The prices of touch ICs, microcontrollers and touch and display drivers ICs (TDDIs) are expected to rise in the second half of 2021, since they mainly rely on the mature process nodes currently facing capacity constraints. With a 10% price increase expected in every quarter, the price hikes is likely to persist into early 2022. As United Microelectronics Corp. (UMC), a leader in mature manufacturing nodes, once again forecasted a growth in its average selling price (ASP) this year, it revealed the fierce price hikes in mature nodes that had surpassed previous expectations.
Those benefited by the price hikes include ELAN Microelectronics Corp., one of the few Taiwanese chip design companies with products covering display drivers chips, microcontrollers and TDDIs. The company currently leads the global market in touch ICs, laptop touchscreen modules and pointing device modules.
As foundry prices have increased, so have the gross margins of chip design companies. In the past, only big players like MediaTek could achieve gross margins nearing 50%, while smaller chip design companies in Taiwan generally had gross margins between 20-30%. Recent dynamics have changed this pattern. Novatek Microelectronics Corp., a leading provider of display ICs, has seen its gross margin reaching 50.33% in Q2 this year, a quick rise compare to the 33.48% in Q2 2020.
TSMC, however, has maintained relatively stable foundry prices, boosting Taiwan’s IC design industry in the process. As its long-term customer, MediaTek has benefited from such stability, especially in competition with its rival Qualcomm. Currently, Qualcomm’s Snapdragon 888 series have been manufactured with Samsung’s 5nm process. If prices increase in the future, it would further damage Qualcomm’s share in the handset chip market.
As of 2020, MediaTek’s handset chips reached a 32% global market share, overtaking Qualcomm for the first time. Counterpoint forecasts that its handset chips will continue to dominate the global market with a 37% market share. Qualcomm, driven by multiple factors, including lower prices, has been the largest customer of Samsung’s foundry business. The relatively low reliability of Samsung’s 5nm process, however, has been one of the factors impeding Qualcomm. In the second half of 2021, Qualcomm will return to TSMC, becoming the second largest user of its 7/6 nm processes.