China-based solar firms have been beating peers around the world with its low product costs. However, competition among the China-based makers in the domestic market is a different game. Comparing with Europe- and US-based firms, China-based solar firms have strong competitive advantages such as low costs and support from the government. But once the firms have to compete with one another in the domestic market, the game has becoming "a hunger game."China's domestic solar market is a playing field that has been leveled for China-based solar giants. The less competitive firms in China have been suspending productions due to low demand in 2011. Hence the battle is solely between large-size, vertically integrated solar firms.The debate over vertical integration has been ongoing in the solar industry. China-based firms have been aggressively integrating from polysilicon to solar modules in hope to avoid being hijacked by firms in other countries. Some even have gone as far as developing and financing projects in the international market. With prospects in Europe starting to look bleak, China-based firms have been shifting their focus back to the domestic market.Some research institutes predict that China is soon to be the second largest solar market in the world, beating Italy.Now may be a good time to see the true competitive advantages of China-based solar giants as they fight over the domestic market and compete with each other. Nevertheless, China's solar industry may need to find ways to lower its dependence on imported polysilicon from international firms because as long as international firms control the supply of solar materials, solar firms in China may find their hands tied by foreign firms.Ties with the government are also crucial for a business to succeed in China, and may become the key factor for the winner.

Elpida Memory's bankruptcy filing reflects the fact that companies must diversify to cope with trends in the evolution of customer behavior and usage. The DRAM memory industry currently is encountering a shrinking market for traditional PCs, which have been are main DRAM consumer. The rising adoption of mobile computing devices such as tablets does provide an opportunity for DRAM makers, but such devices consume a lot fewer chips than desktops encouraging some chip suppliers to diversify their businesses.Even for memory firms that offer both DRAM and NAND flash and have shifted their expansion focus to the latter product line, a substantial fall in DRAM demand and prices has prompted them to consider new directions to maintain their scale. SK Hynix (formerly Hynix Semiconductor), for instance, has revealed plans to diversify into the foundry business.In fact, entering the foundry business is not new for DRAM makers, especially for second-tier players. History shows that during bad times, companies such as Powerchip Technology (formerly Powerchip Semiconductor, PSC) and ProMOS Technologies intended to increase their wafer starts for foundry production. But in the current circumstances, not only second-tier but also top-tier memory firms are seeing expanding their moves into the foundry business as a must.SK Hynix, at the end of March, announced its goal to become a comprehensive semiconductor company, through providing foundry services for non-memory chips. The firm expects its mobile solutions business to account for 70% of revenues by 2016, from the current 40%.Samsung Electronics has already taken a serious approach to expanding its logic foundry business. Having secured orders from Apple, Samsung is aggressively ramping production for application processors and is now considered a major rival to TSMC.According to Gartner, TSMC still led the 2011 IC foundry market with a 48.8% share, compared to 47.1% in 2010. Samsung's foundry business, when including Apple's orders, generated about US$1.47 billion in 2011 and ranked as high as No. 4 in the ranking, Gartner said.Powerchip's decision to shift to foundry has so far been successful. According to Gartner's data, its foundry revenues jumped almost 200% in 2011 to help the firm move up nine spots to No. 10 among IC foundries. Powerchip's sufficient 12-inch fab capacity has attracted orders for LCD driver ICs, CMOS sensors and power management chips.Falling PC demand encouraging DRAM makers to diversifyPhoto: Digitimes file photo

Taipei, Taiwan - Growing concerns about energy and emissions are driving a revolution in the lighting sector, according to a new report from Digitimes Research. Advances in technology and falling prices will see the global penetration rate of LED lighting rise from a mere 1.5% as recently as 2009 to 11.6% in 2012, reaching 25.8% by 2014.This change is nowhere more apparent than in Japan, where power shortages following the earthquake and tsunami of March 2011 have spurred both the public and private sector to seek ways of reducing energy consumption. To this end, Japan has set a target of achieving a 50% LED lighting penetration rate by 2015; this may sound ambitious, but Digitimes' research shows that the country is likely to easily meet the 2015 goal. Other nations including South Korea and China have also set significant LED lighting targets for 2015.Japan's LED lighting sector is also booming, with both household names like Panasonic and Toshiba and smaller players such as Koizumi seeing sharp growth in LED lighting sales. South Korean giants Samsung and LG are stepping up efforts to seize market share in Europe and North America and restructuring their LED businesses, while Siemens' subsidiary Osram seems likely to become the subject of Germany's largest IPO since Deutsche Post. US giant Cree and Philips, by contrast, are making a major push into China, both in terms of manufacturing and sales.For detailed analysis of the major trends and players in the global LED lighting market, see Digitimes Research's new Special Report, "Trends in the high-brightness LED lighting market."About DIGITIMES ResearchDIGITIMES Research is the research arm of DIGITIMES Inc., Taiwan's leading high-tech media outlet. Operating as an independent business unit, DIGITIMES Research focuses on monitoring key high-tech industries, while also guiding clients toward suitable new business as well. Market intelligence and analysis is provided to more than 1,000 corporate customers worldwide. Research and consulting services cover a full range of industries, including information and communications technology (ICT), flat panel display (FPD), renewable energy and semiconductor design and manufacturing.Contacts:Michael McManus (Michael.mcmanus@digitimes.com)Shannen Yang (Shannen.yang@digitmes.com)Source: Digitimes Reseach, February 2012

A recent invesitgation by Digitimes Reseach of the recent LED product prices and trends in the Japan market has revealed that the latest buzz there is the LED ceiling light.LED ceiling lights are more diverse than the traditional incandescent lighting fixtures and relatively thinner. LED ceiling lights use similar tube lights as LED-backlit TVs, hence it would help LED firms to reduce inventories.The price of LED light bulbs that are to replace the traditional 40W bulbs (the most common in Japan) is around JPY1,000-2,000 (US$12.76-25.51). In the retail stores, light bulbs are packed together from two a set to five a set with average price of JPY1,000 per bulb.LED light bulbs are currently on sale in Japan and lighting firms are aiming to promote LED light bulbs that are to replace the 60W traditional light bulbs in 2012. This LED light bulbs are omni-directional with brightness of at least 800lm.In electronics retail stores, the price of 60-inch LED TV falls to around JPY190,000-210,000, making them more affordable to most families.Japan lighting firms to focus on retrofit 60W light bulbs in 2012Photo: Digitimes file photo

Digitimes Research predicts the growth of high-brightness LEDs in 2012 to reach 13.4% with an output value of US$10.1 billion. However, MOCVD demand will shrink to 200 units in 2012.The combined share of high-brightness LEDs in the Japan, South Korea and Taiwan markets is to reach 61.3% in 2012. In particular, China will grow by 30% in 2012 due to the large amount of MOCVD equipment previously ordered. Approximately 150 units will come online in 2012. China mainly focuses on low- and medium-power LED products.LED backlighting for large-size panels will reach a penetration of 34.1%, higher than other applications such as lighting with 16.7%. Digitimes Research predicts by 2014, the penetration of LED backlighting in large-size panels and lighting will reach 28.7% and 33.4% respectively.The sweet spot prices of the LED light bulbs to replace traditional 60W light bulbs are US$25/unit in Japan, US$15/unit in Europe and North America, and US$7/unit in emerging markets. LED light bulb penetration rate is expected to be be 5.4%, around 1.05 billion units in 2012.The penetration of LED lighting in the entire lighting market was only 6.6% in 2011.Various governments have been announcing policies and measures to increase LED lighting market share such as 50% in Japan, 30% in South Korea, and 20% in China in 2015.The penetration of LED lighting on the global scope will reach 11.3% in 2012 and 25.8% in 2014, estimated Digitimes Research. Output value will reach US$16.5 billion in 2012 and US$41.9 billion in 2014.The global high-brightness LED market output value was around US$8.9 billion, a 7.9% growth on year.Global penetration rate of LED lighting to reach 11.3% in 2012, according to Digitimes ResearchPhoto: Digitimes file photo

The economy was harsh to the solar industry in 2011 as supply exceeds demand. In 2012, Taiwan-based solar cell firms still need to find a solution to prevent being marginalized.2008 and 2011: Two dismal yearsThere were two hits to the solar industry, one in 2009 during the financial crisis and one in 2011 when demand suddenly froze.In 2009, Taiwan's solar products with superior quality did not outperform others. Especially when China's solar firms began to flourish, the price of solar products started to drop rapidly, forcing Europe-, US-, and Taiwan-based firms to follow suit in price competition. Taiwan has not yet invested enough into the solar module and system segments, and therefore do not have the advantage of brand recognition like Europe-based firms do.The solar industry rebounded quickly in 2010, only to see oversupply problem reappear as firms took on aggressive expansions. Demand froze suddenly due to changes made in the incentive programs in Europe. In second-quarter 2011, the oversupply pressure mounted.Some firms in Greater China halted production after solar product prices dropped by 50% in 2011. Some Europe- and US-based solar firms declared bankruptcy.Stable finances have helped Taiwan-based firms to survive the 2011 ordeal. China-based integrated solar firms have stopped issuing OEM orders to small- and medium-size firms causing the latter to halt production or closing plants. Despite the size of China-based integrated solar firms, some firms have been said to face difficulties obtaining financial capital, and need to reduce capacity.The challenge in 2011 has forced Taiwan-based firms to face the reality that strong distribution channels are necessary. Taiwan-based solar cell makers have been working closely with Europe-based firms. But as the latter lose ability to compete with China-based peers, Taiwan-based firms have to suffer from decreasing orders. Solon declared bankruptcy while BP announced its exit of the solar market. These two firms have worked very closely with Taiwan-based solar firms.Too far from end marketThe weakness of Taiwan-based solar firms is that by only producing solar wafer and cells, the firms are distant from demand. This is hard for the firms to adjust inventory levels.Taiwan-based firms have blind spots as far as the picture of demand is concerned because of its passive nature. So any cancellation of orders by customers would catch Taiwan-based firms by surprise.Taiwan-based firms believe that by investing in the system end means securing distribution channels like their China-based peers have.China's solar industry has been building distribution channels by allowing state-related financial institutes to provide funds for solar firms to invest in system projects around the world. It has been said that the surprising high level of installation in Europe in 2011 were due to China's large amount of investments.Investing in systems is no panaceaDistribution channels are important, said industry sources, but another important segment is the finance side of solar PV projects. Solar firms need to acquire professionals that understand finance and the subsidy programs in various countries. This will prevent having financial capital stuck in a single segment.The development of the system market can help solar firms to solve short-term sales problems, but in the long-run, liquidity may be a problem. Taiwan-based firms do not have sufficient capital sources like the China-based peers. It has been relatively easier for China-based solar firms to obtain funds because their government has been providing tremendous support through loans and tax breaks. This has caused the US government to initiate an anti-dumping and anti-subsidy investigation against China's solar industry.Giant platforms do not promise vast growthHaving a strong large-size company backing the solar firms up has not yet shown significant benefits.United Microelectronics Corporation (UMC) invested in thin-film solar product maker NexPower. Though NexPower is still the largest thin-film solar product maker in Taiwan, the rapid price fall of mainstream polysilicon solar products has been putting a lot of pressure on the thin-film solar industry.Taiwan Semiconductor Manufacturing Company (TSMC) decided to invest in solar cell firm Motech in 2009. In 2010, TSMC began the development of CIGS thin-film solar products. With TSMC's support, Motech became the largest solar cell maker in Taiwan. However, Gintech, the second largest solar cell maker in Taiwan, is a strong competition with a comparable size.Industry sources noted that product differentiation by technology improvements is less beneficial to solar firms than market segment differentiation. The reason is that differences in technology levels cannot shelter firms from price competitions.This is apparent for industry leading thin-film solar firm First Solar. The firm has been eager to develop markets in Southeast Asia, the Middle East and other emerging economies. But the main market for solar PV products has always been Europe where demand for thin-film solar products is close to zero. The price competition and increasing demand for higher efficiency products in Europe simply is leaving little room for firms who make the more expensive thin-film products.Other large-size Taiwan-based firms such as Delta Electronics, Lite-On, Inventec, AU Optronics (AUO) and Foxconn (Hon Hai) have been entering the solar market in different ways. But the expected positive effects have not yet shown.Taking the China risksMany solar firms in Taiwan have been relying on OEM orders from China-based peers. Taiwan's government also has been proud in the close relationship between enterprises from both sides. However, many solar firms have indicated that relying on OEM orders from China is tantamount to digging their own graves. The firms accept such orders because of the increasing difficulties in finding downstream customers and sufficient financial capital to continue operating. In addition, Taiwan's government has not been supportive of the industry.Furthermore, it is hard for Taiwan-made solar products to differentiate from China-made products. In 2011, there were many OEM orders given to Taiwan from China-based firms because Taiwan firms have quality technologies. Also, China-based firms want to avoid risks in producing high-end products, and therefore have been transferring such risks to Taiwan-based peers.The anti-dumping and anti-subsidy investigation taken up by the US government has been pushing China-based firms to give OEM orders to Taiwan-based peers. But China-based firms demand quotes based on China's domestic prices, which are considered too low for Taiwan-based firms.The anti-dumping and anti-subsidy investigation may be benefiting Taiwan-based firms in some ways. However, some industry sources argue that Taiwan-based firms may thrive due to the investigation but in non-US markets, China-based firms still dominate. Hence Taiwan-based firms are just OEM factories for China.Desperate for a new pathThe solar market is a market closely related to government policies hence Taiwan's government should create an environment and strong support for the solar industry as Taiwan-based solar firms desperately find a market on its own instead of relying on OEM orders from China.Taiwan-based solar firms need to find a new path to avoid being marginalizedPhoto: Digitimes file photo

Japan-based memory chipmaker Elpida Memory reportedly is struggling to repay its debts due by early April, and therefore is exploring various options to raise funds in time. Industry observers speculate on some possible directions that Elpida might choose in fixing the immediate problem. In one scenario, Elpida would partner with US rival Micron Technology with an aim to jointly compete against longtime industry leader Samsung Electronics. Under some form of partnership, the pair could unite their existing Taiwan-based partners - which have a great deal of engineering resources and 12-inch wafer capacity - for a leaner cost structure and enhanced productivity. Such integration links among the non-Korean DRAM firms could be the right direction in favor of not only the industry's near-term development but also its sustainable growth. Powerchip Technology and ProMOS Technologies are both among Elpida's DRAM manufacturing partners. The Japan-based vendor has also shifted part of its in-house production to Rexchip Electronics, its Taiwan-based production subsidiary. Micron has close ties to Taiwan's Nanya Technology and Inotera Memories, with the latter treated as a manufacturing JV between Micron and Nanya. Both Nanya and Inotera also accept financial support from Nanya's parent company Formosa Plastics Group, Taiwan's largest petrochemical conglomerate. However, the Japan government's attitude would disrupt tie-up talks between Elpida and Micron. The government favors a scenario that would avoid the risk of technology outflow. Speculation had circulated previously that the Japan government intended to push some form of integration between Elpida and Toshiba - the country's major memory chip suppliers - considering that Japan should keep its home-grown DRAM technology. Integrating both sides' DRAM, flash and logic IC technology and assets would also help the country expand its overall competitiveness against Korea's semiconductor industry. Nonetheless, Toshiba has denied such speculation that it was considering merging with the financially-troubled chipmaker. While failing to bring Elpida and Toshiba together, the Japan government might throw another lifeline to save the company. Alternatively, Elpida could get a further extension on bank loan repayments through the government's assistance. In the worst-case scenario, Elpida could end up losing support from the Japan government. Without solutions and help to shore up its capital base, the company would have to scale down its operations for survival.

China has always given the impression of having a large and cheap labor force. But as the country's population structure and social values are starting to change, Foxconn Electronics (Hon Hai Precision Industry), which is known for its strict management, is also seeking ways to cope with the changes. Foxconn has been aggressive in introducting automation production to reduce its reliance on manual labor, but it remains to be seen whether the move will work.Foxconn chairman Terry Guo has pointed out many times that China's young people today have completely different values and attitude than the older generations. Therefore, Foxconn will have to adjust its management strategy to fit into the quickly-changing society.In addition to giving up its concept that "the company is the family" and allowing its employees to return to their own lives after work, Guo is also allowing automation to take over some of the monotonous work from employees.Although Guo plans to install one million robots within the next three years, some market observers are still skeptical of the move. They have noted that many of Foxconn's assembly lines will still need a huge amount of laborers.Moreover, Foxconn currently employs over one million workers in China. Unless the company actually sees labor shortages, the Chinese government would not be happy to see one of the biggest employers of the country reduce its human work force in favor of robots.Therefore, some observers believe that Foxconn must provide better training for its employees and try to increase the value of manual labor.

In 2010, Samsung LED became the first LED firm in South Korea to have revenues exceeding KRW1 trillion (US$863 million) and ranked as number one among LED firms in South Korea. Its third-quarter 2011 revenues reached KRW358.2 billion, much higher than KRW248.9 billion by LG Innotek's LED business unit and KRW166.1 billion by Seoul Semiconductor. Samsung LED continues to rank as number one among its Korean peers.However, the third-quarter 2011 revenues only show a slight 3% growth on year while operation profit margin turned negative. The total revenues for the first three quarters in 2011 showed slight decrease on year and Digitimes Research expects its fourth-quarter capacity utilization rate at around 50-60%. Therefore Samsung LED's total revenues in 2011 should show slight on-year drop.In order to enhance Samsung LED's competitiveness, Samsung Electronics plans to merge it into the "Component Solution Business Unit" to hook the LED business with other business units within the group.Although the LED industry in 2011 has not been developing as expected, Samsung LED continues to expand operations. Samsung has been introducing lighting products with very competitive prices and promoting these products through the existing distribution channels in the US and Europe.In addition, the Samsung Group plans to extend LED lighting applications to green buildings. In the first half of 2012, Samsung C&T Corporation, Samsung LED and Samsung Electronics will jointly develop green building solutions that will not only cover South Korea region, but also Europe, China and Southeast Asia.

The quick rise of mobile devices such as tablet PCs and smartphones has significantly changed consumers' habit, and opened up huge business opportunities for upstream component makers. But as the development of mobile devices is getting faster and faster, trending towards faster computing speed, lighter weight, slimmer size and longer battery life, components within the devices will need not only to have their sizes shrunk, but also to provide features such as low-power consumption and high- power performance in order to further extend mobile devices' product life. Therefore, the ability to overcome materials' physical and electrical constraints, grasp the pulse of market changes and launch products that suit market demand will be crucial in keeping one's leadership in the market.One of the major reasons that Chilisin Electronics, as Taiwan's leading inductor supplier, has been able to receive orders from Korea-based clients is that it has a complete product portfolio to offer clients a one-stop shopping service. In contrast to solutions offered by other players in the market, Chilisin's inductor product line is not only capable of competing against international brands, but even also on the verge of surpassing them. Some of the series launched in recent years, such as the molding power chokes and multilayer power inductors, are already outperforming those of first-tier competitors.According to Chilisin's management team: "We hope to provide a one-stop shopping service, providing clients with a service based on a complete range of inductor components. Therefore, in addition to always staying aware of the market trend, we have also been active in involving in our partners' R&D plans." Moreover, Chilisin also has the capabilities of making key materials, such as ferrite powders and ferrite cores. It can mix the materials according to the scope of applications. Therefore, its performance in terms of conversion efficiency is way better than Japan brands. This is why it has become a partner of so many international brands.Active understanding of market trends, active development of new productsOptimistic about the potential of smart mobile devices, Chilisin has been investing significant R&D resources in developing products such as multilayer beads and inductors and power chokes, and it has achieved brilliant results. Currently, Chilisin has a monthly capacity of two billion multilayer beads and inductors. Considering that smartphones' operating frequency is becoming higher and higher, the company has launched variety of Multilayer Power Inductor. MPD is an on going design of high saturating current up to 2A, adding to its existing MPA, MPB and MPC series, in order to satisfy its partners' full range of demand.Besides, Chilisin is also in active cooperation with Taiwan's IC design industry to integrate inductors into IC components to meet the mobile device trend towards thinner and lighter form factors. "Judging from the current development of semiconductors, integrating different components will be the only solution to achieve the goal of shrinking product size," according to the Chilisin management team. "Through mutual collaboration, Taiwan's IC industry will have even stronger competitiveness, and it also meets Chilisin's management strategy of satisfying clients' demand." Under Chilisin's planning, power IC components with integrated inductors are expected to be launched in 2012 to provide its partners in the end market with a one-stop shopping service that will allow them to design thin, light and compact products.As for Chilisin's wire wound chip inductor product line, the company was already able to shrink it to the 0302 size long ago, and with monthly capacity having reached 120 million units now, the company is one of the major suppliers worldwide. As for the company's LVS product line, the component is mainly meant to replace the traditional hand-wound power inductor. It can be used in products such as handheld devices, networking products and LCD TV, with the company's monthly capacity already reaching 50 million units. To further strengthen its products' electrical capability, Chilisin is set to launch the LVF series wire wound power inductors, which will feature an even smaller size, higher power and less power consumption. With planning for an even more complete product line, the company can provide its partners with a wide variety of product choices.Chilisin noted: "Because of a very clear division of labor in our design team, we are able to provide a series of products and services in quick response to market demand. Take the low profile molding choke for example. We have already launched a product in a size of 3x3x1.2mm. The product can be used in tablet PCs and notebooks in big volumes."In addition to providing its clients with high quality inductors and a one-stop shopping service, Chilisin is able to increase it production volume and roll out products of stable quality through fully automated production. Furthermore, Chilisin places strong emphasis on complete technological support and services. It can not only respond to clients' demand within 24 hours, its R&D team and field application engineers (FAE) can also offer timely technological support to assist clients in launching new products to meet market demand.Source: Chilisin Electronics