[Editor's Note] As the COVID-19 pandemic persists, demand for IT products in the first quarter reached its highest level since the second quarter of 2020, driven by increased demand for remote work and personal IT products. Conversely, despite this surge in demand, IT product production volume actually decreased. A representative example is display panels, whose production volume fell by 8.6% in the first quarter compared to the previous quarter due to shortages of DDI and TCON in the upstream supply chain. With economic recovery expected in the second half of 2021 driven by increased COVID-19 vaccinations and the easing of lockdowns, the outlook for IT product demand remains positive. Consequently, foundries for IT component production are currently operating at full capacity and continuing to expand production, and a rise in foundry production unit prices is projected for the second half of the year. Accordingly, this publication has prepared a look at the outlook for the IT components market in the second half of 2021.

Surge in IT demand, severe shortage of IT components

IT demand surged from the end of last year through the first half of this year due to the spread of remote work environments caused by COVID-19.

In 2020, tablet shipments increased by 18% year-over-year and PC shipments by 27% year-over-year, and global consumer electronics companies, including TV manufacturers, are breaking all-time sales records.





Amidst this, IT components experienced a severe shortage in the first half of the year.

Automotive semiconductors were particularly at the heart of the semiconductor supply shortage. Due to a global foundry shortage, the supply of automotive semiconductors, GPUs, DDIs, and power semiconductors has failed to meet demand, leading some automotive companies to cut production and suspend manufacturing of certain models due to the supply shortage of automotive semiconductors.

Meanwhile, the fire at Japan's Renesas Naka Fab and water shortages in Taiwan disrupted product production for automotive and IT set manufacturers.

In addition to the shortage of automotive semiconductors, the shortage of DDIs (Display Driver ICs) was also severe.

According to TrendForce, demand for large DDIs in 2021 is expected to increase by 7.4% year-over-year, but the availability of 8-inch foundry capacity in the upstream supply chain is expected to increase by only 2.5% year-over-year due to other chips.

Although foundries such as NexChip and SMIC are also expanding production capacity this year, market analysis suggests that it will be difficult to meet supply levels with the increase in demand, which could continue until the end of 2021.

It has been reported that the tight supply of large DDIs, coupled with the recent severe shortage of TCONs (Timing Controllers), is having a negative impact on the shipment volume of large display panels.

■ Slump in IT product shipments

Global display shipments in the first quarter of 2021 recorded 39.9 million units, down 8.6% from the previous quarter. This is attributed to a shortage of components such as ICs and TCONs in the upstream panel supply chain due to tight semiconductor production capacity.

In May, China's smartphone shipments and mobile phone exports were also weaker than expected. Smartphone shipments in the Chinese market in May totaled 22.6 million units, down 30.8% year-on-year and 16.2% month-on-month. In addition, smartphone shipments in China in the second quarter of 2021 are projected to decrease by 23% year-on-year and 20% quarter-on-quarter. Officially, component shortages are cited as the cause of this sluggish performance.

Despite increased production volume, the automotive industry experienced numerous factory shutdowns due to supply shortages.

■ Continued increase in demand for IT components in the second half of the year


Automobile demand is also expected to recover significantly. Global automobile demand in 2021 is projected to reach approximately 85.3 million units, an increase of 10.1% compared to 76.78 million units in 2020. Furthermore, despite semiconductor supply and demand issues, the trend of demand recovery is expected to continue, taking into account the base effect from 2020, the normalization of production, and the emergence of pent-up global demand.

Demand for OLED displays is expected to increase. It is expected that all four iPhone 13 models will feature OLED this year, and shipments of 5G smartphones, most of which feature OLED, will increase by 125.9% year-on-year to 610 million units, while demand for OLED panels for smartphones is projected to increase by 46.2% year-on-year to 750 million units this year.

Production of OLED panels for laptops is expected to grow significantly each year, reaching 12,000 units in 2019, 165,000 units in 2020, and 1 million units in 2021.





■ Continued Price Hikes and Supply Shortages Accelerate Usage Reduction and Foundry Capacity Expansion via Design Changes

Display components are expected to see price increases in the second half of the year due to supply shortages.

According to a TrendForce study, 8-inch foundry capacity falls short of market demand, so production allocated to large DDIs It is known that it is not running smoothly due to chips with different capacities.

TCON is mainly manufactured in 12-inch fabs, and it is predicted that the TCON supply shortage will worsen as backend logic IC packaging and test capacity, which are also manufactured in the same fabs, are similarly in short supply.

Foundry prices are also expected to rise again in the third quarter, and IC suppliers are projected to submit large DDI quotes to panel manufacturing customers.

Along with this, large DDI prices are expected to rise once again in the third quarter due to a continued supply shortage.

In addition, as 8-inch fabs will continue to operate at maximum capacity next year, it is expected that IC suppliers overall will find it difficult to secure sufficient 8-inch foundry capacity to manufacture large DDIs.

Accordingly, IC suppliers must flexibly adjust large-scale DDI procurement as foundry demand periodically declines, and the supply and demand situation of large DDIs and TCONs is expected to be a key factor in panel supply and demand in 2022.





The automotive industry is reportedly planning to reduce semiconductor usage through design changes, unable to withstand the supply shortage.

According to Do Hyun-woo, an analyst at NH Investment & Securities, the automotive industry is attempting to consolidate various MCU products using processes of 55nm or larger, which face severe long-term supply-demand imbalances, into Domain Control Units (DCUs) using processes of 20nm or smaller, expecting price increases.It is reported that there is a high possibility that the inventory held by automotive semiconductor distributors, which have increased their stock levels, will be released into the market in large quantities in the future.


The smartphone industry also cut production in the first half of the year due to a shortage of system semiconductors. According to industry sources, component inventories for Samsung Electronics and Apple reportedly decreased in the second quarter.

A sharp rebound in component demand is expected starting in the third quarter due to the base effect of the second quarter. Manufacturers are planning to increase production, and the supply of system semiconductors is improving within Samsung Electronics' supply chain. Trends in Apple's preparations for the launch of a new iPhone are also being confirmed.



Amidst this, it is reported that Chinese smartphone manufacturers, which significantly increased their semiconductor inventories in the first half of the year in anticipation of a worsening U.S.-China trade dispute, have also recently begun adjusting their inventory.

According to Do Hyun-woo, a researcher at NH Investment & Securities, new component orders have recently been reduced. It is reported that they have lowered their smartphone shipment targets for this year, focusing on mid-range products due to reasons such as the spread of COVID-19 in India.

It is reported that announcements by foundry companies regarding aggressive capacity investments will affect the slowdown in order growth by set manufacturers seeking to secure inventory.

Taiwan's UMC is reported to have decided to expand the capacity of its 12-inch Fab P6 by receiving advance payments from clients such as Samsung Electronics and Qualcomm. It was announced that there are plans to invest 100 billion Taiwan dollars to expand capacity to 28,000 units and produce 28nm OLED DDIs, etc.

TSMC invested in a new capacity expansion of 40,000 units in Nanjing, China. Powerchip announced an investment of 25,000 units.

In addition, the spread of COVID-19 in Vietnam is analyzed to potentially affect smartphone component production.