On May 14, 2024, the US administration announced that it would increase tariffs on Chinese new energy vehicles from 25% to 100%. Additionally, tariffs will be imposed on Chinese products such as batteries, chips, medical supplies, and critical mineral raw materials, affecting an estimated total value of USD 18 billion in Chinese imports.

The United States believes that China’s substantial state subsidies and excess production capacity allow Chinese products to penetrate the European and American markets at low costs.

TrendForce Insights:

1. Impact of Tariff Increase on Chinese Electric Car Imports in the US Market Is Minimal

According to sales statistics from the first quarter of 2023 to the first quarter of 2024 in the US electric car market, only Geely, among the Chinese electric car groups actively operating in the US market, holds a market share of merely 2%.

By the first quarter of 2024, this share had further declined to just 1%. In fact, Chinese automakers, anticipating such measures, have already shifted their focus away from the US market to regions such as Europe, Southeast Asia, Latin America, and Russia. Therefore, the current increase in tariffs is expected to have minimal impact on China’s new energy car industry.

2. Consumers Focus on Electric Car Prices, Not Nationality

The affordability of Chinese electric cars stems from China’s long-standing high level of self-sufficiency in the entire electric vehicle supply chain, from complete vehicles to components, especially in the battery sector, which accounts for the highest proportion of total vehicle costs.

Coupled with government subsidy policies aimed at attracting consumers to purchase electric cars and increasing the overall market size, this further enhances the cost advantage of various components.

Additionally, according to data released by Gallup in April 2024, only 36% of people with an annual income below USD 40,000 would seriously consider purchasing an electric car, while those with incomes between USD 40,000 and USD 100,000 or more have a purchase intention of 45-50%.

Therefore, the high cost of electric cars remains the primary reason why consumers are currently unwilling to switch to electric cars, rather than being a matter of the car’s “nationality.”

3. Is the Decoupling Strategy for Electric Vehicles from China a Cure or a Poison?

The US administration’s decision to increase tariffs can protect the US fossil fuel car industry in the short term. With consumers unable to access cheap Chinese electric cars, they may opt for US fossil fuel cars.

While this measure may prolong the life of the US automotive industry chain, it could hinder both US and global carbon reduction goals and reduce the international competitiveness of US car manufacturers in the electric vehicle sector. 

Stellantis CEO Carlos Tavares has stated that increasing tariffs will not truly protect his company, and the only option is to continue fighting. Therefore, while higher tariffs serve as a protective shield for the domestic automotive industry chain, car manufacturers ultimately still need to face the harsh reality of global market competition.

Read more

• [Insights] China’s Position in EV Battery Market to be Shaken as the Mass Production Race of All-Solid-State Battery Industry Speeds up?
• [News] Six Companies, Including BYD and CATL, are Included in the U.S. Procurement Ban List

Just as generative AI is revolutionizing industries worldwide today by creating new opportunities, the concept of the Metaverse in 2021 was similarly embraced by technology giants as a strategic goal and vision for the future of the entire tech sector.

Microsoft, for instance, targeted the corporate segment of the Metaverse, showcasing the use of its mixed reality (MR) device, HoloLens 2, in manufacturing operations. NVIDIA introduced the Omniverse platform for image simulation, thereby facilitating the development of virtual environments within the Metaverse. There were also rumors about Google and Apple launching new virtual reality (VR) head-mounted devices. Perhaps most notably, Facebook’s name change to Meta was a clear indication of its commitment to this emerging field.

As Hype Fades, More Hardware and Content Are Needed to Strengthen the Foundation of the Metavers

Despite initial market optimism, the reality was that wearable technology had not reached maturity, and the quality of virtual content experiences fell short of expectations. As a result, there was insufficient momentum to drive the Metaverse forward in subsequent market developments. Many tech companies established departments dedicated to the Metaverse, but due to lackluster results and issues with resource allocation, these departments often faced workforce reductions, downsizing, or even complete dissolution.

Declining enthusiasm for the Metaverse primarily stems not from a flaw in the idea of blending virtual and real worlds, but from the grandiosity of its concept. The essence of Industry 4.0, after all, revolves around enhancing production efficiency through the data-driven integration of physical and digital realms.

This is a proven approach. Nevertheless, the challenge with the Metaverse lies in its ambitious scale. Without adequate software and hardware support, efforts to expand and implement it often fall short, yielding minimal benefits and, thus, diminishing its commercial appeal.

Essentially, the widespread adoption of technologies like head-mounted devices and a rich content library are vital for industry growth. In response, companies that develop VR and augment reality (AR) in recent years have pivoted their focus from the broader environmental framework towards improving wearable devices and creating engaging content. In doing so, they aim to boost the practical value of adopting VR and AR.

From Virtual Interaction to Spatial Computing, the Scope of Applications for Head-mounted Devices Continues to Expand

In 2023, according to TrendForce’s analysis, Meta’s Quest series dominated the global VR and MR device market, securing nearly 70% of total device shipments. This significant market share places Meta at the forefront, with Sony’s PS VR series ranking second, followed by other manufacturers like PICO and HTC. Entering the fray in 2024, Apple introduced its Vision Pro, which is expected to claim a 6% share of the global market.

Meta’s latest offering, the Quest 3, has adopted pancake lenses that enhance image clarity while slimming down the device’s profile. It is powered by the Qualcomm Snapdragon XR2 Gen 2, a (SoC) tailored for head-mounted devices that significantly boosts GPU and AI processing capabilities.

The Quest 3 marks a pivotal shift for Meta from VR to MR. Equipped with dual front-facing RGB cameras and advanced features like depth projection and room mapping, the Quest 3, alongside the higher-end Quest Pro, supports a range of MR applications. Additionally, the tracking capabilities of the Quest 3 are augmented by computer vision and machine learning technologies. With Meta’s ongoing collaboration with LG on new product development, the focus is now on extended reality (XR) applications linked with the television ecosystem.

Apple’s Vision Pro, which was launched in February 2024, has reignited market interest in VR.

This device fills a previously unaddressed gap in Apple’s portfolio by offering a VR head-mounted device that integrates seamlessly with iPhones, iPads, and other devices within Apple’s ecosystem, thereby enabling functions like image and video projection onto larger screens. The introduction of the Vision Pro brought the concept of spatial computing into the limelight, enabling users to interact with virtual objects in a natural and intuitive way and thus infusing fresh perspectives into the industry.

Moreover, at CES 2024, Sony unveiled an XR head-mounted device dubbed a “spatial content creation system.” Like the Apple Vision Pro, this device leverages the advantages of spatial computing. It’s designed as a commercial tool for developing 3D content, offering users precise and intuitive control over virtual objects, thereby simplifying the process of creating 3D models.

From Taiwan, ASUS has recently introduced its first AR glasses, the AirVision M1. These glasses are designed to function as a secondary screen, ideal for use outdoors or in situations where extra screens are necessary at home.

Taiwan-based Companies Expand into the Supply Chain for Headsets, Focusing on Optics, Chips, and Assembly

TrendForce analyst P. K. Tseng said that a critical aspect of the transformation for VR head-mounted devices is the increasing need for key components that are lighter and more compact, particularly pancake lenses, which are gaining importance due to their contribution to volume reduction.

However, the technological complexity and higher cost of manufacturing these advanced optical components mean that suppliers, such as GSEO and Young Optics, are relatively limited. This presents a blue ocean market opportunity, likely attracting more manufacturers to develop pancake lens components.

Furthermore, the trend is expected to drive demand for smaller-sized panels. While mainstream LCD panels continue to be widely used, the advent of devices like the Apple Vision Pro is anticipated to increase the adoption rate of Micro OLED panels.

Additionally, as standalone virtual devices become more mainstream in product design, and as the need for processing large volumes of image and sensor data independently by SoCs grows, demand will rise for dedicated chips used in VR and AR devices. For instance, MediaTek is rumored to be developing an exclusive AR chip for Meta.

System or device assembly is a key area of focus for Taiwan-based companies, particularly evident in the efforts of major ODMs like Quanta and Foxconn. These companies are enhancing their VR and AR hardware manufacturing through various strategies, including partnerships, mergers and acquisitions, and investment initiatives.

In the VR device supply chain, the strength of system assemblers lies in their ability to offer comprehensive product solutions, which expands the options available to prospective clients. The assembly of VR and AR devices presents unique challenges due to the necessity for high-quality image rendering and real-time motion capture. Numerous components are involved in the process.

Not all VR and AR device brands can develop head-mounted devices completely in-house, as demonstrated by companies like Meta and Sony. For newer market entrants, securing a comprehensive product solution that allows for future customization is a more desirable strategy. This demands that system assemblers have significant expertise in relevant technologies and ODM capabilities. As such, as opportunities in the VR and AR market continue to emerge, these assemblers are well-prepared to offer solutions for head-mounted devices.

Generative AI and Added-Value from Applications Will Sustain Future Growth Momentum

Beyond hardware, the focus on creating more content and valuable applications will be a major topic in the next phase of VR industry’s development, with generative AI poised to play a pivotal role.

Taking gaming as an example, VR game development is known to be exceedingly time-consuming, requiring developers to dedicate substantial amounts of time to coding. As a result, the games often lack diversity, customization, and meaningful game mechanics.

However, leveraging generative AI can expedite the game development process without sacrificing quality or increasing costs. Recent market analyses suggest that the adoption of generative AI could significantly reduce the time required to create XR learning modules from the 5-10 days typically seen in 2021 to less than 30 minutes today.

Consequently, major game engine providers like Unity are seizing this business opportunity. In mid-2023, Unity introduced a suite of generative AI development solutions tailored for VR game production. These solutions can be employed to create characters, objects, assets, and sound effects, thus significantly reducing development costs.

According to TrendForce’s research, global shipments of VR head-mounted devices are projected to register a slight year-on-year drop of 1.8%, but the annual total is still expected to surpass 9.3 million units.

Furthermore, with the releases of many new products ranging from chips and peripherals to complete systems, many of which were showcased at this year’s CES and MWC, there is strong bullish sentiment regarding the development of the VR industry. The strategies of major manufacturers for VR and AR devices also demonstrate intense efforts to explore new use cases beyond existing applications, or to expand into other commercial sectors such as remote assistance, virtual learning, and simulation training.

Additionally, in many countries, VR and AR are now being incorporated into medical treatments, such as psychological therapy and physical rehabilitation. Although the progress in promoting VR and AR technologies still depends on factors like pricing, specifications, and user experience, the expansion into new application markets is a positive development, particularly given the current shortage of content.

Therefore, the added-value provided by new applications will be a key determinant of the VR market’s growth momentum. Furthermore, the efficiency of using generative AI in content production holds the potential to propel device manufacturers into the next technological generation.

Join the AI grand event at Computex 2024, alongside CEOs from AMD, Intel, Qualcomm, and ARM. Discover more about this expo! https://bit.ly/44Gm0pK

(Photo credit: Apple)

On May 20, a report by Reuters revealed that Google plans to invest an additional Euro 1 billion in its data center park in Finland. This move aims to expand the scale and boost its AI business growth in Europe.

The report notes that in recent years, many data centers have been established in Nordic countries due to the cool climate, tax incentives, and ample supply of renewable energy. Finland’s wind power capacity has seen significant growth over these years, up by 75% to 5,677 megawatts by 2022, which brings electricity prices even down to negative values on particularly windy days.

Thus, Data center operators like Google have been taken advantage of this renewable energy, and already signed long-term wind power purchase agreements in Finland.

Driven by the AI wave, cloud providers such as Microsoft, Google, Meta, and Amazon have an increasingly robust demand for AI servers and data centers.

According to a previous forecast by TrendForce, considering the global CSPs’ demands for high-end AI servers (Those equipped with NVIDIA, AMD, or other high-end ASIC chips included) in 2024, the demands from four major U.S. CSPs: Microsoft, Google, AWS, and Meta are expected to account for 20.2%, 16.6%, 16%, and 10.8% of global demand respectively, reigning over the global market with a total proportion of more than 60%.

Read more

• [Insights] Big Four CSPs Continue to Shine in Q1 2024 Financial Reports, AI Returns Garnering Attention

(Photo credit: Google)

On May 21st, Samsung Electronics announced that Young Hyun Jun will take over as the head of the Device Solutions (DS) division, replacing the current leader, Kyung Kye-Hyun, who will now lead the Samsung Advanced Institute of Technology (SAIT) and the Future Business Division, overseeing the company’s global operations of the Memory, System LSI and Foundry business units.

Young Hyun Jun initially joined Samsung Electronics in 2000, focusing on the development and strategic marketing of DRAM and flash memory. He has been in charge of the memory business since 2014, served as CEO of Samsung SDI, the battery division, in 2017, and led the Future Business Division starting in 2024.

In the press release, Samsung expressed confidence that Young Hyun Jun will strengthen its competitiveness amid an uncertain global business environment.

Upon approval by the board of directors and shareholders, Young Hyun Jun will also be appointed as CEO of Samsung. Samsung employs a dual CEO system, with one CEO responsible for the semiconductor division and the other for the device experience division, which includes the mobile and visual display business groups.

At the time of this personnel announcement, Samsung is striving to catch up with its competitor SK Hynix in the AI memory sector. SK Hynix currently leads the market for high bandwidth memory (HBM), a crucial component for AI computing. SK Hynix previously stated that its HBM production capacity for this year and next year is already sold out.

TrendForce has analyzed that the current HBM3 supply for NVIDIA’s H100 solution is primarily met by SK hynix, leading to a supply shortfall in meeting burgeoning AI market demands. Samsung’s entry into NVIDIA’s supply chain with its 1Znm HBM3 products in late 2023, though initially minor, signifies its breakthrough in this segment.

Whether Samsung, led by Young Hyun Jun with his extensive memory experience, can regain ground in its competition with SK Hynix is under close observation.

Per a report from Reuters, a source has noted that since Samsung’s personnel changes typically occur at the beginning of the year, it is unusual to replace a high-ranking executive like this in the middle of the year.

Read more

• [News] HBM Boom May Lead to DRAM Shortages in the Second Half of the Year
• [News] Samsung Reportedly to Challenge Apple/TSMC with 3nm Exynos W1000

(Photo credit: Samsung)

Memory giants Samsung, SK Hynix, and Micron are all actively investing in high-bandwidth memory (HBM) production. Industry sources cited in a report from Commercial Times indicate that due to capacity crowding effects, DRAM products may face shortages in the second half of the year.

According to TrendForce, the three largest DRAM suppliers are increasing wafer input for advanced processes. Following a rise in memory contract prices, companies have boosted their capital investments, with capacity expansion focusing on the second half of this year. It is expected that wafer input for 1alpha nm and above processes will account for approximately 40% of total DRAM wafer input by the end of the year.

HBM production will be prioritized due to its profitability and increasing demand. Regarding the latest developments in HBM, TrendForce indicates that HBM3e will become the market mainstream this year, with shipments concentrated in the second half of the year.

Currently, SK Hynix remains the primary supplier, along with Micron, both utilizing 1beta nm processes and already shipping to NVIDIA. Samsung, using a 1alpha nm process, is expected to complete qualification in the second quarter and begin deliveries mid-year.

The growing content per unit in PCs, servers, and smartphones is driving up the consumption of advanced process capacity each quarter. Servers, in particular, are seeing the highest capacity increase—primarily driven by AI servers with content of 1.75 TB per unit. With the mass production of new platforms like Intel’s Sapphire Rapids and AMD’s Genoa, which require DDR5 memory, DDR5 penetration is expected to exceed 50% by the end of the year.

As HBM3e shipments are expected to be concentrated in the second half of the year—coinciding with the peak season for memory demand—market demand for DDR5 and LPDDR5(X) is also expected to increase. With a higher proportion of wafer input allocated to HBM production, the output of advanced processes will be limited. Consequently, capacity allocation in the second half of the year will be crucial in determining whether supply can meet demand.

Samsung expects existing facilities to be fully utilized by the end of 2024. The new P4L plant is slated for completion in 2025, and the Line 15 facility will undergo a process transition from 1Y nm to 1beta nm and above.

The capacity of SK Hynix’s M16 plant is expected to expand next year, while the M15X plant is also planned for completion in 2025, with mass production starting at the end of next year.

Micron’s facility in Taiwan will return to full capacity next year, with future expansions focused on the US. The Boise facility is expected to be completed in 2025, with equipment installations following and mass production planned for 2026.

With the expected volume production of NVIDIA’s GB200 in 2025, featuring HBM3e with 192/384GB specifications, HBM output is anticipated to nearly double. Each major manufacturer will invest in HBM4 development, prioritizing HBM in their capacity planning. Consequently, due to capacity crowding effects, there may be shortages in DRAM supply.

Read more

• HBM3e Production Surge Expected to Make Up 35% of Advanced Process Wafer Input by End of 2024, Says TrendForce
• [News] DRAM Price Surge Halts, Could HBM Demand Drive Price Increases?

(Photo credit: Samsung)