, UAVs are shown to have a significant advantage over conventional weapons such as fighter planes and tanks in terms of the amount of time needed for outfitting, loading armaments, and initiating attacks Moreover, military UAVs are able to stay in the sky many times longer than conventional military aircrafts, as observed in their performances in missions related to long-range reconnaissance and airstrike On top of all these, the most important reason for using UAVs is the reduction of casualties on one’s own side while substantially improving the combat capabilities of small military units In modern warfare, where precision in attacking targets and minimal casualty rate are emphasized, military UAVs have now emerged as the general trend
Many countries are now learning from the ongoing Russia-Ukraine conflict and will most likely make UAVs a key part of their respective strategies for national defense and military equipment acquisition Some of them might even consider setting up a dedicated unit for operating battlefield drones, as in the case of Ukrainian armed forces For the major military powers and regions affected by intense geopolitical tensions, their demand for UAVs is going to get higher Presently, military UAVs are mainly purposed for target tug, reconnaissance, communication support, and airstrike As the related technologies continue to advance, military UAVs will have a greater participation in missions involving electronic warfare, aerial refueling, and airborne early warning Their role as loyal wingman will also be strengthened with reconnaissance and airstrike as the key points of focus in their next phase of development
Among Taiwan-based companies that are developing a presence in the field of UAVs, Thunder Tiger is a long-established manufacturer for whole vehicle systems Its offerings include multi-rotor UAVs and medium- and large-sized unmanned helicopters The company also builds unmanned underwater vehicles (also known as unmanned submarines and underwater drones) All in all, its solutions can meet a wide range of application demand, such as photography/cinematography, surveillance, reconnaissance, patrol, communication support, and emergency assistance Furthermore, Thunder Tiger is currently involved in the development of the T-400 unmanned helicopter that is geared towards communication support and reconnaissance The T-400 is noted for attaining a combat radius of 200 kilometers
Another Taiwan-based manufacturer named GEOSAT has also been developing remote-piloted aircrafts for civilian and military applications The types of UAVs that this company offers include fixed-wing drones, multi-rotor drones, and unmanned helicopters Like Thunder Tiger, GEOSAT has provided solutions for many applications, including photography/cinematography, surveillance, reconnaissance, patrol, crop spraying, etc
With regard to key components, the growing demand for military UAVs will generate many opportunities for suppliers In Taiwan’s semiconductor industry, potential beneficiaries are SoC suppliers such as MediaTek, image processor suppliers such as Novatek, and microcontroller suppliers such as Nuvoton and Holtek In the field of cameras and related optical technologies, local companies including Asia Optical and JMO could see gains from participating in the development military drones Additionally the demand for antenna-related solutions could be met by INPAQ
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2022/12/06
On December 2, the US Commerce Department released its preliminary findings on four Chinese solar companies that are charged with circumventing US tariffs by setting up product assembly sites in Southeast Asia The companies targeted by the investigation are BYD (Cambodia), Canadian Solar (Thailand), Trina Solar (Thailand), and Vina (a Vietnamese subsidiary of LONGi) The US Commerce Department’s initial ruling is that the four Chinese companies have been evading the anti-dumping and countervailing duties on PV modules (aka, solar panels) by shipping products from their foreign assembly sites However, TrendForce believes, regardless of the outcome of this probe, the tariff exemption that the US government has recently granted for PV module imports from Southeast Asia will remain in force The exemption applies to modules that are to be imported before June 6, 2024 and installed at project sites before December 2024 Therefore, the initial ruling has no tangible impact during the interim period
TrendForce believes another issue that should warrant more attention than the anti-circumvention probe is the US government’s import ban against goods and raw materials from China’s Xinjiang Uygur Autonomous Region How the US government determines which components and materials that flow from China to assembly sites in Southeast Asia are from Xinjiang or elsewhere is going be a major factor affecting Chinese solar companies’ shipments The origins of components and materials used in PV products are not ascertained through a direct identification process Instead, regulatory agencies often have to rely on product manufacturers and importers to provide supply chain information and sourcing certification Also, the subjective view of the US Customs and Border Protection will play a deciding role in blocking imports from Chinese companies For instance, JinkoSolar’s PV modules have been released into the US because they are made with polysilicon from German supplier Wacker Chemie This example indicates that the US regulatory authorities do allow some flexibility in their case-by-case reviews of PV module imports from Southeast Asia
PV Installation Demand in the US Is Expected to Rise Rapidly in Near Future, and Solar Imports Will Still Mainly Come from Southeast Asia in Mean Time
TrendForce’s data reveal that PV installations in the US from January to August 2022 totaled around 1496GW, showing a YoY decline of 16% With the recently granted tariff exemption, PV module shipments from Southeast Asia to the US will steadily return to their normal pace Looking ahead, PV installation demand is projected to climb up sharply in the US over the next two years Drivers of the demand momentum include numerous deferred projects, rising energy prices, and government policies that encourage the adoption of renewables TrendForce currently forecasts that the installation demand of the entire US solar market will total around 35~40GW for 2023
Regarding the domestic manufacturing of PV products, the US lacks a complete industry chain and is at a relative disadvantage in PV module production Hence, local project developers are more dependent on foreign imports If the anti-circumvention probe continues and leads to actions that further restrict imports, then costs will rise for PV installations across the US Also, since the US is already experiencing relatively high labor and energy costs, there is a low chance of the country’s own solar companies being able to cut their manufacturing costs in the near future Additionally, the next US presidential election will take place in 2024; and due to the political climate in that country, there are uncertainties about whether the current Biden administration or the next administration under a new president will stay committed to the existing subsidies and policies for promoting renewables Given these factors, the US will remain dependent on imported PV modules to meet its rapidly rising installation demand as long as its domestic solar companies on the whole have yet to become competitive in terms of production capacity and cost In sum, TrendForce believes the US government will continue to be “open-minded” about PV products imported from factories in China and other countries at least during the next two to three years
For more information on reports and market data from TrendForce’s Department of Green Energy Research, please click here, or email Ms Grace Li from the Sales Department at graceli@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2022/11/29
TrendForce estimates that global shipments of VR devices will come to around 858 million units for 2022, showing a YoY drop of 53% There are three notable factors behind the decline First, the ongoing high inflation has been suppressing the consumer demand for end products this year Second, VR brands have either opted to not release a new product this year or pushed back the schedule for releasing a new product Lastly, the demand for Meta’s Quest devices has been dampened by a significant pricing adjustment As for 2023, TrendForce forecasts that global shipments of VR devices will bounce back to a total of 1035 million units and show a YoY growth of 206% New products including the Sony PS VR2 and the Meta Quest 3 are scheduled for release next year, so they are expected to be a significant demand driver
Meta has been the most aggressive in committing resources into the VR/AR market However, the effect of its attempt to offer hardware at a low price has been quite disproportionate to its massive investments in related technologies Due to mounting cost pressure, Meta has adjusted its pricing strategy for Quest devices The Meta Quest 2, in particular, is now priced at US$1,499, which is more than three times its previous price On account of this price hike and its relatively short battery life, the Quest Pro will unlikely follow the footsteps of the Quest 2 with respect to maintaining a strong shipment growth momentum TrendForce estimates that that shipments of the Quest Pro will reach just to the level of 250,000 units for 2022 Meta will have to wait until next year, when the Quest 3 hit the market, to again see a notable positive growth in its shipments of VR devices TrendForce currently forecasts that Meta’s shipments for 2023 will total around 725 million units
As for Sony, raising the sales of its upcoming PS VR2 to a significant scale will be difficult as the device is targeting the very niche market for gaming products Nevertheless, PS VR2 will be able to provide a much better VR gaming experience This has to do with the fact that it is not downward compatible in terms of hardware and software Moreover, its games will be pure VR games designed to take advantage of the device’s new or more advanced functions such as eye tracking and haptic feedback Providing an exceptional user experience is going to be Sony’s key to maintaining its market share for VR products TrendForce forecasts that shipments of the PS VR2 will reach around 16 million units for 2023 This particular product will be a major growth contributor in the VR market next year
Even though shipments of VR devices will rise again next year, the extent of this growth will still be limited due to directions in production development Currently, the specifications of VR devices are moving towards smaller form factor (ie, lighter and thinner devices), better performance (such as better image quality), and more sensing functions These three trends not only have led to a simultaneous rise in both hardware cost and retail price but also discourage other electronics brands from entering the VR market It is worth noting that even though Meta is still the top brand for VR devices, but its advantages associated with being a market leader are going to diminish due to the increasing cost pressure and the inability to find use scenarios for its products TrendForce believes that Meta’s competitors can use this opportune moment to capture more market share for VR devices by focusing on entry-level products that can offer a better C/P ratio
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2022/11/28
TrendForce’s latest research finds that shipments of display panels used in notebook computers (NB panels) came to 135 million pieces (pcs) in this October, showing a MoM drop of 161% and a YoY drop of 450% Based on TrendForce’s tracking of NB panel shipments, this figure is a 10-year low for the month of October Moving into 4Q22, TrendForce expects NB panel shipments to remain in a slump because of uncertainties in the global economy and inventory adjustments that are taking place across the entire supply chain Fourth-quarter shipment figure is now estimated around 417 million pcs, reflecting a QoQ drop of 108% and a YoY drop of 459%
TrendForce points out that from a historical perspective, this latest decline in NB panel shipments is part of the wider, multi-year cycle for global manufacturing The cycle first begins with strong demand causing shortages and price hikes Then, supply outpaces demand, thus leading to falling prices and inventory corrections Looking back to 2020 when the COVID-19 pandemic was at its height, the surging demand for notebook computers (NBs) caused a panel shortage Then, even as more panel supply was released, NB brands continued to stock up due to worries about potential shortages of the key components They allowed their panel inventories to keep climbing Fast-forward to the recent period, the pandemic has eased, so the supply situation has improved as well Furthermore, the demand and windfall associated with the effects of the pandemic have also subsided What follows now is a series of large inventory corrections in the panel market, the kind of which is rarely seen on record in terms of the overall scale
According to TrendForce’s data, the glut ratio for NB panels reached around 18% in 3Q21 Since the glut ratio for an ideal supply-demand balance should be within 11~14%, the market for NB panels had already shifted to oversupply at that time This situation was also becoming more severe over the quarters
Then, moving into 1Q22, the Russia-Ukraine military conflict exacerbated global inflation Furthermore, China suffered a wave of regional lockdowns as its government enforced a strict zero-COVID policy These factor together caused a sharp slide in the demand for end products and compelled NB brands to scale back their panel procurements Consequently, the NB panel market saw falling shipments and glut ratio from 2Q22 onward Later on, the demand for end products weakened further, and the flow of components and materials was gradually returning normal as the problem of cargo pile-up at the major seaports was easing Brands thus realized that the massive panel inventory that they had been building up over the preceding quarters had become a serious problem Now, in the second half of this year, brands have again made considerable cuts to their panel procurement quantities so as to effectively control their inventory levels The scale of corrections has been reflected by the glut ratio, which has stayed under 5% for two quarters straight (3Q22-4Q22)
In its latest survey of individual brands’ inventory situations for NB panels, TrendForce finds that some US brands began to impose strict inventory control as early as the start of 2Q22 The total NB panel procurement quantity for that quarter saw a QoQ reduction of around 60% However, the total procurement quantity then rose by around 40% QoQ for 3Q22 as brands’ inventories had fallen back to a relatively healthy level This dramatic fluctuation between the two quarters indicates that brands will raise demand back up when the inventory situation is again optimal At the start of 3Q22, brands with a higher inventory level were carrying more than 12 weeks However, following two quarters of significant adjustments to procurement quantity, more than half of brands are expected to bring their inventories down to the healthy level of 4~8 weeks by the end of this year
Looking ahead to the first quarter of next year, brands’ procurement quantities will rebound despite the arrival of the low season for end products because their inventory situation is expected to be fairly optimal by then TrendForce forecasts that NB panel shipments will rise by 35% QoQ to 432 million pcs for 1Q23 The glut ratio for that quarter will come to around 13%
For more information on reports and market data from TrendForce’s Department of Display Research, please click here, or email Ms Vivie Liu from the Sales Department at vivieliu@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
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