Optoelectronics and Semiconductor Sectors Braces for a Challenging 2016


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Global market research firm TrendForce held its 2016 IT Industry Forecast Conference at Room 101 of the NTUH International Center in Taipei, Taiwan, on October 15, 2015. A team of senior analysts assembled from TrendForce’s major research divisions – TrendForce, DRAMeXchange, WitsView, LEDinside and EnergyTrend – will share their detailed forecasts on trends in major tech industries for 2016.

Below is a summary of the presentations given during the second half of the conference.

TrendForce: IoT to play a key role in the transformations and adjustments of IC industry in 2016

The integrated circuit (IC) industry has undergone quantitative and qualitative changes in 2015. The annual growth rate has dropped from 7.2% in 2014 to 2~3% this year. TrendForce research manager Jian-Hong Lin notes that developments in the Internet of Things (IoT) sector will increasingly exert influences on semiconductor products in terms of design features and production cycles. Going into 2016, IC companies will need to differentiate their products to become more competitive as well as transforming their business models in order to prepare for the next wave of innovations. IoT in particular will significantly change the production cycles of products and affect the distribution of profits among supply chain partners in some applications. At the same time, however, IoT also gives rise to new, underdeveloped market segments that can create values for companies. To fill these market gaps, companies will have to develop new positioning strategies and design processes. In sum, transformations and adjustments will be the primary challenges for the industry next year.

DRAMeXchange: Weak demand continues to drag down DRAM prices

Even though the DRAM industry has become an oligopoly of three companies – Samsung, SK Hynix and Micron, competition remains fierce this year. Among different types of DRAM products, PC DRAM and server DRAM have been hit hard by weak demand through much of 2015. PC DRAM prices have fallen close to 40% year on year while the price decline in the server DRAM market is expected to be steeper during this year’s second half. The mobile DRAM market on the other hand has been the exception to the severe downtrend as its growth is sustained by smartphone sales. As Apple continues to upgrade iPhone’s memory specs and equipped the latest iPhone 6s with 2GB RAM, the drop in the mobile DRAM prices has moderated in general.

Looking ahead to 2016, Samsung will maintain its technological lead and put considerable pressure on its competitors by migrating to the 18nm process. However, SK Hynix and Micron will also have plans to make sure that they are not too far behind. Ken Kuo, DRAMeXchange assistant vice president, expects the DRAM chip market to suffer sharper price decline next year if there is not enough demand to effectively consume the DRAM chips.

DRAMeXchange: Demand bit growth of NAND Flash at 44% next year, posing challenges for suppliers

The year 2016 will be filled with challenges and opportunities for the NAND Flash industry. On the supply front, the migration to advanced manufacturing process will continue and the development of 3D-NAND Flash technology will accelerate. DRAMeXchange’s latest projection shows that annual supply bit growth for next year will reach 50%. On the other hand, the demand forecast for next year is on the conservative side. Sean Yang, DRAMeXchange assistant vice president, points out that the slowing global economy will be negatively affecting OEM end demand as well as retail markets for memory cards and USBs. Demand bit growth for 2016 is currently estimated at 44%, meaning that the NAND Flash market will be having a notable oversupply problem next year.

LEDinside: Market for high-brightness LED products to grow just 2% this year as the industry prepares for consolidation next year

This year has been very difficult for companies in the LED industry. While LED lighting products are seeing rising demands and have replaced numerous traditional products in different applications, their average selling prices have gone down by 30~40% due to oversupply. According to LEDinside, the value of the market for high-brightness LED products is projected to grow 2% year on year to US$14.52 billion in 2015. Duff Lu, LEDinside research manager, notes that the industry will undergo consolidation next year with companies merging or being driven out of business. With uncompetitive players leaving, the industry will gradually reorganize itself.

EnergyTrend: PV market to see falling prices in 2016; devising new business strategies will become imperative

The photovoltaic (PV) sector have consistently achieved high growth each year, and EnergyTrend forecasts the total market demand to grow by almost 10% annually in 2016, reaching 58GW. With China and the U.S. being the main growth driver, the global PV market will be unaffected by seasonality and stay hot during the first half of next year. China’s share in the global demand will gradually increase. The U.S. on the other hand will significantly scale back its investment tax credit (ITC) benefits; but before this cut in subsidy rate, PV companies will keep expanding their shipments. Consequently, installed capacity growth in the U.S. is expected to peak next year.

According to EnergyTrend analyst Corrine Lin, the current oversupply situation in the market is unlikely to ease due to the ongoing capacity expansion efforts by major PV companies. Prices across the PV supply chain therefore will still be under heavy downward pressure in 2016. The strategic concern of industry participants will be to develop businesses outside the low-margin market segments.

WitsView: Prices to remain weak in the panel market during the first half of 2016 as production capacity outstrips market demand

The downturn of the global economy has seriously weakened the demand for consumer electronics products this year. Respective shipments of monitors, notebooks and tablets are projected to drop 10% year on year on average, while shipments of LCD TVs are seeing near-zero growth. For next year, vendors will be offering products with special features and technologies, such as HRD TVs, wide-viewing angle monitors and HD notebooks. They are banking that these products, along with the promotion of large-size tablets, will become strong incentives to consumers. However, the overall demand will stay stagnant because various applications markets are becoming saturated.

Eric Chiou, WitsView senior research director, noted that panel makers are constantly expanding their production capacity for large- and small-size panels. Furthermore, their stances on capacity adjustments have been generally conservative since they want to retain their market shares. The oversupply situation will therefore gradually worsen. On a quarterly basis, the overall panel supply-demand ratio is estimated to be upwards of 9% between this year’s fourth quarter to the middle of 2016. Panel prices will also remain weak.

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