China smartphone vendors' shipments started weakening in mid-May with the upstream supply chain also seeing orders turning week despite the fact that several China-based smartphone players are still able to deliver over 10 million units each quarter, according to Digitimes Research.Among the players, those with tighter relationships with China-based telecom carriers are seeing their 3G smartphone inventories rising rapidly as carriers have been reducing and canceling their subsidies for 3G models and turning to subsidize 4G models.China vendors' new sub-brand smartphones released between the end of the first quarter and the beginning of the second, for the online channel, boosted the China smartphone supply chain's sales to a new high in April, which also helped smartphone vendors' sales do the same in early May. However, these devices were only able to compete over price and lacked differentiation from each other, and support only 3G, significantly reducing their lifecycle.The high cost of 4G service, unsatisfactory communication quality during the initial period, and the limited availability of 4G entry-level smartphones have caused consumers in China to be unwilling to upgrade their services to 4G. In addition, as carriers just stopped providing subsidies for entry-level/mid-range 3G smartphones in May and started turning to subsidize 4G models in June, some consumers have delayed their plans to purchase a new smartphone for the second quarter.Digitimes Research believes that vendors will gradually digest their 3G inventories in the third quarter, and 4G smartphones priced below CNY1,000 (US$161) will start to appear in July, pumping up China's domestic smartphone shipments. However, China's smartphone shipments are unlikely to break 400 million units as originally expected due to 4G smartphones' failure to become popular in China in the first half.

Observing Japan's mobile consumer electronics market in the second quarter of 2014, Digitimes Research found several key factors such as mirrorless interchangeable-lens cameras (MILC) are seeing better shipments than DSLR cameras; Japan-based DSC vendors' total shipments for fiscal 2014 (April 2014-March 2015) are estimated to fall 22.7% on year; Windows-based tablets accounted for almost 20% of Japan's total tablet sales; and NTT DoCoMo is pushing a wearable sport bracelet.As the global DSC market continues to shrink, demand for DSLR cameras has also been affected; however, MILC models have become a new star of the DSC market with worldwide shipments reaching 266,000 units in April 2014, up 3.9% on year, performing a lot better than DSLR camera's 29.6% on-year drop.MILC shipments in Japan suffered an on-year decline of 29.6% in April because of the country's consumption tax raise, but the drop was offset by the combined growth of 16.2% in other regions.Japan's DSC vendors have estimated their combined shipments for fiscal 2014 to drop. Canon and Nikon are expected to see slight drops, but Sony and Fujifilm will see serious declines. The trend is also expected to boost Canon and Nikon's combined share of global DSC shipments to 66.6% in fiscal 2014, up from 60.3% in fiscal 2013.After successfully achieving a sales share above 10% in December 2013, Windows-based tablets have seen stable sales in Japan's retail channel, and accounted for almost 20% of total tablet sales in the first quarter of 2014.Windows-based tablets are raising demand for 8-inch and above tablets in Japan and taking market share from Android and iOS models, especially iOS-based ones. The trend shows that Apple's influence in Japan's tablet industry is not as strong as in the smartphone industry.Japan-based telecom carrier NTT DoCoMo announced the Move Band 2 on June 4, while its competitors Softbank and KDDI also launched similar products recently. These wearable devices are capable of connecting to smartphones through apps and support several cloud services.Since wearable device prices are not very high, paid cloud services are likely to become the focus of the telecom carriers, Digitimes Research analyzed.

China-based Spreadtrum's application processor (AP) shipments have been dropping since China Mobile began subsidizing dual-core smartphones, as opposed to single-core models, in June 2013, and the company so far is showing no signs of recovery. Spreadtrum's parent company Tsinghua Unigroup's acquisition of China-based communication chipmaker RDA Microelectronics did not provide much benefit to Spreadtrum's operation and instead caused issues over their merging process and delayed Spreadtrum's product planning due to internal struggles.Spreadtrum's smartphone AP shipments have been mostly TD-SCDMA chips in the first half of 2014, with processors having more than dual cores accounting for almost 50% of the volume. The company's shipment share of WCDMA chips have also risen slightly.Spreadtrum's SC7715 and SC7730 APs both have competitive pricing, but are unlikely to start shipping until the second half of the year due to software issues. Although Spreadtrum has said it has plans to release LTE products in 2014, the company may only be able to maintain its revenues through its existing products since Digitimes Research believes the chipmaker is unlikely to release any actual LTE products until 2015.On the other hand, the lower technological threshold required in the feature phone business, combined with the company's competitive pricing, has driven Spreadtrum's chip shipments to reach over 20 million units per month, about the same level as Taiwan's MediaTek. Because of strong feature phone demand, related chips may suffer from shortages at the end of second quarter.Since Spreadtrum's product lineups for the mid-range and high-end segments are clearly less competitive compared to its competitors, Digitimes Research believes that if Tsinghua Unigroup is unable to resolve issues over internal management and the acquisition of RDA Microelectronics, the company may quickly lose its competitiveness in the smartphone AP market in the future, especially if Spreadtrum is unable to significantly improve its technology.

Amazon announced its first own-brand smartphone, the Fire on June 18, 2014. Digitimes Research has commented that Amazon has not set the smartphone's price low to boost competition, and the device's hardware specifications are also not considered very high-end. Some special features of the smartphone are Dynamic Perspective and Firefly. Through the combination of Firefly and Amazon's Prime member services, Digitimes Research believes Amazon is trying to change user habits and drive more online shopping.The strategy is expected to help expand Amazon's e-commerce business and eventually reach a goal that users are able to purchase anything through Amazon's e-commerce platform, but such a move could impact channel retailers, which still rely on physical stores.The Fire adopts Qualcomm's quad-core Snapdragon 800 processors, a 4.7-inch HD display, 2GB of RAM, and a 13-megapixel rear and 2-megapixel front camera. The smartphone also has four ultra-low power specialized cameras and four infrared LEDs at the front to detect motion and provide information for the Dynamic Perspective function.Compared to Amazon's previously released Kindle products, which mainly push their entry-level pricing, the Fire smartphone's price after bundling with telecom services, is still at a very similar range to Apple, Samsung and HTC's high-end smartphones, which implies that the Fire smartphone's hardware price-performance ratio is not very strong.The Dynamic Perspective feature that the Fire smartphone is pushing is expected to bring a visual effect and usage experience that is completely different from before, but for most consumers, the feature is not compelling enough to replace their existing smartphone.Since Amazon's digital content services are also available on other platforms and other vendors' devices, Digitimes Research said the Fire smartphone will have limited attraction to most existing smartphone users, and will have trouble achieving outstanding sales in the US, a market that has already been highly penetrated by smartphones.Digitimes Research believes Amazon's release of the Fire smartphone is not meant to compete against other vendors' flagship products in the market, and its initial targets are customer groups that have a high reliance on Amazon's website.To change consumers' offline shopping habits, the smartphone's free US$99-value one-year Prime membership, free 2-day shipping and Firefly function, which allows users to identify products via the camera, are expected to build up the habit of quickly connecting to Amazon's e-commerce platform with their Fire smartphone to shop online, promoting an offline-to-online business model, and snatching business opportunities away from physical retailers.

Qualcomm, a leading player in terms of LTE technologies, started supplying LTE solutions to markets worldwide including China in 2013. But because of regulations and issues over licensing issues, China's LTE service started later than most of the developed countries. At the same time, restrictions from the China-dedveloped TD-SCDMA standard and policies over multi-mode support also limited the number of chipmakers who were able to enter China's LTE chip supply chain initially. Qualcomm is the biggest supplier of China's LTE chip market, of which it is expected to take over 80% in the first half of 2014. Qualcomm is currently pushing its Snapdragon 400 series as the mainstream platform for the LTE market and because of the series' friendly pricing and strong performance/function balance, the platform has achieved high popularity in the market. Qualcomm is set to release its entry-level 64-bit Snapdragon 410 series in the third quarter of 2014, looking to accelerate shipment growths. As for Marvell, the company released its LTE solutions at the same time as Qualcomm, but limited by its business scale and supporting personnel, Marvell has been unable to offer a technology support as competitive as Qualcomm's, while component costs for its solutions are also higher. It has a lot less clients than Qualcomm. Despite the fact that Marvell and Qualcomm both released their LTE solutions at about the same time, Marvell's LTE chip shipments have been a lot weaker than those of Qualcomm. Meanwhile, MediaTek continues to achieve growth in 3G-related chip markets. The chipmaker's quad-core and eight-core products are achieving rapid growth in the second quarter and have become the main revenue contributors. Although MediaTek has already developed independent LTE baseband chips and released related solutions to the market, demand for the solutions is limited and significant shipments are unlikely until the third quarter. However, by then, the entry-level market, where MediaTek has a strong presence, may have already been occupied by Qualcomm's 32-bit and 64-bit solutions and MediaTek is likely to be forced to offer same-spec-but-cheaper solutions to compete for orders, Digitimes Research believes. As for the high-end segment, MediaTek currently still lacks plans for 64-bit products. MediaTek's high-end 32-bit MT6595 is able to outrace Qualcomm's Snapdragon 801/805 in terms of performance, but for the 64-bit product line, MediaTek currently still has nothing to compete against Qualcomm's upcoming 64-bit 808/810 series.

Global SSD sales are expected to grow 60% on year in 2014 after nearly doubling a year earlier, buoyed by continually declining NAND flash prices, slimming-down of notebooks, and the rise of convertible tablets, according to Digitimes Research.SSD products with a storage capacity of 60GB were the mainstream in 2012, but shipments of 120GB and 240GB models began gaining momentum in 2013, buoyed by falling prices. By 2014, 240GB models have become the mainstream, while the roll-out of 480GB devices is likely to drive a new round of shipment growth, said Digitimes Research.Prices of TB-grade SSDs in 2014 are comparable to 480/512GB SSDs available in 2013. But the quotes for TB-grade SSDs are expected to drop further using TLC NAND flash.Marvell Technology and JMicron both have launched new SSD controller chips for 2014 featuring improved performance and reliability, while SandForce is ready to release its new SSD controller chips.Intel has recently launched its new series of chipsets that feature native support for M.2 SSDs, which is likely to encourage other memory storage firms to roll out related SSDs in the second half of 2014. M.2 SSDs support both PCIe and SATA interfaces and have a strong possibility of replacing 2.5-inch SATA SSDs, Digitimes Research commented.

Semiconductor capital spending by Samsung Electronics has topped the world's semiconductor companies for the fourth straight year since 2010. In 2014, Samsung's semiconductor capex is expected to stay flat at US$11.5 billion as compared to the previous year. However, since Samsung plans to begin install production equipment at its Line-17 fab in Hwaseong, Gyeonggi Province, its semiconductor capex in the second half of 2014 will be higher than that in the first half, according to Digitimes Research.Having already set up seven semiconductor production lines in its plants in Hwaseong and Xian, China, the Hwaseong plant will aim to migrate to more advanced process nodes in 2014, while the Xian plant will focus on ramping up its vertical-NAND (V-NAND) flash capacity. The Line-17 fab, which is slated for completion in the second half of 2014, will focus on offering wafer foundry services using 20nm and below processes, Digitimes Research said.Meanwhile, SK Hynix's capex for 2014 is expected to reach US$3.3-3.8 billion, up from US$3.3 billion a year earlier. SK Hynix' main capex for 2014 will be used to build its M14 fab. Construction of the M14 line is expected to begin in mid-2014.Capital spending of other semiconductor companies, including Micron Technology, Toshiba and SanDisk will also top US$1.0 billion each in 2014. Micron is expected to accelerate the migration of its DRAM production to 20nm process, while also ramping up its NAND flash capacity.Toshiba will team up with SanDisk to expand the production capacity of V-NAND flash at its plant in Yokkaichi.For non-memory chips, the 2014 capex of Intel, Taiwan Semiconductor Manufacturing Company (TSMC), Globalfoundries and United Microelectronics Corporation (UMC) will also exceed US$1 billion each. While Intel will deepen its development of 14nm and below processes, TSMC will focus on 16nm FinFET process. Globalfoundries and UMC will raise the ratios of their 28nm production,while beginning to develop 20nm and below technologies.Combined 2014 capital spending of these semiconductor firms with a capex budget of over US$1 billion in the year is expected to amount to US$49.3 billion, Digitimes Research estimates.The top-three DRAM chipmakers will move to upgrade their processes to 25-21nm, while the NAND flash industry will stress on ramping V-NAND flash production as well as to migrate to 19-16nm processes.

Photoimageable ink is not easy to process; issues over through hole filling result in extra processing time and low yield rates. The biggest problem that has been troubling flexible printed circuit board (FPCB) makers for many years concerns through hole filling. The technological issue has hindered Taiwan FPCB makers' advancement to the high-end precision FPCB market segment.If Taiwan-based FPCB makers want to enter this market segment - which is dominated by Japan-based FPCB makers and covers applications ranging from hard disk drives (HDDs), printers, precision medical instruments and aerospace control devices - they must overcome the technological challenge of through hole filling.There are several keys to achieving success in the process. First, FPCB ink must be high-quality and easy to coat over the FPCB, which will enhance its softness and flexibility. The mask also needs to seep into the through holes to form a protection layer there. Second, FPCB makers must have the expertise to employ either the screen printing or roller coating coverlay process; otherwise there will be a high chance of seeing products of poor quality. Third, production efficiency must be high; without an efficient production, the output scale and production schedule will both be stranded.Advanced material R&D companies in the US and Japan, which are pioneers in the FPCB industry and have a large portion of the global FPCB market, now use lamination to solve problems faced with the through-hole filling process. Using this type of solution can shorten the time for manufacturing FPCBs, reduce material cost by one-third and significantly increase yield rates and production efficiency.Germany-based TMT GMBH specializes in making high-precision FPCBs used in high-end medical devices and equipment. As traditional photoimageable ink's manufacturing processes may cause solvent pollution and face low production yield rates, TMT, which had been eager to find an eco-friendly replacement, has already started using Taiwan-based TeamChem Material Company's photoimageable coverlay (PIC) to replace photoimageable ink.TeamChem develops PIC to replace traditional photoimageable inkFPC coverlays are meant to overlay and protect the fine circuits, giving them flexibility and sheltering them from damage by temperatures, humidity, pollutants and erosive substances. Coverlay development has so far resulted in three types: the dry-film coverlay, screen-printing coverlay and photoimageable coverlay (PIC).Dry-film and screen-printing coverlays generally involve low yield rates, high costs, imprecision and poor flexibility, and more importantly, these solutions do not thoroughly address the quality issue of through hole filling. PICs are technologically more advanced than the other types and can more precisely locate the position for soldering on FPCBs, making it a superior solution for precise soldering for the creation of fine-pitch circuits and an even coating thickness. PIC is used to fill through holes by lamination instead of a coating with ductile solder mask ink. Taiwan-based TeamChem Materials Company started investing in PIC production and R&D in 2012. Now the company has started mass production of PIC and sold them to Europe.The importance of PIC for the FPCB industryPICs are important because they can change the FPCB production model as well as the FPCB industry ecosystem by giving Taiwan-based FPCB makers the opportunity to compete against Japan- and US-based makers in the high-end precision FPCB market. TeamChem Materials Company, headquartered in Taoyuan, northern Taiwan, in early 2012 decided to step into development and production of PICs with a goal of resolving issues associated with Japan- and US-produced PICs, such as implementation difficulties, high equipment costs, time-consuming manufacturing processes, and high unit prices. TeamChem Materials chairman Todd Yeh points out that the company wants to provide a type of PIC that is based on a low-temperature manufacturing process utilizing FPCD makers' existing equipment, with a low level below NT$500 (US17.1) per square meter.TeamChem Materials Company is now able to mass produce and supply its PICs. R&D personnel at some FPCB makers in Shenzhen and Xiamen, China are already testing TeamChem's coverlays on their FPCBS for communication antennae and light bars used in tablets and smartphones. Commenting on PICs' future development, some R&D engineers at FPCB makers have pointed out that traditional FPCB production requires 11 steps - micro-etching the circuit, pre-tacking, lamination, baking, hole punching, sandblasting, applying photoimageable solder masks, pre-baking, exposure, developing and baking again. With TeamChem Materials' new PICs, the process can be reduced to only five steps - micro-etching the circuit, lamination, exposure, developing and baking – and can be quickly laminated through vacuum laminators to save time and personnel costs and greatly increase their competitiveness in obtaining OEM/ODM orders.TeamChem PIC R&D focuses on ease of useTeamChem Materials is the first Taiwan-based maker to have successfully developed ductile solder masks specifically for use in FPCBs and has been known for supplying the most flexible mask to FPCB makers. It has been working with various handset FPCB makers to develop specialty ink, and has also identified key problems FPCB makers face using PICs. PICs currently used by FPCB makers are usually expensive, and there are problems such as the coverlay's excessively high lamination temperatures, which could create excessive stress and deform the FPCB, or create bubbles during lamination when the material is not ductile enough. These problems form an obstacle to improving yield rates and reducing production costs.There are other problems, such as: poor image development, which could fail to leave a clear land pattern on the FPC; and material absorption during the back-end electroless nickel immersion gold (ENIG) and gold plating processes due to weak chemical resistance. These problems have prevented PIC use from becoming popular among Taiwan-based FPCB makers who are inexperienced in handling such processes. TeamChem Materials chairman Todd Yeh points out that the company has many years of experience working with major FPCB makers and has for many times developed special inks exclusively for certain FPCB clients. TeamChem believes that its initiative to start PIC R&D and production will create a win-win model for itself and FPCB makers. FPCB makers can provide specification requirements and product samples, and the FPCB solder mask expert TeamChem Materials will be happy to work with them.TeamChem PIC can replace PI coverlayTeamChem PIC comply with enviromental regulation

Panel makers are eyeing wearable device business opportunities, as the market for other panel applications continues to mature and demand remains limited, according to Digitimes Research.Display applications have become mature in the market but wearable device solutions such as smart watches are just emerging in addition to new demand for large-size products in niche markets.Glasses-free 3D display technology is continuing to slightly emerge as as Ultra HD solutions for TVs in addition to notebooks, but markets are currently limited, added Digitimes Research.

The ratio of 3G/4G subscribers to total mobile phone users in Southeast Asia remains relatively low despite the fact that most countries in the region have already set up their 3G networks, while some cities in Singapore and Malaysia have begun offering 4G services, according to Digitimes Research.In Singapore, Malaysia and Thailand, where the population totals 140 million, the penetration rate of 3G/4G handsets tops over 50%. But the penetration rate dips to below 20% in Indonesia, the Philippines and Vietnam where the combined population of the three countries totals 400 million.While 2G/3G models still dominate the entire Southeast Asia market, the growing number of 3G subscribers indicates that there will be a vast replacement demand for transitioning from feature phones to smartphones, said Digitimes Research.Singapore began to implement 4G services in 2012 and now enjoys a high penetration rate of 3G/4G phones in the region, with smartphones priced at over US$500 accounting for the majority of models available in the market. Although Thailand just began to offer commercial 3G services in May 2013, the 3G penetration rate in the country is currently the second-highest in the region. Shipments of smartphones in Thailand are expected to grow 30% in 2014 despite the impact of the recent political upheaval.Malaysia developed its 3G networks quite early, with some cities beginning to offer 4G services in 2013. Entry-level and mid-range smartphones priced at US$100-500 are the main models available currently, said Digitimes Research.