TV shipment performance in 2022 will return to a pre-pandemic cycle but the Russian-Ukrainian war has indirectly led to rising inflation. With consumer spending unchanged, expenditures on non-essentials are bound to feel the squeeze. Russia accounts for 82% of TV shipments in the CIS (Commonwealth of Independent States) region and Ukraine also maintains a 12% market share. As the war drags on, the region will bleed 1.5 to 2 million TV sets in the short term, and TV shipments may fall by more than 3 million sets in the medium term. Although demand in the CIS region is not positive, Southeast Asia and emerging markets were severely affected by the COVID-19 pandemic in 2021, deferring a portion of demand. Overall, TV shipments in 2022 will adjust downward to 215 million units, or 2.4% YoY and a decrease of 0.7% from the previous 2022 forecast.

According to TrendForce statistics, TV shipments in the CIS region account for 4% of the global total, of which 60% consists of 32-inch and 43-inch models. The two major TV brands, Samsung and LG, account for nearly 50% of the combined market in the CIS region. At present, due to factors such as geopolitics and economic sanctions, shipments to Russian factories for back-end TV assembly have been halted and Samsung has gone one step further by halting sales.

Samsung and LGE account for more than 50% of CIS region market share, hardest hit by the Russian-Ukrainian war

Russian demand for TV sets falls at 6-7 million units per year. Due to high tariffs, TV giants Samsung and LGE have been encouraged to set up TV assembly plants in Russia which, not only reduce tariff costs, but also enjoy the benefits of zero-tariff exports to Ukraine.

Samsung and LGE originally sent imports from South Korea to Russia in the form of CKD (Complete knock down) in order to assemble TV sets in local factories and enjoy duty-free benefits. However, the war has suspended all shipments to Russia.

It is worth mentioning, as damage has been dealt to the two Korean brands, Chinese brand Haier has chosen to accelerate its deployment in the Russian market. Haier is expected to successfully occupy third place in TV sales in the CIS region with a market share of 11% in 2022. In 2021 Haier’s shipments in the CIS region reached 800,000 units. In 2022, it has an opportunity to cannibalize lost market share from Korean brands with a shipment target of one million units. Judging from the TV production capacity of local factories, volume maxes out at 2 million units. Haier is forecast to become the biggest winner of the Russian-Ukrainian war.

Soaring shipping costs portend possible further downgrade of 2022 TV shipments

Due to factors such as reduced shipments and inventory control, the two Korean brands have gradually adjusted their purchase volume of TV panels in the near term, relegating 32- and 43-inch TV panels, units that had an opportunity to increase in price in April 2022, to a downward price trend again. Due to falling demand for TVs and IT, concerns over panel overcapacity are overwhelming and some panel manufacturers have decided to begin gradual capacity adjustment in April 2022.

Of the challenges plaguing the TV market in 2022, in addition to the existing problem of the COVID-19 pandemic, the Russian-Ukrainian war and rising global inflation also add variables to demand. In addition, cargo container shortages and port congestion increased shipping costs significantly in 2021, indirectly inflating the cost of TV sets with costs rising as TV sizes grow. Even though current panel pricing has dropped by 30% to 40% compared with its high point in 2021, no expected reduction in freight costs in 2022 will inevitably affect the scale of branded promotions and stocking during the peak season of overseas markets in 2H22. Therefore, there is still room for TV shipments in 2022 to be revised downward.

（Image credit: iStock）

According to TrendForce, the consumer electronics market will feel the brunt of the weakening stay-at-home economy, the pandemic in China, international tensions, and rising inflation in 1H22. Coupled with the traditional off-season, demand for relevant applications such as PCs, laptops, TVs, and smartphones has cooled significantly and downstream customers have successively downgraded their shipment targets for the year, while demand for automotive, Internet of Things, communications, and servers products remain good. At the same time, the supply chain will build higher inventories in general to mitigate the risk of material shortages due to transportation impediments induced by the spread of the pandemic and the ongoing war between Russia and Ukraine.

1. Foundries

Due to the prolonged lead-time of semiconductor equipment and limited new capacity in 1Q22, the overall foundry capacity utilization rate remains fully loaded, in particular, component mismatch issues continue for parts produced at mature nodes (1Xnm~180nm). Looking forward to the second quarter, although growth in global wafer production capacity remains limited, due to weak demand for end products, continuing international tension, and China’s forced lockdowns and supervision due to the recent spread of the pandemic, there is an opportunity for the supply chain to obtain a more adequate supply of wafers that were previously squeezed by production capacity.

2. Servers

The overall supply of key server materials improved slightly in 1Q22. In addition, due to increasing orders from ultra-large data centers, the general supply cycle of NetCom chips such as LAN IC/chip remains as long as approximately 40 weeks but the demand gap can be bridged by instituting urgent order fees, mitigating actual impact. As the aforementioned situation eases, additional orders for ODM motherboard production are moving briskly, prompting continued stocking of FPGAs and PMICs materials. NetCom chips are also overstocked and the overall market has a reached a “rich get richer” mindset. Material shortages at second-tier ODMs still stifle the production of motherboards for a small number of customers but does not affect the overall server market supply. With improvements in material supply, server shipments will increase significantly in 2Q22, growing an estimated 15.8% QoQ to 3.6 million units.

3. Smartphones

Affected by sluggish seasonal demand, the Russian-Ukrainian war, and rising inflation, market demand has cooled. Thus, material delivery issues in the supply chain have eased compared to 2H21. Although there is still a shortage of certain components, most of these shortages are concentrated in mid/low-end smartphone products. The lead time for 4G and low-end 5G SoCs is approximately 30 to 40 weeks, which is limited by production capacity planning. Since last year, the demand of the mid/low-end mobile phone market has not been met. This is followed by A+G sensors with a lead time of approximately 32~36 weeks and OLED DDIC and Touch IC with a lead time of 20~22 weeks. The production volume of smartphones in 2Q22 will be affected by the interaction of the aforementioned factors with a forecast production volume of 323 million units, or only 6% QoQ, which is lower than the performance of previous years.

4. Notebooks

Also affected by weakening end market demand, discounting client SSDs that are no longer oversupplied, Type C IC, WiFi, and PMIC all currently boast long lead times, with Type C IC the lengthiest at 20~25 weeks. However, compared with TrendForce’s assessment at the beginning of this year, the delivery cycle has not grown longer, so the lead time of these three types of products is expected to improve by the end of 2Q22. As supply chain backlog continues to improve, shipments of notebook computers (including Chromebooks) is expected to reach approximately 55.1 million units in 2Q22, down 0.7% QoQ.

5. MLCC Passive Components

From the perspective of other key components, taking MLCC as an example, demand for major consumer electronic products such as mobile phones, laptops, tablets, and TVs declined significantly in 1Q22, resulting in high consumer product specification MLCC inventory levels held by original suppliers and channel agents and this situation may continue into 2Q22. At present, the stocking momentum for automotive and industrial MLCCs has steadily increased, while consumer specification products have yet to escape the pattern of oversupply. In 2Q22, the MLCC market has the opportunity to alleviate its component mismatch issues through gradually increased production capacity and automotive and server ICs supplied by semiconductor IDM companies, driving stocking momentum at automotive power, server, fast charging, and charging/energy storage equipment OEMs. Vehicle and industrial MLCCs have the opportunity to become primary growth drivers in 2Q22 with Murata, TDK, Taiyu and Yageo as the primary beneficiaries. Consumer specification products, which account for the bulk of MLCC production from suppliers in Taiwan, South Korea, and China, may face continued market demand weakness in 2Q22 due to a slowdown in demand for mobile phones and laptops and continuing inventory adjustment by branded companies and ODMs.

Looking forward to 2Q22, not including servers, demand for end products related to the consumer category remains weak. Components that were originally oversupplied will face more severe price tests due to the imbalance between supply and demand. In terms of materials in serious short supply, more output will be transferred to products with strong demand through the deployment of internal production capacity. TrendForce believes that from the changes in PC market conditions, it can be seen in rapid changes in demand, purchasing behavior has quickly switched from the former over-ordering strategy to actively cutting orders, inducing supply chains to buck the seasonal trends of previous years. Due to the accelerated recent spread of Omicron in China and under the country’s dynamic zero-COVID policy, mandatory and sudden lockdown and control measures may cause local manufacturers to face multiple and complex supply chain problems, which will be detrimental to market performance.

Regarding rising tensions stemming from the Russian-Ukrainian war, TrendForce indicates that Russia is not one of the Taiwanese foundry industry’s primary markets. Hence, while sanctions against Russia continue to pile up, their impact on Taiwanese foundries will likely remain limited, though the war may potentially result in a decline in sales of end-devices, thereby indirectly reducing manufacturers’ component demand and, subsequently, wafer inputs at foundries.

TrendForce indicates that the smartphone industry will be noticeably affected by the ongoing war. Take the ranking of smartphone brands by market share in Russia and Ukraine last year, for instance; the top three brands sold included Samsung, Xiaomi, and Apple, which had a combined annual sale of about 45 million units for 2021. Since the inception of the armed conflict, there have been continued fluctuations in currency exchange rates, with the Ruble plummeting in value, and this devaluation has been noticeably reflected in retail sales of iPhones. More specifically, the retail price for the iPhone 13 Pro 128 GB has risen by almost 50% in Russia. Such price hikes pertaining to electronic items will likely prompt consumers to reallocate a rising portion of their spending to other daily necessities instead. Therefore, the two countries’ demand for chips is expected to rapidly shrink, in turn leading IC design companies to reduce their wafer input at foundries.

With foundries terminating their supply to Russia, will Chinese companies subsequently benefit from redirected orders?

Although Russia is not a major market for the Taiwanese foundry industry, certain Elbrus-branded chips, used in military and networking applications, are manufactured by TSMC. Notably, the Washington Post indicated that TSMC is no longer manufacturing and shipping Elbrus products, while there have also been rumors suggesting Chinese semiconductor companies may reap benefits in response. TrendForce, however, believes that, even though Chinese foundries are able to provide the 1Xnm and more mature process nodes necessary for Elbrus chip production, the requisite redesign and verification processes will likely take at least one year. As such, Russia will have a difficult time immediately redirecting orders for Elbrus chips to Chinese foundries, and the Chinese semiconductor industry will not be able to take advantage of these orders in the short-term.

Escalating warfare places significant stress on transportation, logistics, and supply chains

In light of the ongoing conflict, various parties have been imposing diverse sanctions on Russia, and the shipping industry has, in turn, sustained both direct and indirect ramifications pertaining to their businesses’ stability and safety. Logistic disruptions and skyrocketing prices, for instance, represent some of the issues that have emerged post-conflict and placed undue stress on the global supply chains. As a hotbed of semiconductor production, then, Taiwan would naturally be assumed to have domestic semiconductor companies stockpile component inventories. However, according to TrendForce’s investigations, not only do most of these companies currently possess healthy inventory levels, but Russia and Ukraine also do not represent the sole sources of semiconductor materials for Taiwan, since Taiwanese companies have been sourcing materials from China as well. Hence, the Russian-Ukrainian war has caused neither noticeable stock-up activities nor production bottlenecks for Taiwanese semiconductor companies.

（Image credit: shutterstock）

Global smartphone production came to 356 million units for 2021, showing a QoQ increase of 9.5%, according to TrendForce’s latest investigations. The second half of last year saw demand injections related to the peak promotion season for e-commerce platforms and year-end holiday sales. These factors thus bolstered smartphone production and resulted in 4Q21 seeing the highest QoQ growth rate for the year. Apple’s new iPhones were the primary growth driver. On the other hand, the performances of a few smartphone brands were constrained by the shortage of some key components. Hence, the total smartphone production for 4Q21 was slightly lower compared with 4Q20 or even 4Q19.

Apple took production leadership in 4Q21 with record high of 85.5 million units

After unveiling the iPhone 13 series in September, Apple started aggressively ramping up the shipments of these new devices to meet market demand. Owing to its fast-paced sales and marketing rhythms, Apple has been able to take first place in the quarterly ranking of smartphone brands by production market hare for many fourth quarters, and 4Q21 was no exception. Besides maintaining its top position in the fourth-quarter brand ranking, Apple raised its quarterly iPhone production to a new record high of 85.5 million units, a 66.0% QoQ increase. In the aspect of pricing strategy, the prices of the new iPhone 13 models were reasonable for consumers, while the price reductions for the older iPhone models were noticeable as well. Moreover, the capturing of the market share left by Huawei can be considered as the main factor behind Apple’s stellar performance in 4Q21. Over time, the orders for Huawei’s flagship models (i.e., the P and Mate series) have been gradually replaced by iPhone orders. In terms of annual production, Apple reached 233 million units for 2021, up from almost 200 million units for 2020. The growth was mainly attributed to an expansion of Apple’s market share in China from 10% to 16%. Samsung took second place in the global brand ranking for 4Q21 with 71 million units, a 2.9% QoQ increase. In 2Q21, the spread of COVID-19 outbreaks in Vietnam affected smartphone production facilities in the country and lowered Samsung’s capacity utilization rate. But apart from that quarter, Samsung’s performance remained stable for the other three quarters of last year. For the ranking of smartphone brands by annual production, Samsung was still the leader for 2021 with 275 million units.

OPPO (including Realme and OnePlus) took third place in the ranking with a quarterly production of 48 million units, a 5.9% QoQ decrease, for 4Q21. Xiaomi (including Redmi, POCO, and Black Shark) took fourth place with a production of 45.5 million units, a 2.2% QoQ increase. Fifth-ranked Vivo (including iQoo), on the other hand, reduced its smartphone production by 11.8% QoQ to 30 million units. As these three Chinese brands’ target markets and product strategies show significant overlap, their control of key components that are currently in shortage will have a direct impact on their production volumes going forward. It should also be pointed out that Honor, which was spun off from Huawei in early 2021 and underwent a period of corporate restructuring and component procurement in 1H21, experienced a meteoric rise in 2H21. Much like other Chinese brands, Honor adopts a sales strategy that primarily focuses on the Chinese market, meaning Honor’s smartphone business will continue to affect OPPO, Xiaomi, and Vivo, all of which place a top priority on domestic sales.

Annual smartphone production for 2022 will likely reach 1.381 billion units despite potential decline

Assuming that the global spread of the COVID-19 pandemic continues to slow, TrendForce expects annual smartphone production for 2022 to undergo a slight YoY increase of 3.6% to 1.381 billion units. Not only is smartphone demand expected to decline in China, which represents the largest consumer market in the world, but other markets will also exhibit only limited growth. Hence, the leading growth drivers will come from both cyclical replacement demand and new demand from emerging markets. Notably, in addition to factors such as foundry capacity allocation, global inflation, and energy shortage, whether an economic recovery will bring about positive change for the smartphone market will continue to influence the overall performance of the industry. TrendForce therefore believes that the annual smartphone production for 2022 may still face potential downside risks.

Regardless, the recent war between Russia and Ukraine has generated a host of issues including exchange rates, inflation, and logistics problems that affect smartphone sales in Eastern Europe. With regards to the market share of smartphone brands in Russia and Ukraine last year, the top three brands by sales included Samsung, Xiaomi, and Apple, with a combined 45 million units sold, accounting for 3% of the global total. Preliminary assessments indicate that the ongoing war will not have a drastic effect on smartphone production for 2022, though TrendForce also does not rule out the possibility that the resultant global economic problems may affect overall smartphone demand.

The conflict between Russia and Ukraine has escalated in recent days. In addition to the surge in natural gas and crude oil prices, the conflict may also impact the supply of non-ferrous metals including aluminum, nickel, and copper. According to TrendForce, nickel is a key upstream raw material for the manufacture of electric vehicle power batteries and mainly used in the production of ternary cathode materials. In 2021, global nickel mine production was approximately 2.7 million tons, originating primarily from Indonesia, the Philippines, and Russia. Russian nickel production accounts for approximately 9% of the world’s total (including low, medium, and high-grade nickel), ranking third globally. At present, the market penetration rate of new energy vehicles is accelerating and ternary power batteries account for nearly half of power battery market share, which signals strengthening demand for upstream raw material nickel for automotive power batteries. Although Russian nickel exports remain unaffected for the time being, if the situation on the ground between Russia and Ukraine continues to deteriorate, global nickel supply may be impacted in the short term, pushing up nickel prices, and further increase cost pressures on end product markets such as the electric vehicle industry.

TrendForce states that in the medium to long term, since the lion’s share of new nickel ore smelting and processing projects have been located in Indonesia in recent years and Indonesia’s nickel ore production accounted for approximately 37% of the world’s total production in 2021, Indonesia’s concentrated production of nickel is expected to improve supply and demand in 2H22. TrendForce also emphasizes, regarding the export ban on mines announced by Indonesia last year, this ban only prohibits the export of raw ore and does not prohibit Chinese companies such as Zhejian Huayou Cobalt, Tsingshan Holding Group, Lygend Resources, and GEM from investing in the processing end of nickel mines in Indonesia. Therefore, smelting nickel ore and highly processed products are not affected by the export ban.

From the perspective of suppliers, among the top five nickel ore manufacturers in the world, Russian manufacturer Norilsk supplies approximately 9% of the world’s raw nickel materials, or 90% of overall Russian production, and its high-grade nickel production accounts for 22% of the world’s total (Note: according to nickel content, nickel materials can be divided into high-grade nickel, medium-grade nickel, and low-grade nickel with high-grade nickel referring to Ni content ≥ 10%), ranking first in the world. China’s Jinchuan Group ranks second at 17%, followed by Switzerland’s Glencore at 13%, and Brazil’s Vale S.A. at 12%. TrendForce believes, looking at the current conflict between Russia and Ukraine, if Europe and the United States impose sanctions on Russia, a change in the flow of Russian nickel may occur due to the high concentration of production and processing by Norilsk.

TrendForce states, at present, high-nickel-based ternary cathode materials (primarily referring to ternary materials with high nickel content such as NCM622, NCM811, and NCA) rely on the two advantages of higher energy density and less dependence on the precious metal cobalt as a raw material, its market share of ternary cathode materials has increased rapidly, 10% in 2019 to nearly 40% in 2021. The development of high nickel content means that consumption demand for nickel corresponding to each ton of ternary cathode materials has increased. With the acceleration of the penetration rate of new energy vehicles in China, Europe, and the United States, the market demand for lithium power batteries is strong and overall nickel inventories continue to decline. At present, the global refined nickel inventory is only 100,000 tons. In the context of tight supply and increasing demand, inferring from the Chinese market where new energy vehicles accounted for 53% of the global market in 2021, the spot market price of electrolytic nickel in China reaching RMB130,000 to RMB150,000 per ton in 2021, and prices jumping in early 2022 to RMB160,000 to 170,000 per ton, the possibility of continued pricing spikes in the future cannot be ruled out.