Shipments of small- to medium-size LCD panels by Taiwan makers fell 23.6% sequentially to 184 million units in the first quarter of 2019, reflecting factors including seasonality and significant reduction in shipments by financially-battered Chunghwa Picture Tubes (CPT), according to Digitimes Research.CPT saw its shipments tumble 68.7% sequentially in the first quarter as its production was disrupted by its financial woes. Fellow company HannStar Display suffered a less severe drop of 25.5% as it managed to receive more windfall orders for smartphone panels while reducing those models for feature phones.Innolux experienced the least sequential decline of 2.5% in the first quarter, thanks to strong demand for automotive and tablet panels.Taiwan's shipments of small- to medium-size panels are expected to rebound 6.7% on quarter in the second quarter, buoyed by a pick-up in seasonal demand and a gradual resumption of panel production at CPT.But such shipments are likely to plunge 37.3% on a yearly basis, as CPT will not be able to resume production of panels for feature phones, and HannStar plans to ramp up automotive and smartphone panels, while reducing those for feature phones.Shipments of medium-size panels for consumer electronics applications, which suffered a severe sequential drop of 49.1% in the first quarter due to seasonal inventory adjustments, are expected to rebound 29.5% in the second quarter, Digitimes Research estimates.For individual companies, CPT is expected to see its shipments expand 75.2% on quarter in the second quarter thanks to a gradual recovery of its production capacity, while HannStar is likely to be the sole panel producer that will see its panel shipments continue to fall in the second quarter as it aims to ramp up smartphone panels and medium-size models.

Apple, Microsoft, Google, Amazon and Facebook are five major Internet service providers of the US. Their relationships with China have gradually turned from collaborations to confrontations, as the country has been citing national security or the need to grow local enterprises to bar the US firms from the China market.Apple's smartphone application processors are made by TSMC. Google has installed datacenters in Taiwan, has recently activated one in South Korea, and has acquired HTC's smartphone team.Currently, there are over 400 datacenters worldwide, of which 147 are equipped with over 5,000 servers each and owned by Amazon, Microsoft or Google. In addition to North America and Europe, the three Internet service providers have also constructed 28 datacenters in East Asia - in Japan, South Korea and Taiwan.Their competitions against China-based Internet service providers are being undermined by the US IT industry's structural disadvantage: over reliance on demand from Western countries. Google, Amazon and Apple are all facing the same issue and for markets such as India and emerging countries in the Asia Pacific area, they lack the appropriate personnel and the determination to actually go deep into those markets.In Apple's case, the company has 41% of its revenues coming from North America and 23% from Europe. If Japan's 9% is included, the US smartphone vendor has nearly three fourths of its revenues generated from advanced economies. Meanwhile, Apple's revenues have been heavily relying on its smartphone sales, which account for over 60%. The company's iPads and iPods are already not seeing much growth.With Apple's failure to achieve good sales for its new smartphones and its strategy focusing on promoting entry-level and mid-range smartphones in China and India not working as intended, Apple's hardware business apparently has reached a bottleneck.For business opportunities from smart city and smart home in Asia Pacific's emerging markets, China-based makers, which have a lot of experience in making deployments in the rural area, are expected to have advantage over US-based makers. The China government's Belt and Road Initiative (BRI) is also expected to help its makers tap into the emerging markets in Asia Pacific.(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

Nvidia CEO Jen-Hsun Huang has claimed that software is eating the world, but AI is going to eat software. The concept of machine learning has somehow infinitely expanded people's imagination about software. The biggest difference compared to hardware is that software offers high added value that incurs very low cost in making copies of the software. But each software developer needs to develop its own unique business model.Hardware is a different story. The costs for copying hardware are very high, but its business models can be easily duplicated. Products with different specifications and prices can all find their own business opportunities. Since hardware manufacturing requires a lot of manpower, hardware's connection with the manual labor market remains very high though many of the production processes have already been automated.At the end of 2018, Foxconn still had a total of over one million workers worldwide. For governments worldwide, how to create non-technical job openings for their citizens has always been one of their major challenges and is also the reason behind Taiwan manufacturers' strong popularity among governments around the world.In addition to China, India and countries in ASEAN have also been keen on seeking foreign investments into their hardware manufacturing industry to create more jobs. The governments of Taiwan, South Korea and Japan have also been keen on preventing their existing manufacturing industries from moving out and affecting employment.On the other hand, with the rapid advancement of semiconductor technologies, the need to allocate huge sums of capex has created high barriers for many firms in the semiconductor sector. This is clearly seen from Japan, Taiwan and South Korea semiconductor players' heavy spending in the equipment market. The semiconductor industry is capital intensive and carries very high technological barriers, which makes it prohibitive for many countries. We think hard tech may still become hot tech in the future.(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

During the Industrial Age, the US was the world's leader in the automotive industry, but that is no longer the case now. In 2018, 370,000 units of electric cars were sold in the US, but the sales in China were as high as 1.255 million units.In addition to the market, China-based Tencent, despite having investments in Tesla, saw its affiliate Xiaopeng Motors Technology launch an electric car with a price/performance ratio far better than that of the US-based car maker.Sharing a similar fate to that of the smartphone industry, the electric car industry will not be dominated by US-based makers, as China-based ones have been expanding their presence.Xiaopeng's release of an electric car priced a lot lower than Tesla's at the end of 2018 prompted Tesla to significantly cut its price to compete. However, trying to compete against China makers in pricing where they have the most advantages is like walking a tightrope. Even if Tesla managed to win at the end, it would not be unscathed.It is not just about the competitiveness of the two countries' automakers alone. Of the worldwide top-10 car-use battery makers, six of them are based in China. These makers are not only producing batteries locally, they also have production lines in Europe to cater to Mercedes-Benz and BMW. China-based electric car and battery makers also have entered South Korea and have been competing fiercely against local automotive and battery makers.Since 2012, Korea-based automotive maker Hyundai has seen its operating profits slip every year. The company had profits of nearly US$8 billion in 2012, but the amount dropped to a record low at US$2.4 billion in 2018. If the car making industry does not see a new business model, second-tier automakers will all suffer.The electric car and Internet of Vehicle (IoV) markets seem promising, and most of Japan's first-tier component makers are focusing on China as their main target. However, there are risks in the China market. In January 2019, China's car sales slumped 15.8% on year as a result of an economic downturn.Whether China's economy is able to grow steadily will significantly affect sales in the local car market. The stronger China's spending power is, the faster it can become the leader worldwide.(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

The PC market used to cater mainly to white-collar workers, with manufacturers relying mostly on HP and Dell. The traditional PC and handset assembly sector remains a stable supply chain with the US still being the largest market. Currently, Taiwan still accounts for 80% of the worldwide notebook manufacturing, and for servers, the percentage is even higher at 94%. With the business opportunity of datacenter growing rapidly, Taiwan makers' manufacturing bases in Taiwan are still the best places for their Internet service provider partners.If the US-China trade war worsens, more ICT product manufacturing in China is expected to shift back to Taiwan or elesewhere.Apple's smartphones are all manufactured by Taiwan-based companies such as Foxconn, Pegatron and Wistron, while smartphones from Samsung and Huawei also see some of their components supplied by Taiwan makers. Wistron has even cooperated with Apple to establish a new factory in India.With the rise of the mobile communication era, demand was coming from every industry and consumers of all ages, generating more business opportunities and expanding the market beyond white-collar workers. However, the market was starting to see domination by a few brands with Apple taking over two thirds of all profits from the market. Samsung at its peak had 75% of profits coming from the smartphone business. For the other smaller vendors, the struggle was to keep operations from incurring losses.The situation began to change in 2018 as Apple and Samsung were unable to come up with more innovations for their smartphones. China-based brands started to take center stage. At the moment, seven of the worldwide top-10 smartphone brands are based in China and these players have dominated the smartphone markets in emerging countries by flooding them with multiple models.China brands' strategy focuses on expanding market share, which is expected to give Huawei a chance to surpass Samsung to become the largest smartphone brand worldwide in the second half of 2019.Huawei and Xiaomi are both expected to become leading players in the upcoming 5G era. In addition to launching its 5G smartphones at about the same time as its top-tier competitors, such as Samsung, Huawei is also a major force in the 5G base station sector. Huawei is considered a necessary partner for almost any country deploying 5G networks.Since 5G technologies not only present business opportunities, but also fuel data security concerns, the US government believes 5G would provide the best chance for China to break its global dominance, and therefore has been taking rather aggressive actions such as banning supply to ZTE and having Huawei CFO Meng Wanzhou arrested. Apparently the US will not sit idly in the face of China's growing ambition to fully control the 5G market.In December 2018, South Korea claimed to have become the first nation in the world running a commercialized 5G network. The president of Korea-based telecom carrier LG Uplus, which has been the fastest in making 5G base station deployments in the country, previously stated that using Huawei's 5G base stations would not jeopardize national security. But its competitor, Korea Telecom (KT), responded by announcing that it would follow the US government's suggestions and would not adopt any 5G solutions from Huawei.The two carriers' completely different attitudes about Huawei's equipment show that telecom carriers in South Korea, Taiwan and Japan will all also need to take sides at some point when it comes to buying 5G equipment.In addition to the concerns about data security, some companies in the West are also wary of Huawei's strong patent portfolios for 5G technologies. US companies have relied on patents to dominate business opportunities, but the tide may be turning as China grows bigger and bigger in terms intellectual property.(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

The worldwide ICT industry is formed by supply chains that cooperate with each other. Prior to 2000, the ecosystem was structured simply in linear partnerships between upstream and downstream sectors with US-based first-tier vendors dictating the standards and specifications, and outsourcing manufacturing orders to their Taiwan- and Korea-based partners. At present, the ICT supply chain that has worked for 30 years continues to serve as the key foundation of the global ICT industry.Of the worldwide top-10 ICT companies that Digitimes identifies, six of them are from the US, two from China, one from South Korea (Samsung Electronics) and one from Taiwan (TSMC). In the world of connectivity, Metcalfe's Law tells us that the more nodes a network has, the higher its value. China's demographic dividend and the US leadership both show us the applicability of Metcalfe's Law in the ICT world.TSMC, which has a market value of US$177 billion, and Samsung, which has a value of US$223 billion, both have been deeply influenced by Moore's Law that many argue will become irrelevant. The two firms have often faced the question of whether they will also become irrelevant or continue to play leadership roles in the future. However, we can expect Samsung and TSMC to remain important and irreplaceable for the next 10 years. As for the others in the present top-10, with the fast and unpredictable changes in the era of the Internet, none of them can be certain to be staying at the forefront for long.Meanwhile, the worldwide network market can be divided into two areas: one is China and the other is beyond China. China has been keen competitors in various sectors worldwide, investing in the telecommunication industries of its neighbors and in US electric vehicle firms, and many others.However, China's local network, telecommunication and cloud computing services have all been strictly controlled by the government citing national security concerns. As a result, China is a closed market that has managed to create its home-grown networking giants such as Alibaba and Tencent.But China's ICT industry is now facing all types of challenges in its attempt to reach the pinnacle. Not only does it need to catch up with the current step of the semiconductor industry, it also faces an onslaught by the US in the upcoming 5G era. None of the global top-15 semiconductor suppliers is from China, which imported a total of US$312 billion of semiconductors in 2018, and exported a much smaller amount that resulted in a trade deficit of US$227.4 billion in the year. The semiconductor sector remains the weakest link in the superpower's tech industry. And related upstream semiconductor equipment and design tools are also being controlled by US-based firms.China is known as the world's factory, but its industry prowess is not as strong as imagined. Still far from the peak, China is at a critical point in the development of its ICT industry and its national strengths in general.(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

I call the first island chain in East Asia the "Asian Edge," which carries a double reference: cutting-edge technologies in an IT context, and the peripheral in geopolitics. In the ICT market, the US is the first superpower, while China, which has been catching up fast, comes in second. Following the two dominating forces, Japan, South Korea and Taiwan that feature cutting-edge technologies form the third camp of superpowers lurking on the geopolitical edge of the top-two superpowers.Apple's application processors (APs) are completely outsourced to Taiwan Semiconductor Manufacturing Company (TSMC), while its demand for memory and OLED is met by Samsung Electronics. Apart from the iPhone vendor, most of the other US-based top-notch ICT firms including Intel, Microsoft, Qualcomm, Nvidia, AMD, Synopsys, Texas Instruments (TI) and Xilinx heavily depend on Asia's supply chain.The operation of the ICT industry, which used to simply follow traditional business practices, has changed in response to the rising of China. The trade war waged by US president Donald Trump may even become the beginning of a revolution for Asia's ICT industry and permanently change the global supply/demand relationships.For the key trends of the global ICT industry in the next 10 years, we should not just monitor the tech giants in the US and China, such as Apple, Amazon, Microsoft, Google, Alibaba and Tencent. The roles of Taiwan, Japan and South Korea in semiconductor and 5G applications will also be important. Because of the enormous investment amounts and the intricate links between existing and emerging technologies, I believe hardware technologies that have been written off for so long may stage a comeback.Taiwan is situated at the very front of the first island chain. It is a major player in the worldwide ICT supply chain, but is also the weakest link from a geopolitical perspective. The rise of China has sent Taiwan makers relying more on production in China, boosting their competitiveness on the one hand and yet putting Taiwan's ICT industry in an awkward position on the other.If China were to take over Taiwan politically, not only would it give the superpower direct access to the Pacific Ocean, it would also be able to leverage Taiwan's ICT prowess and resources, fixing the chink of its armor – namely the semiconductor sector – turning the country into a true manufacturing power worldwide.Taiwan's over 100 semiconductor firms together contributed US$92 billion in production value in 2018, while South Korea's semiconductor industry generates a value of around US$100 billion a year. Currently, Taiwan's and South Korea's semiconductor industries run a coopetition relationship. They form the very first obstacle that China needs to remove in order to develop its own semiconductor industry.(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

How is the trade war between the US and China affecting Taiwan, Japan and South Korea? Why are semiconductors and 5G becoming the key issues of their brawls? 5G technologies are bringing revolutionary changes to the ICT industry's operation and ecosystem. Apart from the economic benefits, they have strong implications in terms of many sensitive issues, such as data and national security. This is the reason why both the US and China are taking the matter seriously.Semiconductors are the key driving the ecosystem behind the Internet. High-speed calculation and mass storage all need support from semiconductors, which as a result are the foundation of the ICT industry. The US-China trade tensions have recast semiconductor giants South Korea, Taiwan and Japan back to the center of the stage. South Korea currently has the largest memory industry worldwide, while Taiwan's foundry sector is the global production center of top-end chips. Although the trade war is between the two superpowers, the battlefields are actually in Taiwan and South Korea.In order to shed light on all these latest developments, I've written my eighth book of my career in the ICT industry: Asian Edge: On the Frontline of the ICT World. Although the focus of the ICT industry may not necessarily shift entirely from the West to the East, the roles of the ICT industry players in the East are definitely growing much more important.The book also describes how Japan, Taiwan and South Korea, all located on the first island chain at the edge of Asia, have been able to reach where they are right now and how they have gained competitiveness making them stand out from the US and China. This book represents an Asian perspective and an Asian researcher's view on the ICT industry.In 1985 - the year Microsoft released Windows, and the first year of the PC era - I returned to Taiwan to participate in the planning of the local ICT industry and witnessed the PC industry's booming growth while working at Hsinchu Science Park. At the time, I worked with colleagues reporting to ICT industry pioneers such as KT Lee, Stan Shih and Morris Chang, and saw substantial OEM orders come knocking on the doors of Taiwan's ICT industry in the 1990s, creating the heyday that pushed Taiwan to the top of the global ICT manufacturing sector.After year 2000, the worldwide ICT industry's focus has turned from PCs to mobile communication devices, and China's industries had also grown strong after 20 years of economic reform. With its strong domestic demand, demographic dividend, capital market and investment from national capital, China has won out in nearly all core industries - from petrochemical, steel, shipbuilding and automobile to IT applications such as panel, solar, car-use battery - they have made efforts into developing.What are the keys to China's success? In the past 30 years, I have made trips that have taken me to almost 100 cities in China in order to be at the frontline to understand the business models and the influences of Taiwan IT players moving production to China's Pearl River Delta, Yangtze River Delta, Chengdu and Chongqing. My experiences living in the US for 18 months and as an exchange student in South Korea for two years also helped give me a clear understanding of how Taiwan and South Korea have been caught between the US-China row.As a researcher studying the relationships between the industries in the US and Asia, a witness of the global ICT industry's transformation, I felt responsible to provide the information that I have of the frontline to people around the worldwide and to share my views through support from historical facts.During the past 18 months, I have visited India, Japan, South Korea, China, UAE, Iceland, Netherlands, Vietnam, the Philippines, Malaysia, Armenia, Belarus, Estonia, Latvia, Lithuania and Finland - a total of 16 countries. I have seen changes to the world, the critical roles that South Korea, Taiwan and Japan are playing in the global market, and the reaction of the supply chain to the competition between the US and China.(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

Mobile modem chips are likely to become scarce strategic resources in the 5G era, now that Intel has decided to exit the 5G smartphone modem market to focus on 4G and 5G modems for PCs, IoT and smart home devices, according to industry sources.Intel announced the decision soon after Apple and Qualcomm struck a surprise settlement in their ongoing patent infringement and royalty disputes related to Apple's use of Qualcomm modem chips in iPhones.The Intel move and the Apple-Qualcomm settlement have indicated that 5G mobile modem chips can hardly be suitable for investment by non-dedicated makers, unlike smartphone APs, which handset vendors can develop on their own and secure profitable development as long as their annual shipments can reach a scale of over 100 million units, just as what Apple and Huawei have achieved, the sources commented.This is because 5G mobile modem chips, though only responsible for signal transmission, must involve both sub6 GHz and mmWave technologies and be compatibile with 2G/3G/4/G/5G systems, the sources reasoned further.At the moment, there are only five modem chip suppliers in the world, namely Qualcomm, Samsung Electronics, MediaTek, HiSilicon and Unisoc. Samsung and HiSilicon develop the chips for use on their own smartphones. Of the remaining three purely IC design houses, Qualcomm's modems can serve both iOS and Android systems, while MediaTek and Unisoc mainly support the Android camp.In the 5G era, handset vendors are more interested in in-house development of AP chips than modem chips, and the world's existing five mobile modem chip suppliers are poised to embrace bright business prospects for the segment, industry sources noted.

Taiwan startup KKStream, a video streaming service consultant affiliated with Taiwanese music streaming service provider KKBOX Group, will leverage AI, big data and cloud computing solutions as well as 4K and 8K applications to offer multiple B2B video streaming services to help clients better grab business opportunities associated with the 2020 Tokyo Olympics, according to company president Eric Tsai.KKBOX founded KKStream in February 2016 to handle B2B video streaming services launched two year earlier, providing a technology platform to help enterprise clients create video streaming services carrying their own characteristics, with clients including telecom operators, cable TV operators, retail chains, and content providers, Tsai disclosed.Tsai stressed that his company has developed many AI, big data and cloud computing applications that can help understand music and video preferences of users, recommend music and video programs catering to their needs, and remind them to access the programs on streaming.In the upcoming 5G era, Tsai continued, KKStream will incorporate VR and AR technologies to launch more innovative video streaming services.Tsai highlighted his firm's per title encoding service, with AI applied to judge the optimal bit rate in accordance with the complexity of films before being compressed to allow more economical bandwidth for users and provide better film quality.Tsai said that KKStream hopes to help content providers make direct contacts with consumers, and provide a different access for traditional large-size channel distributors to foray into music and video renting businesses.Tsai, who used to serve as technical director at KKBOX, stressed that his company is also keen to combine diverse domains to create more values for its services.KKStream is now an advanced technical partner of Amazon Web Services (AWS), enabling the company to help clients set up their exclusive video streaming services faster by utilizing cloud transmission and storage services offered by AWS, according to Tsai.Besides the markets in Taiwan and Japan, KKStream will move to promote its business to Southeast Asian countries, which are moving at full throttles to develop smart city infrastructures, showing great growth potentials for video streaming services, Tsai noted.KKStream president Eric Tsai