Jiwei.com reported that Omdia, a well-known market research institution, recently updated its forecast for the display driver chip market. Looking ahead, after the DDI market size hit a "big volume" last year, it may continue to decline to 2029, when the market size will fall back to about US$8 billion, which is only equivalent to the level in 2020. The prediction of
has once again attracted the attention of the display driver chip market. It is not difficult to understand if the market downward cycle will be in years rather than quarters, which will undoubtedly mean that a long and cruel "ice age" will begin for related manufacturers.
shows whether the driver chip market has "winter has arrived"? For DDI manufacturers, what opportunities can they become the "Ark" that travels through the cycle?
"is indeed very unoptimistic."
shows the current situation of the driver chip market, which has been intuitively reflected in the operating data of leading global manufacturers.
According to the monthly revenue data released by LianYong, the company's Driver IC business segment performance took a sharp turn for the worse at the end of the second quarter of this year, with revenue in September only NT$3.79 billion, a shrinking of more than 50% from the first four months of this year. 's share price also "halved", and its net inventory also rose sharply from NT$14.18 billion at the end of last year to NT$18.8 billion at the end of the third quarter to NT$17.18 billion at the end of the third quarter.
The Korean display driver chip manufacturer LX Semicon (Silicon Works) also saw a 20.1% revenue decline in from in the third quarter. fell by about 5.3% year-on-year compared with last year. At the same time, the company's inventory soared to 448.3 billion won at the end of September, a significant increase of 122.9% year-on-year compared with the end of last year.
As the business situation of the design company changes, the adjustment of the investment volume has also begun to affect the OEM process. Among the revenue of the top ten OEMs in the world in the second quarter counted by research institution TrendForce, PSMC is the only manufacturer that saw a month-on-month decline in revenue. A major reason for the decline in consumer DDI orders, which account for a considerable proportion of its business. Judging from the subsequent monthly data, Liji Electric's revenue in the third quarter not only continued to decline month-on-month, but its monthly revenue in September even turned 0.38% year-on-year. Strategies such as switching to power management chip obviously failed to offset the wavering of the revenue pillar of display driver chips. Another major display driver chip foundry company, World Advanced (VIS), had a year-on-year revenue in September. The third quarter report showed that the revenue of large-size panel display driver chips fell sharply.
Among mainland manufacturers, some listed display driver chip design companies have released their third-quarter financial reports, which can also see the impact of changes in the market environment. A manufacturer that shows driver chips are among the leading domestic brands in the third quarter, down about 13% year-on-year, and also saw a double-digit percentage decline from the previous quarter. While revenue declined, inventory increased by more than 100% from the beginning of the year at the end of the quarter, and asset impairment losses soared by more than 500% year-on-year, mainly due to the increase in inventory provisions for the current period.
It is worth noting that the provision of inventory reserves generally means that the gap between inventory items at the end of the period net realizable value has further widened compared with inventory book cost, reflecting the current downstream consumer market pressure.
中国全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全全�
In addition to price pressure, Wang Yongpan also reminds us to pay attention to the "quantity" challenges of related manufacturers. As downstream panel manufacturers reduce procurement, the inventory turnover of some enterprises has slowed down passively, and inventory has been raised to a "very astonishing" level.
is a coincidence. The aforementioned listed company also stated in an investor exchange activity that "the sales prices of most of the company's products are currently stable, and the performance in the third and fourth quarters is not a factor in price changes, but mainly volume fluctuations."
If the synchronous shrinking of downstream consumption and prices is the "first hit" to the display driver chip market, then the reaction of chip manufacturers may further aggravate cyclical fluctuations. The aforementioned company revealed that "some newly established companies only focus on realizing sales, not on profits" bring competitive pressure to product gross profit margins.
According to Taiwan media reports, while Chinese Taiwanese companies are reducing the price discounts for investing in chips and negotiating OEM packaging and testing, the risk of price wars between them has also emerged. The prices of many small and medium-sized DDI companies have fallen below the bottom line. Lian Yong and other leading manufacturers are not ruled out that they will follow up to digest the huge amount of inventory. In contrast, mainland manufacturers still have "stay", and an industry insider revealed to Jiwei.com that although mainland DDI OEM factories have also made certain quotations, "there are not so many orders cut."
However, although some categories and local regional markets show resilience, the display driver chip market overall still faces severe challenges. What is particularly worrying is that the financial surplus and new entry capital accumulated in the previous two years of prosperity may instead delay or intensify the intensity of the "fight" among manufacturers in the new stage of the cycle.
The "new normal" of gross profit margin is an opportunity for mainland manufacturers
At the third quarter performance briefing held a few days ago, Wang Shouren, general manager of Lianyong, estimated that the company's revenue in the last quarter of this year is expected to remain generally flat, but gross profit margin continues to decline, which may hit a new low in two years. Regarding the inventory issue, Wang Shouren said that Lianyong has strictly controlled the investment volume and effectively reduced the inventory water level. It is expected that the inventory amount will further decline in the fourth quarter.
As a leading manufacturer, Wang Shouren's judgment on behalf of Lianyong is quite representative. From the perspective of "quantity", although downstream TV and mobile phone manufacturers have not yet "landed" from the inventory destocking quagmire, their impact is not expected to exceed several quarters. Looking ahead to the medium and long term, the market demand for display driver chips is still showing an upward trend. The aforementioned Omdia report also predicts that DDI annual consumption will show recovery growth from 2023 after falling below the 8 billion mark this year, and is expected to hit a new high after 2026.
(Omdia's overall demand for display driver chips)
But from the perspective of "price", due to the flip of the supply and demand pattern, the gross profit margin of display driver chips may further decline from the already low level before 2020, entering a "new normal".
As mentioned above, in the previous two years of prosperity, the DDI track not only accumulated a large amount of financial surplus, but new entrants also received a lot of capital support. In the field of LCD driver chips, design companies and foundries in mainland China are quickly gaining market share . In the OLED field, many mainland manufacturers have also emerged. After the turning point of the
business cycle, both new and old manufacturers began to feel the "chilliness" of the market. An industry expert even predicted to Jiwei.com, "A dozen domestic display driver companies will die in the next two or three years, which should not be exaggerated." However, even after experiencing such supply-side clearance, the market competition pattern may be more "crowded" in the future than before 2020. More brands of chip design companies and larger OEM packaging and testing production capacity supply means that the market, especially the LCD display driver market, which occupies the demand entity, has been in a state of loose supply and demand or even excessive easing for a long time, which may have a long-term suppression on product prices and gross profit margins.
(change of OEM production capacity)
Faced with the above challenges, product structure upgrade is undoubtedly the preferred strategy of overseas advantageous manufacturers. Wang Shouren, general manager of Lianyong, said that next year (2023), it will continue to be optimistic about OLED-related products to continue to ferment. Not only will the penetration rate of in mobile phones , but also customers will be introduced in laptops, flat panels, and TVs. TDDI for automotive use also has a chance to grow. Others such as VR/AR display driver ICs, high-end 4K 120HZ and 8K TV SoCs, and ASICs have good room for growth.
The sub-tracks listed by Wang Shouren are common characteristics of having higher technical and business barriers, thus having better gross profit performance. However, considering the continuous influx of new players, the " bonus " of these sub-tracks may be difficult to continue for a long time.
OLED field, many mainland design companies have entered the market for small and medium-sized AMOLED driver chips, and local foundries are currently actively making breakthroughs. For example, the announcement of SMIC shows that the company has laid out the research and development of a 28nm high-voltage display driver process platform, mainly used in AMOLED high-end drive products. Based on the 28HKC+ platform, the platform has completed the development of a full set of high-voltage, medium-voltage, low-voltage devices and low-leaved SRAM, and the process reliability verification has been smoothly promoted.
It can be imagined that after mainland manufacturers enter the high-end display driver chip market and gain a foothold, the gross profit margins of related products may also decline rapidly. Traditionally advantageous Korean and Taiwanese manufacturers may face more severe tests under the "new normal" of cost structure competition. On the other hand, mainland manufacturers have formed an adaptive cost structure under low gross profit, which can be said to be the "magic weapon" for the rise of mainland manufacturing. In addition to the upgrade of product , "stalemates" with overseas manufacturers and ultimately "counterattack" it, which requires local manufacturers to fully utilize this endowment.
Conclusion
After the dazzling super prosperity, the display driver chip market is returning to its origin. Even with the profound changes in the supply and demand pattern, it will further explore the "new normal" of profit level. This process undoubtedly means severe challenges for design and foundry manufacturers.
But at the same time, it should be seen that behind this "new normal" is the further expansion of the mainland panel industrial chain in the global industrial map. The upstream local display driver chip manufacturers may use the potential advantages of cost structure and synergistic efficiency to create a "Ark" that travels through a long cycle.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-