According to WitsView, as the shortage of wafer remains, foundries have adjusted their product portfolio for 200mm wafer since the second half of 2017, hoping to maximize profits. They have raised the quotes for 200mm wafer, and also reduced the input of drive IC. The prices of driver IC have dropped dramatically in recent years due to the price competition among panel makers, making it a product of low gross margin for foundries. So the increasing demand for PMIC and MCU, which can generate higher profits, has appeared to be a great opportunity for foundries to adjust their product plans. WitsView estimates that foundries will lower the input of driver ICs by around 20% from Q417 to Q118.

The production plan adjustment will mainly affect driver ICs for IT panels, such as HD TN/FHD TN and other low-end and middle-end products. Current suppliers are mainly panel makers from Greater China, including AU Optronics, Innolux Corporation, and BOE, as Korean makers have gradually withdrawn from the low-end IT panel market.

The current delivery time of driver ICs has been extended to over 10 weeks, thus the panel shipments may also be influenced by tight supply of driver IC in 1Q18, despite the fact that the first quarter is a traditional off-season for IT industry, and panel makers normally make conservative purchase. For now, WitsView has not observed any panel shortage yet, but the tight supply of driver IC will make it harder for panel makers to reschedule the orders, for example, taking urgent orders or arranging early delivery.

Currently fabless IC companies are considering transition to other manufacturing processes, or accelerating the verification of products offered by Chinese foundries to add to their available production capacity. Meanwhile, fabless semiconductor companies are also figuring out the panel makers’ attitudes about the price increases in 1Q18. In this regard, WitsView thinks panel makers may hold a positive attitude and agree to the proposed price rise in order to ensure the driver IC supply.