According to TechNews’ report, Apple, NVIDIA, AMD, Qualcomm, and MediaTek all utilize TSMC’s semiconductor processes for manufacturing their latest chips, with some potentially employing Samsung’s foundry, though typically not for flagship products.

With Samsung’s improved yield rates in recent months, the company is eager to secure a portion of the orders, particularly for the 3-nanometer GAA (Gate-All-Around) process.

Earlier market reports suggested that Qualcomm’s Snapdragon 8 Gen 4 might adopt a dual-foundry strategy, simultaneously utilizing TSMC’s N3E process technology and Samsung’s SF3E process technology.

However, both Qualcomm and MediaTek currently plan to employ TSMC’s second-generation 3-nanometer process technology (N3E) for manufacturing chips like the Snapdragon 8 Gen 4 and Dimensity 4, without pursuing a dual-foundry strategy at this time.

As of the end of June 2022, Samsung announced the commencement of production for 3-nanometer process chips at its Hwaseong Industrial Complex in South Korea. These chips incorporate a new GAA transistor architecture technology, rumored to be more energy-efficient compared to TSMC’s 3-nanometer FinFET technology. Despite this, in the realm of 3nm, Samsung has yet to secure substantial orders from major clients.

Interestingly, the company has seen more success in the 4nm domain. It is reported that Samsung has gradually addressed yield and various issues in the 4-nanometer process technology domain. The third generation of 4-nanometer process technology has seen improvements in performance, reduced power consumption, increased density, and achieved yields close to TSMC’s level. Market sources indicate that Samsung has gained recognition from companies like AMD and Tesla, securing new orders.

Currently, TSMC’s 3-nanometer process technology production capacity is ramping up, with an expected monthly capacity of 100,000 wafers by the end of 2024. The revenue contribution is projected to increase from the current 5% to 10%.

Meanwhile, Samsung plans to introduce the second generation of its 3-nanometer process technology, named SF3 (3GAP), in 2024. Building upon the existing SF3E, it aims for further optimization, and Samsung’s in-house Exynos 2500 is expected to be one of the first high-performance chips to adopt this new process technology.

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MediaTek announced a collaboration with Meta to develop its next-generation smart glasses chip. Since Meta has previously used Qualcomm chips for its two generations of smart glasses products, it is speculated that Meta’s expansion of chip suppliers is aimed at maintaining supply chain flexibility and reducing costs. MediaTek, in turn, is poised to leverage smart glasses to tap into opportunities within Meta’s VR/AR devices.

 TrendForce’s Insights:

1. Meta Expands Chip Collaboration Suppliers, Maintaining Product Development Flexibility and Potential Cost Reduction

In mid-November 2023, MediaTek hosted the overseas summit, Mediatek Executive Summit 2023, where it announced a collaboration with Meta to develop the next-generation smart glasses chip.

Meta’s first smart glasses, a collaborative creation with Ray-Ban in 2021, differ from the Quest series as they are not high-end VR devices but rather feature a simpler design, focusing on additional functionalities like music playback and phone calls.

In the fall of 2023, Meta introduced a successor product with significant improvements in camera resolution, video quality, microphones, and internal storage. This new device is designed to simplify the recording and live streaming process by integrating with Meta’s social platform. Additionally, the new product aligns with the trend of generative AI and incorporates Meta’s AI voice assistant based on Llama2 LLM.

Notably, the market has shown keen interest and discussion regarding MediaTek’s announcement on the collaboration with Meta, given that Meta’s previous two generations of smart glasses used Qualcomm chips, specifically the Qualcomm Snapdragon Wear 4100 for the older version and the AR1 Gen1 for the new version.

Analysis of Meta’s Motivation: Meta’s decision to collaborate with MediaTek may be driven by considerations of risk diversification among suppliers and overall cost reduction.

Firstly, Meta has been investing in the development of in-house chips in recent years to ensure flexibility in product development. Examples include the MTIA chip, disclosed in mid-2023, designed for processing inference-related tasks, and the MSVP, the first in-house ASIC chip for video transcoding, which is expected to be used in VR and AR devices.

Given Meta’s previous attempts, including collaboration with Samsung, to independently develop chips and move towards chip autonomy, the partnership with MediaTek can be seen as a risk mitigation strategy against vendor lock-in.

Secondly, considering that smart glasses, unlike the high-priced Quest series, are currently priced at USD 299 for both models, MediaTek’s competitive pricing may also be a significant factor in Meta’s decision to collaborate with them.

2. MediaTek Eyes VR and AR Device Market Opportunities Through Smart Glasses Collaboration with Meta

From MediaTek’s perspective, their focus extends beyond smart glasses to the vast business opportunities presented by Meta’s VR and AR devices. In reality, examining Meta’s smart glasses alone reveals estimated shipments of around 300,000 pairs for the older model. Even with the new model and the anticipated successor expected to launch in 2025, there is currently no clear indication of significant market momentum.

In practical terms, this collaboration with Meta might not contribute substantially to MediaTek’s revenue. The crucial aspect of MediaTek’s collaboration with Meta lies in strategically positioning itself in Meta’s smart headwear supply chain, challenging the dominance of the original chip supplier, Qualcomm.

Looking at global VR device shipments, Meta is projected to hold over 70% market share in 2023 and 2024. There are also reports of an updated version of the Quest device expected to be available in China in late 2024. If MediaTek can expand its collaboration with Meta further, coupled with the gradual increase in the penetration rate of VR and AR devices, significant business opportunities still lie ahead.

From an overall perspective of the VR and AR industry, the current design of headwear devices no longer resembles the early models that required external computing cores due to considerations of cost, power, and heat.

The prevalent mainstream designs are now standalone devices. Given that these devices not only execute the primary application functions but also handle and consolidate a substantial amount of data from sensors to support functions like object tracking and image recognition, VR and AR devices require high-performance chips or embedded auxiliary SoCs. This market demand and profit potential are compelling enough to attract chip manufacturers, especially in the face of the gradual decline in momentum in the consumer electronics market, such as smartphones.

The VR and AR market still holds development potential, making it a strategic entry point for manufacturers. This insight is evident in MediaTek’s motivation, continuing its market cultivation efforts after developing the first VR chip for Sony PS VR2 in 2022 and collaborating with Meta.

According to CNA’s news, the potential business opportunities in artificial intelligence have spurred major tech giants, with NVIDIA, AMD, Intel, MediaTek, and Qualcomm sequentially launching products featuring the latest AI capabilities.

This AI arms race has expanded its battleground from servers to smartphones and laptops, as companies hope that the infusion of AI will inject vitality into mature markets.

Generative AI is experiencing robust development, with MediaTek considering this year as the “Generative AI Year.” They anticipate a potential paradigm shift in the IC design industry, contributing to increased productivity and significantly impacting IC products.

This not only brings forth new applications but also propels the demand for new algorithms and computational processors.

MediaTek and Qualcomm recently introduced their flagship 5G generative AI mobile chips, the Dimensity 9300 and Snapdragon 8 Gen 3, respectively. The Dimensity 9300, integrated with the built-in APU 790, enables faster and more secure edge AI computing, capable of generating images within 1 second.

MediaTek points out that the smartphone industry is experiencing a gradual growth slowdown, and generative AI is expected to provide new services, potentially stimulating a new wave of consumer demand growth. Smartphones equipped with the Dimensity 9300 and Snapdragon 8 Gen 3 are set to be released gradually by the end of this year.

Targeting the AI personal computer (PC) market, Intel is set to launch the Meteor Lake processor on December 14. Two major computer brands, Acer and ASUS, are both customers for Intel’s AI PC.

High-speed transmission interface chip manufacturer Parade and network communication chip manufacturer Realtek are optimistic. The integration of AI features into personal computers and laptops is expected to stimulate demand for upgrades, leading to a potential increase in PC shipments next year.

In TrendForces’ report on November 8th, it has indicated that the emerging market for AI PCs does not have a clear definition at present, but due to the high costs of upgrading both software and hardware associated with AI PCs, early development will be focused on high-end business users and content creators.

For consumers, current PCs offer a range of cloud AI applications sufficient for daily life and entertainment needs. However, without the emergence of a groundbreaking AI application in the short term to significantly enhance the AI experience, it will be challenging to rapidly boost the adoption of consumer AI PCs.

For the average consumer, with disposable income becoming increasingly tight, the prospect of purchasing an expensive, non-essential computer is likely wishful thinking on the part of suppliers. Nevertheless, looking to the long term, the potential development of more diverse AI tools—along with a price reduction—may still lead to a higher adoption rate of consumer AI PCs.

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(Image: Qualcomm)

Amid a two-year recalibration in the smartphone and electronic component supply chain, inventory levels have rebounded to a healthy state. The infusion of new applications like AI and auto driving has fueled a comprehensive replenishment of consumer electronics inventory, propelling IC design with a surge in urgent and short orders.

Although wafer prices surged by over 40% during the pandemic, recent declines in utilization suggest an impending price reduction cycle to maintain operational rates, expected to lead to a reduction in IC design costs. Key players, boasting inventory turnover periods below a hundred days, are well-positioned for a potential upswing in demand, as reported by CTEE.

While most semiconductor companies are anticipated to experience declines in 2023, inventory levels have already tapered off. MediaTek boasts an inventory turnover period of just 89.11 days, with Realtek and ITE Tech at 96.77 and 84.11 days, respectively.

IC design companies emphasize the dominance of rush orders in the latter half of the year. Despite the uncertainty of economic visibility, confidence prevails regarding the new applications like AI, auto driving, and LEO(Low Earth Orbit) satellites, promising an upsurge in demand.

IC design companies also point out that the 3-5 year cycle of device replacement is imminent. The infusion of new AI applications and technological advancements in decision-making and workplace practices is expected to drive business demand. Positive developments, such as Microsoft discontinuing support for Windows 10, are anticipated to gain traction by 2024.

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According to anue’s news, during the recent MediaTek 2023 Summit, major IC design firm MediaTek held an overseas summit in the United States and announced a new collaboration with Meta. MediaTek will take charge of developing the chip for Ray-Ban Meta smart glasses, replacing the competitor Qualcomm’s Snapdragon AR1 Gen 1 chip.

Notably, in October 2023,  Meta launched the new generation of Ray-Ban Meta smart glasses. These feature the Qualcomm Snapdragon AR1 Gen 1 chip, a 12-megapixel camera, and 5 microphones for sending and receiving messages. It is the world’s first smart glasses with Facebook and Instagram live streaming capabilities, enabling the recording of high-quality videos.

MediaTek has long been dedicated to developing low-power, high-performance SoC. This collaboration with Meta focuses on jointly creating a custom chip specifically designed for AR smart glasses, meeting the requirements of lightweight and compact devices. The collaborative product, Ray-Ban Meta smart glasses, is expected to be launched in the future.

(Photo credit: MediaTek)