Advanced Foundry Processes Reach Transistor Structure Transition Period, Mature Processes Focus on Diversified Specialized Development

Pure foundry processes transitioned from Planar Transistor to the FinFET generation starting from the 16nm node. After the development of the 7nm process and the introduction of EUV lithography technology, FinFET structure encountered physical limits at the 3nm node. Since then, the two leaders in advanced manufacturing processes have diverged. TSMC continues utilizing FinFET structure in mass-produced 3nm products in 2H22, which will be officially released in 1H23, with the scale of mass production increasing quarter by quarter. In 2023, TSMC 3nm products will include PC CPU and smartphone SoC. Samsung began introducing the GAAFET-based MBCFET architecture (Multi-Bridge Channel Field-Effect Transistor) at 3nm and this process will begin mass-production in 2022. Its first-generation product is a cryptocurrency mining chip. In 2023, Samsung will focus on second generation 3nm processes, with a goal of mass-producing smartphone SoCs. Both companies remain focused on high-performance computing and smart phone platforms in the initial stage of 3nm mass production as these products have higher requirements for improving performance, lowering power consumption, and reducing chip area.

For mature processes above 28nm, foundries are focused on diversifying development of special processes and have develop technology platforms including HV (High Voltage), Analog, Mix-signal, eNVM, BCD, and RF from logic processes. These are used to professionally produce peripheral ICs such as power management ICs, driver ICs, microcontrollers (MCU), and RF (Radio Frequency) required in the fields of smart phones, consumer electronics, high-performance computing, automotive, and industrial computing. As 5G communication, high-performance computing, new energy vehicles, and automotive electronics usher in a trend of increased special semiconductor component consumption, it is imperative for these applications to rely on support from diverse specialized processes to achieve the special purposes required in various fields.

Development Trends Focus on Automotive IC Design, Third Generation Semiconductors on the Rise

The global automotive industry is trending towards C-A-S-E, driving strong demand for automotive semiconductors. Automotive semiconductors are essentially divided into two categories: IDM and Fabless. As traditional automotive chip suppliers, IDMs offer a fairly complete selection of various ECUs and have gradually evolved from a traditional distributed architecture to Domain Control Unit (DCU) and Zone Control Unit (ZCU) architectures. Fabless, on the other hand, continue to focus on the field of high-performance computing for vehicles and develop in-vehicle telematics systems and SoCs for self-driving computing. Due to the complexity of automotive functions, the 32-Bit MCU type ECU has become the mainstream specification in the market. In 2023, its penetration rate will exceed 60% with a market value reaching US$7.4 billion and it will develop towards processes below 28nm (inclusive). In addition, self-driving cars require high-performance computing AI SoCs and continue to develop towards advanced processes below 5nm (inclusive) with computing power reaching 1,000 TOPS and, along with MCUs, these products will accelerate the upgrade of the global automotive industry.

With the rapid rise of 800V automotive electric drive systems, high-voltage DC charging piles, and high-efficiency green data centers, SiC and GaN power components have entered a stage of rapid development. TrendForce predicts that from 2022 to 2026, the compound annual growth rate of the SiC and GaN power device market will reach 35% and 61%, respectively. As demand for rapid charging and better dynamic performance in electric vehicles becomes more pressing, additional car companies are expected to introduce SiC technology into main inverters ahead of 2023, among which highly reliable, high performance, and low cost SiC MOSFET is a competitive focal point. GaN has entered a red ocean market for low-power consumer electronics applications and Samsung launched its first 45W GaN fast charger in 2022, again boosting market enthusiasm. As technology and supply chains continue to mature and costs fall, GaN power components are expanding to medium and high-power energy storage, data centers, household micro-inverters, communication base stations, and automobiles. Against the backdrop of the EU’s draconian energy efficiency requirements and China's East-West data center plan, data center power supply and server manufacturers have clearly grasped the importance of GaN technology. GaN power components are expected to be released on a large scale in 2023.

New DRAM Generation Takes Shape, Development of 200+ Layer NAND Flash Accelerates

In terms of DRAM, accompanying the pandemic-accelerated digital transformation of corporations, not only did server shipments focus more on data centers, but also allowed new types of memory modules to coalesce, especially CXL specification based modules. As the number of RDIMM slots in a server system is limited, the use of CXL enables the entire device to avoid this limitation when performing high-speed computing while increasing the amount of DRAM that can be used by the system. In 2023, not only will server CPUs such as Intel Sapphire Rapids and AMD Genoa support CXL 1.0, but DRAM modules will also employ DDR5. Furthermore, in order to run AI and ML (Machine Learning) operations effectively, certain server GPUs will introduce a new generation of HBM3 specifications. Therefore, amid planning by memory manufacturers and numerous xPU providers, a new generation of memory has gradually organized and is expected to gain market share in 2023.

In terms of NAND Flash, the number of stacked layers will accelerate in 2023 and four suppliers are expected to move towards 200+ layer technology. Some manufacturers will even mass-produce PLC (Penta Level Cell), hoping for an opportunity to replace HDD applications on servers in the future as unit growth is further optimized. In terms of SSD transfer interfaces, with the mass production of Intel Sapphire Rapids and AMD Genoa in 2023, enterprise SSDs will be further upgraded to support PCIe 5.0 transfer, increasing transfer rate manifold to 32GT/s to be utilized for high-speed computing needs such as AI/ML and also contributing to the rapid increase in the average capacity of enterprise SSDs.

Automotive MLCC Development Accelerating Due to Rising Assisted Driving Penetration Rate

At present, advanced driver assistance systems (ADAS) are gradually becoming a standard feature on new cars. L1/L2 is the primary configuration level in the market at this stage, utilizing approximately 1,800~2,200 automotive MLCCs. As semiconductor IDM developed ADAS-specific MCUs, Sensor ICs, etc. become increasingly mature, L3-level ADAS systems will become a central upgrade sought by many luxury-manufacturers for their high-end car models starting from 2023, leading MLCC consumption to jump to 3000~3500 units. Among MLCCs, the 0402 size just meets the limited space of a vehicle side monitoring module and has become the main application size specification.

The electric vehicle power core has become one of the main research and development priorities of various car manufacturers in response to consumers' demand for improved battery life, as well as to optimize charging and discharging efficiency and power recovery systems. The inverter, battery management system, and DC power converter are three sub-system making up the soul of the vehicle, utilizing approximately 2,000~2,500 high-capacity (above 10u) and high-temperature (X7S/R) automotive MLCCs. Japanese manufacturer Murata officially mass-produced new high capacitance and high voltage 1206 size automotive products that can reach 22u 16V in early 2022. Companies including TDK, Taiyo Yuden, Samsung, and Yageo are also actively rushing to market.

Carbon Neutrality Accelerates EV Transition, Battery Battle Rages as Reduced Subsidies Resurface Cost Issues

The cost of a variety of raw materials required for automotive manufacturing have risen after the start of the Russian-Ukrainian war. In particular, battery-related material costs have increased dramatically and were quickly passed through to automobile list prices. Coupled with the two-year long shortage of automotive semiconductors, strengthening the toughness, elasticity, and stability of the supply chain has become a top priority for car manufacturers. Automakers hope to shorten the battery supply chain to avoid supply chain dissociations. Countries are actively promoting the localization of battery supply chains due to political considerations. On the one hand, they propose preferential investment conditions and, at the same time, they also require localization of a proportion of vehicle components, as a form of carrot and stick in attracting battery plants to invest worldwide. As a number of countries begin to reduce or cancel car purchase subsidies for electric vehicles, the cost issue has resurfaced. As it is necessary to produce cost-competitive models while taking into account safety and performance, battery development is inevitable and is expected to develop towards unity, diversification, and integration. Unification of battery assembly strengthens battery production management and improves commonality. Using different types of batteries according to vehicle grades diversifies supply risk and reduces cost. Integrating designs through cell-to-pack (CTP), cell-to-chassis (CTC) and other highly consolidated methods improve the modularity of battery and chassis.

On the other hand, driven by the global goal of net zero carbon emissions, demand for power batteries as the heart of electric vehicles has grown rapidly, inciting relevant companies to accelerate capacity expansion. In 2023, global power battery production capacity will exceed the TWh (Terawatt-hour, one million megawatt-hours) threshold and output value will be close to US$120 billion. At present, the rapid expansion of the power battery industry chain is constrained by the expansion cycle of vanguard mineral resources such as lithium, cobalt, and nickel, resulting in the rising cost of power battery manufacturing in recent years. With its cost-effective advantage, the global market share held by lithium iron phosphate batteries is expected to exceed that of ternary batteries in 2023.

Production Capacity and Technology Secured, Chinese Panel Makers Expand Influence in Small-size AMOLED Market

With the gradual expansion of China's flexible AMOLED production capacity, the development of the small-size mobile phone market has gradually increased in influence. Korean panel manufacturers and brands were previously major leading companies in the flagship-oriented folding mobile phone market. However, as domestic Chinese mobile phone brands began to successively launch folding mobile phones, opportunities have appeared for folding AMOLED panels produced by Chinese panel manufacturers. Adopting a strategy of supply chain localization, local Chinese mobile phone brands are expected to gradually expand the use of foldable AMOLED panels sourced from Chinese panel factories. In order to reduce massive flexible AMOLED production capacity, panel makers are aggressively optimizing costs. AMOLED driver IC are expected to be converted to a RAM-less architecture to reduce costs. As flexible AMOLED panel structure is adjusted, the cost and quotations of some flexible AMOLED panel products can be reduced to that of standard Rigid AMOLED panels, with an aim towards mid-range models which account for a greater proportion of the market.

Another mid-size market is notebooks. AMOLED notebooks are expected to account for approximately 1.2% of the overall notebook market in 2022 and approximately 1.7% in 2023. The decisive key to accelerated mid-size market development in terms of AMOLED panels revolves around Apple's future plans for iPad and Macbook series products, as Apple has begun to consider the use of AMOLED panels. Prevailing AMOLED panels remain limited by the size of production lines, currently still in the sixth-generation, which are not very economical in terms of cutting efficiency. In addition, the service life of notebook computers is longer than that of standard mobile phones. Doubts regarding the lifespan of current AMOLED panel structure led to the development of Tandem (two-stack light emitting layer) architecture. Panel makers are expected to continue focusing on the development of mid-size notebook products with their existing production capacity and technology in the next 1-2 years, which will serve as a basis for future larger generational capacity development. At the same time, discussions and planning will be conducted related to 8.5-generation RGB vapor deposition AMOLED production capacity and technology.

Micro LED Diversifies into More Applications, TV and Automotive Displays Drive Mini LED Backlight Penetration

In 2022, total shipments of Mini LED backlight displays will come in at approximately 16.8 million units, an increase of 74% YoY, of which TV applications will account for the greatest investment by brands. There are three main reason. First of all, Mini LED technology is the best solution for improving LCD contrast. Secondly, due to limited OLED production capacity, more than 95% of flat-screen TVs are expected to retain the use of LCD technology in 2023. Mini LED provides the best path for LCD TVs to improve specifications and rejuvenate products. Finally, Chinese manufacturers are actively investing in the upstream, midstream, and downstream of Mini LED products. Through a strategy of pricing by quantity, manufacturers can use a higher cost-efficacy to accelerate Mini LED backlighting penetration in the TV market. Mini LED TV shipments are estimated to reach 4.4 million units in 2023, an annual increase of approximately 13%.

Vehicle displays are another incubation hotbed for Mini LED backlight applications. Compared with consumer displays, automotive displays have higher requirements for brightness, contrast, and reliability. Mini LED backlights’ relevant characteristics help improve driving safety. Stimulated by a dynamic pursuit of more powerful display effects in new energy vehicles (NEV) and a trend towards digital instrumentation, Mini LED backlights will also be prioritized for expanded use in NEVs. In 2023, approximately 300,000 Mini LED automotive displays are estimated to be shipped, an annual increase of approximately 50%.

Smart watch wearables will be the next mass-produced application of Micro LED post-large displays in 2023 with high-priced fitness trackers as a starting point. In the future, design will be centered on Micro LEDs combined with flexible backplanes. In terms of applying microdisplays to transparent AR smart glasses, although very small sized (below 5um) Micro LEDs must first overcome difficult challenges such as full-color solutions and external quantum efficiency of red light chips, there is an opportunity to accelerate the development of Micro LED microdisplays through the solid technical foundation laid out by the LED industry as a whole.

In terms of automotive displays, in order to allow drivers to immerse themselves in a highly intelligent cabin built for interaction with a man-machine interface, the development of in-vehicle displays covers large-scale, curved, and transparent displays, high dynamic contrast, or even a combination of more sensing components to achieve intelligent functions. Micro LED is very suitable for application in a high-end automotive environment. In terms of heads-up display (HUD) applications, a HUD integrates and projects dashboard and navigation system information onto the front windshield, reducing the chances of drivers looking down, for the purpose of driving safety. Micro LEDs with active driving solutions can also be directly displayed on the transparent glass backplane to achieve a HUD function. 2023 is a key period for relevant manufacturers to begin product design and verification, establishing a long-term development foundation for Micro LED automotive smart cockpits and transparent displays.

Looking Forward to 2023, Proportion of 5G Smartphones Expected to Increase to 60%

From the perspective of smartphone evolution, prior focus has been on improving hardware specifications. However, as innovation fell in recent years, smartphone brands are more committed to software algorithms and the promotion of peripheral services such as partnerships with optical giants Zeiss and Leica in the field of video algorithms and providing payment and video streaming services. In addition to highlighting differences between brands, this strategy also represents a win-win in terms of revenue by increasing peripheral services. Looking forward to 2023, the proportion of 5G smartphones is expected to officially top 50%. As display technology advances, the penetration rate of OLED folding mobile phones is estimated to reach 1.1% in 2022. With smartphone brands successively launching new flagship folding devices and driven by improved specifications and more competitive pricing, penetration rate is expected to reach 1.8% in 2023. There is an opportunity to inject a breath of fresh air into a market where inflation has led to sluggish consumer sentiment and drive folding mobile phones into the mainstream.

AR/VR Products Become Cornerstone of Green Production, Accelerate Metaverse Popularization

The Metaverse will prompt branded manufacturers to accelerate investments in AR/VR product development and bring more products to marker in 2023. At the same time, manufacturers will also actively promote various Metaverse application services to drive demand in the AR/VR hardware market through platform services and then use the virtual interactive experience provided by hardware devices to enhance the benefits of Metaverse applications. In the consumer market, manufacturers will focus on application such as virtual communities, games, and live streaming of virtual characters (VTubers) while commercial distance conferencing and distance education can provide more diverse communication and interaction functionality through the Metaverse platform than 2D video. The demand for visual and man-machine interaction will gradually increase after users try these interactive and entertainment applications.

Therefore, the Metaverse will also drive the adoption of new displays and optical components such as Micro OLED, MiniLED, and Pancake lenses. Operation will also develop from the original controller configurations towards image recognition or wearable device applications, leading to the installation of more image sensing and MEMS components to achieve a natural man-machine interface through the analysis of human body data. This effect has prompted many manufacturers to invest in the development of technology and patents related to operational design and analysis algorithms. In addition, AR/VR applications will also play an important role in smart manufacturing, smart transportation, and smart cities, especially considering green industry trends such as energy conservation and carbon reduction. The Metaverse platform’s virtual simulation functionality can reduce waste generated in real-world testing and usage including in product design and inspection, production line management and trial operation, traffic simulation and planning, and virtual tour of urban facilities. Assisted by AI applications and computing performance, virtual simulations will reduce the costs of running corporations and governments, and will also increase the willingness to adopt and accelerate the popularity of the Metaverse.

Large-scale Commercial Use of 5G FWA Adopted Globally in 2023, Accelerates Popularization of Home Broadband

Since 5G FWA can support home and business applications and provides larger bandwidth and lower latency connections, it has become an alternative to fixed broadband connections. At present, 83 operators in more than 45 countries and regions worldwide have launched 3GPP-compliant 5G FWA services. FWA operators need to provide data at the lowest possible total cost of ownership (TCO), while ensuring network connectivity and the future development of the entire broad ecosystem. In 2023, operators around the world have invested in the development of broadband construction. In addition, regulators see wireless as an alternative to wired connections. Operators are also considering expanding the deployment of FWA services, accelerating the provision of broadband Internet services, and improving transmission rates through wireless communication technology. Deploying 5G FWA services involves shorter time-to-market and lower cost. Therefore, service providers can furnish high-speed, low-latency broadband services in a shorter timeframe through integrating 5G technology. In addition, the provision of new spectrum in multiple frequency bands and services that are becoming gradually more affordable to families will become a driving factor for the development of 5G FWA in 2023.