With China handset brand vendors starting to launch flagship products with fingerprint sensors in the second half of 2014, touch controller IC players who have seen thinning profitability have been aggressively developing fingerprint sensor solutions.During a recent visit to Southern China's touch control supply chain, Digitimes Research found that China-based touch solution developer Goodix will be able to receive fingerprint sensor solution orders for mid-range smartphones from China brand vendors in the second half of 2015 thanks to its glass-covered fingerprint sensor technology, and the company will also surpass Sweden-based FPC to become the largest fingerprint sensor solution provider in China.China's major online payment players such as Alipay and China UnionPay are coming close to finalizing fingerprint-certified payment standards. In addition to unlocking smartphones, the fingerprint data input will also serve as a certification method for online payment, prompting China's smartphone brand vendors to adopt fingerprint sensor functionality into their CNY1,000 (US$161) mid-range smartphones.Therefore, creating a fingerprint sensor technology that is reliable and low cost has become a major task for related players in the fingerprint sensor industry in the second half of 2015.Among fingerprint sensor technologies in terms of contact surfaces, four major solutions - from top-end to entry-level - are commonly used by developers: sapphire, glass, ceramic and film coating. In 2014, sapphire and film coating solutions both entered mass production and were adopted in several mobile devices.However, sapphire solutions carry high costs and film coating can easily flake off. The chance of glass and ceramic solutions' penetration into the midrange smartphone segment in second-half 2015 will depend on the R&D and mass production schedules for such technologies.Currently, within China's major touch controller IC designers, Goodix mainly focuses on glass-type solutions; Holitech Technology, which has a tight partnership with BYD, is only capable of providing film coating-based solutions and is estimated to focus on the white-box smartphone segment; and Silead is mainly developing ceramic-based solutions.Thanks to its solutions' high sensitivity and protection layer of over 300µm, Goodix is currently the only player worldwide with the ability to mass produce glass-based fingerprint sensor solutions.Glass has a good optical behavior and strong wear- and impact-resistance, and it is much cheaper than sapphire. Glass solutions have received orders from China-based major smartphone brand vendors such as Xiaomi and Huawei and will be adopted into their mid-range smartphones in the second half of 2015.In 2014, Huawei used FPC's fingerprint sensors, but the competition from Goodix in the mid-range smartphone market in 2015 is expected to greatly threaten FPC's leadership in China's fingerprint sensor industry.

The output value of China's IC foundry industry is forecast to register a 10.5% increase in 2015 reaching US$3.9 billion, according to Digitimes Research.With China's domestic market continuing its growth momentum, China's IC design industry is set to report more than 20% growth in output value in 2015, said Digitimes Research. Robust demand coming from local IC design companies will play a key role in driving the growth of China's IC foundry industry output value in 2015.On the supply side, new capacities at Semiconductor Manufacturing International (SMIC) and Huahong Grace Semiconductor Manufacturing will come online leading to a 5.8% rise in the total production capacity of China's IC foundries in 2015, Digitimes Research indicated. Meanwhile, production utilization rates at China's IC foundries will climb to 91.6% on average in 2015 from 88.2% in 2014, Digitimes Research said.Major China-based foundries' technology transition to 45/40nm processes will play another key driver of the overall industry output value growth in 2015, Digitimes Research noted.Looking forward, capacity expansions at local foundry players will be an important growth driver during China's 13th Five-Year Plan period. SMIC, Huahong Grace and Wuhan Xinxin Semiconductor Manufacturing (XMC) will carry out their capacity expansion plans, while Shanghai Huali Microelectronics (HLMC) and CSMC Technologies are looking to build new fabs, Digitimes Research observed. In 2018-2019, 12-inch fab capacities in China will likely exceed 8-inch fab capacities, Digitimes Research estimated.

Observing the Intel mobile platform's development in the non-Android tablet market, Digitimes Research expects Windows tablets to replace Android tablets and become Intel's new focus. Intel's Education Tablet, which achieved success in the education sector in 2014, is also expected to benefit the CPU giant's mobile processor shipments in 2015.The reasons that Windows tablets will become the new growth driver for Intel's mobile processors in 2015, replacing Android tablets, are because Android tablets are seeing weakening demand, the 2-in-1 form factor has become a new trend for notebook products, Windows 10's interface for tablets will become more complete, and Intel's subsidies for Android mobile devices are gradually shifting to smartphones, Digitimes Research analyzed.Brand vendors and white-box players are both treating 10-inch 2-in-1 devices as their primary shipment focus for 2015, while the Surface Pro 3's strong sales are expected to help Microsoft and brand vendors grow in confidence to release more high-end 2-in-1 products with above 10.8-inch displays.Sub-9-inch tablet products can only rely on white-box players in China, a market that Google has almost no influence in, for shipments, using dual-operating system (OS) designs to attract demand.

While visiting Southern China's white-box tablet supply chain, Digitimes Research discovered that shipments of white-box tablets with phone functionality saw their first on-year drop in the second quarter. This is because their major markets have experienced weak economy and competition is also growing from China-based smartphone brand vendors who have been expanding in overseas markets.Since the fourth quarter of 2014, the major markets for inexpensive phone-enabled tablets, including Russia and Eastern Europe and Latin America, have been suffering from sharp currency depreciation, which relatively constrained these markets' purchasing and investments and the issues continued to impact the markets in the second quarter of 2015.However, some of the markets such as Brazil and Southeast Asia saw their demand for white-box tablets with phone functionality drop because of increasing demand for 5.5- and 6-inch smartphones.While demand for phone-enabled tablets is growing weaker in emerging markets, China-based TCL and Huawei, which had strong performances in overseas smartphone markets, have started expanding their phone-enabled tablet product lines and have been cannabalizing white-box tablet players with advantages over channel, quality and after-sales services.Based on Digitimes Research's findings, TCL, which has advantage in the Latin America channel, is estimated to have shipped three million phone-enabled tablets in the first half, while Huawei, which is stronger in the Europe channel, is estimated to have shipped 1.5 million units.As for the shipments from white-box players, the volume in the second quarter was lower than those of the first quarter and compared to a year ago, it also dropped over 15% because of the factors described above.

In an effort to secure flexible display orders from China-based wearables vendors, China's panel makers are increasing investments in AMOLED and PMOLED technologies, with aim of increasing production and securing more market share in early 2017, according to Digitimes Research.EverDisplay Optronics (EDO) is continuing to expand AMOLED production while Visionox has invested in PMOLED capacity expansion at Govisionox Optoelectronics' facilities in Kunshan, China.Tianma Optoelectronics is also investing in 6G AMOLED facilities, while BOE is pushing its 5.5G development and China Star Optoelectronics Technology (CSOT) 6G development, all of which are expected to open in 2017.The developments are likely to impact Taiwan makers' cooperation with China vendors for providing PMOLED displays, a niche the makers currently dominate, in addition to other AMOLED small- to medium-size solutions starting 2017, said Digitimes Research.

China's smartphone industry in the second quarter did not see growth as strong as Digitimes Research had anticipated previously and it grew only slightly more than 15% sequentially and by a single-digit percentage on year.The weaker-than-expected growth was because the market is already approaching saturation. Many first-, second-tier and regional brand vendors' sales have been greatly impacted by China telecom carriers' large subsidy cuts and demand from emerging markets such as India and Russia has yet to see a meaningful rebound. As a result, China's independent design houses (IDHs) and ODMs that mainly take orders from overseas markets saw weak shipment growth in the second quarter.Digitimes Research in April forecast China's overall smartphone shipments would achieve an over 25% sequential growth in the second quarter, but from its visits to the related suppliers in late-June, Digitimes Research found that only a few China-based brand vendors such as Huawei, Oppo, BBK (Vivo), TCL and Meizu achieved significant shipment growth in the quarter, while the rest only saw a flat performance or decline. Lenovo and CoolPad, both of which rely heavily on China's telecom channel for sales, had on-year shipment declines of almost 20% and over 30%, respectively.As for the third quarter, Digitimes Research expects vendors with strong connections with physical retail channels, such as Oppo and BBK, to continue achieving stable growth, while vendors that have a high portion of shipments to overseas markets such as TCL, Huawei, ZTE as well as some IDHs and ODMs located in Southern and Eastern China, will benefit from the overseas markets entering the traditional peak season.

Japan's home entertainment segment saw several developments in the second quarter of 2015. Sharp introduced a mix of new Ultra HD (4K) TVs, including Aquos 4K Next that can upscale to 8K resolution, according to Digitimes Research.4K TV sales in Japan increased about 20% on year in May 2015. The penetration for 4K used in 50-inch and above size units increased to 47.2%, and Sony in particular expects 4K TV sales to most likely make up about half of its TV business in 2015.4K TVs in the Japan market have reached a 30% share of overall LCD TV sales during certain months, and the 50-inch and above size proportion has climbed from 40% in previous months. The nation is at the forefront of pushing 4K transmissions and is expected to be one of the first to make 8K readily available. 4K TVs are expected to hold a 13% share of global LCD TV sales in 2015.Panel makers aim to tackle the 8K market starting 2018 when Japan will offer various channel transmissions in 8K, and the World Cup is held in Russia. Demand will continue to grow around 2020 when major sporting events will be held in Japan, according to Digitimes Research.Sharp will play a major role in supplying 8K panels in the future and will use 10G facilities to produce the technology, while BOE aims to do so at its 10.5G fabs, with an emphasis on 98- and 82-inch units. LG Display meanwhile is currently looking to production of 55- and 98-inch units. Sharp's Aquos 4K Next featuring Aquos Quattron technology is part of Sharp's strategy to gain a foothold in both the 4K and 8K markets, Digitimes Research believes.Digitimes Research believes in addition to TV applications, 8K displays will also be used for public and industrial displays, art galleries and museums, public speaking areas, traffic control operations, specialized monitors and medical applications.

Despite Taiwan makers lagging behind Korea and Japan in TFT LCD and AMOLED panel technologies, the makers have advantages for producing PMOLED and EPD products used in wearable devices.According to Digitimes Research, Taiwan makers have a number of old fabs that have been converted to producing the two technologies, and have been strengthening their R&D efforts for use in smartwatches and smart wristbands.China makers on the other hand have focused on TFT LCD expansion while Korea makers are pushing AMOLED. Taiwan makers such as AU Optronics (AUO) are pushing LTPS TFT LCD and AMOLED efforts but are relatively behind, and need other technologies to compete in the wearables segment.Chunghwa Picture Tubes (CPT) and HannStar Display meanwhile are promoting Open Cell products to white-box wearable vendors in China in a bid to maintain their presence in the segment, Digitimes Research found.In terms of EPD solutions, these are mainly used in niche products and Hydis will continue to act as the main producer of the technology while also pushing PMOLED solutions.

An international LED forum held in Taiwan in mid-June showed that makers have extended development and production from general lighting to IR (infrared), UV (ultraviolet) chips, and high-end automotive lighting, according to Digitimes Research.Taiwan-based Epistar has become the globally largest IR LED maker, Digitimes Research indicated. Epistar-developed dual-junction high-power IR LED chips can increase recognizing distance at night and are mainly used in nighttime security surveillance. Epistar has developed low-power IR LED chips with wavelength of 1,550nm for use in measuring blood glucose. Low-power IR LED chips can be used in smartphones to recognize iris for personal identification.For development of UV LED, Taiwan-based makers currently focus on UV-A (320-410nm in wavelength) LED and lag behind international vendors in more advanced UV-C (200-275nm) LED.

Despite the fact that the design is complete and the chip is ready for mass production, Intel's 28nm SoFIA 4G application processor (AP) is still unlikely to be launched until the beginning of 2016 due to the adjustments over the software part that is still not yet mature. For 2015, Intel will still need to rely on its SoFIA 3G/3G-R APs to prop up is mobile device AP business and may miss the business opportunities from the 4G market, which is expected to grow rapidly in the second half of this year.Intel may face an even more problematic issue in 2016 as its 14nm SoFIA product line is already planned for late-2016 and could overlap with the 28nm one from early 2016 and affect each other's demand.Intel currently only has solutions that pair an independent XMM baseband with an Atom AP for its 4G product lineup, but the solutions are unattractive to players in China due to its high prices. Intel has been working on integrating two chips into an SoC for its SoFIA product line since the end of 2014 to improve the BOM, Digitimes Research noted.With the SoFIA 4G - which was originally scheduled for 2015 - being delayed until early 2016 and Intel only being able to provide baseband+AP solutions for 4G demand in 2015, the CPU giant may find it difficult to persuade clients to use its solutions for their 4G devices due to the high prices and its subsidies for using its solutions are unlikely to provide much persuasion.Intel's second-generation SoFIA 4G AP, based on a 14nm process, will become available in late-2016 and could put the first-generation SoFIA 4G AP based on a Taiwan Semiconductor Manufacturing Company's (TSMC) 28nm process, in an awkward position and cause the 28nm AP to have an over-short lifecycle. Although Intel may offer cheap prices for the 28nm SoFIA 4G AP and push the 14nm one to the high-end market sector to create a boundary, the CPU giant will still see its profit impacted and its marketing for the processors will also be limited.