Display driver depression follow flat panel succession!

Recently, Randy Lawson, Senior Analyst, Digital TV and Display Electronics, iSuppli Corp., discussed the application market for large and small LCD panel display driver semiconductors, including consumer, monitor monitor/notebook PC displays, consumer plasma displays and cell phone and portable displays.

The LCD driver semiconductor market took a disastrous turn in the second half of 2008 as the economic downturn kicked into high gear and the entire electronics supply chain suffered unprecedented declines. Now, as the industry enters H2-09 and forecasts prognosticating better times, vendors of these display driver ICs are looking at when they will see the market recover.

Revenues history of display driver market
Going by the revenues history, the display driver market peaked in 2005 in terms of revenues. The year 2008 saw revenues for display driver ICs dip ~$1 billion from 2007 levels.

The economic crisis resulting in large production cutbacks in all panel types was the main cause. Also, the driver IC unit shipments fell ~30 percent in 2H-08, compared to 2007 levels.

There have been various factors limiting revenues -- ASP pressure due to panel price, competition, technology shift, particularly, advancements in multichannel and gate-in-panel technologies.

In the last half of 2008 panel production went dramatically low. Some Taiwanese panel fabs were at 50 percent capacity or lower, said Lawson. This market, in terms of iSuppli, has peaked in terms of revenue outlook. It is a very large market in terms of units.

Tracking 2009 recovery
iSuppli has been tracking the monthly shipments of large panel driver ICs in 2009, a main area to watch for recovery signs. Q4-08 was devastating with over 30 percent drop in shipments. However, the large panel driver IC shipments improved from January onward. Also, the panel fab utilization rates increased. The low inventories of IC increased the orders.

However, according to iSuppli, the Q3 outlook is likely to be flat to Q2-09 due to higher quarterly baseline.

Dec. 08 vs. Nov. 08 was down 40 percent in terms of unit shipments. From Jan. 09 onward, shipments started going back up. It really went up in February and March as well. Going into April, things are slowing down a little bit, but it is positive for now. Lawson said that Q3 will likely be pretty flat. The industry is still down on a YoY basis, a point to be noted.

Driver IC units forecast
According to iSuppli, the large LCD saw ~13 percent CAGR and small LCD ~2 percent CAGR. The overall driver IC unit growth rate is likely to be ~10 percent CAGR from 2008-12. Growth will be due primarily to the large panel applications as mobile displays unit growth limit potential for small panel driver ICs, advised Lawson.

"We still have a pretty robust outlook for driver ICs from 2008-2012. LCD TV growth is remaining. Monitors and notebook PCs continue to show relatively strong growth in the long term trend," he said.

Large panels are where the driver ICs will find its biggest opportunity. Small panels will be down this year due to much lower unit shipments. This is due to the quite lower volume shipments of mobile handsets, which make up approximately two-thirds of all categories of drivers in the small categories.

Display driver market forecast -- revenue outlook
In this area, the revenues are likely to be more dictated by large panels. The small panel driver revenues are falling due to the ASP erosion exceeding units growth.

As for the large LCD driver IC revenue swings during the forecast period, 2008 and 2009 will contract due to the overall poor economy hurting customer demand. However, 2010 and 2011 should see strong growth return based on very attractive prices for panels and emerging markets taking more share of LCD TV market and growing.

On the whole, the total revenues are likely to contract >13 percent from 2008 to 2012. The year 2009 will be dramatically down by 20 percent over 2008. "Revenue growth is not there for small LCD drivers. The unit growth strong enough in small drivers to counteract the ASP erosion," said Lawson.

Also, some of the market for small panels is LTPS, which typically has a smaller driver IC and cheaper driver IC anyway, as some of the functionality of the LTPS panels can be integrated into the panel, making for a cheaper driver IC.

Revenue rebound likely in 2010
Definitely, turbulent revenues lie ahead! As mentioned, 2009 driver IC revenues will show significant decline in 2009 over 2008. Panel production levels are still below a year ago levels.

A rebound is likely in 2010, but it won't take the industry back to where it was! Keep in mind that the rebound that happens will be due to a rebound in consumer demand as well as the strength of the China market.

Driver IC unit growth has been slowing in the large panel category. This is due to the adoption of multichannel, high-column drivers as well as the gate-in-panel technology effect. Some maturing in LCD monitor and TV applications in Western markets is also causing slower end system unit growth.

As for small panels, the application growth rate is limited. As mentioned, the cell phone unit growth has been declining. Also, the LTPS share has been growing (driver ICs are smaller and less complex).

There have been continual ASP declines. Also, small panels are transitioning from 130nm to 110nm and 90nm, while large panels transitioning from 0.35um to 0.18um/0.16um. Also, there is a transition from 8-inch to 12-inch wafers.

Market share rankings
In this area, there haven't that many changes. Himax has moved up a bit. iSuppli has added several other companies, such as Lusam, Raydium, Sitronix, Orise, etc., into its tracker.

Q1-09 display driver IC market shares
Q1-09 revenue levels dipped well below Q4-08 revenue levels due to production cutbacks and weak demand in large panel category. The revenue levels were down ~50 percent YoY for Q1-09 as the LCD panel market struggled to find stability in the middle of a disastrous Q4-08 and severe cutbacks in panel production, and thus, IC orders.

The Q4-08 revenues were $1,310mn and Q1-09 revenues were $1,017 revenues -- about 30 percent down. Just for the sake of statistics, Q1-08 was $1,936mn.

Large LCD driver market outlook
Here, revenues are likely to grow ~10 percent over the next four years, primarily a rebound from the dismal H2-08 and 2009 levels. LCD TVs will remain a growth engine, overtaking monitor driver IC volumes from Q3-09 forward.

Lawson said: "There are still large markets such as China, and regions that are still in transition to flat panels. More consumers are buying more TVs per household, and decreasing the time between buying TVs."

However, the monitor driver market has stayed mainly flat, and multichannel use and gate-in-panel are causing diminished unit growth as well.

LCD TV driver type forecast
There is clearly a trend toward multichannel, which is likely to grow for cost, space and reliability savings. It lowers the ICs per panel ratio, and lowers IC unit growth rate as well.

Growth is also expected in 10-bit as well as in TV space for improved image quality. The 10-bit growth may be trimmed due to short term focus on 120/240Hz performance, advised Lawson.

Most of this will be driven by the larger panel category. One trend is toward LED backlighting, which is increasing the contrast ratio.

Small/medium markets scenario
A majority of this market is driven by mobile handsets, which account for two thirds of the market. Almost all of the small display drivers are single chip except for clamshell phones.

Some other major applications of small display drivers include digital cameras/camcorders, automotive, digital photo frames, handheld games/PDAs, PNDs, PMPs, as well as some other applications.

Small display driver forecast
Here, active matrix remains the only growth area left. "Gains will be offset by steep CSTN/MSTN declines," said Lawson. "The ASP erosion is also an issue." There is a transition from 130nm/110nm to 90nm, as well as a move to 300mm and LTPS growth.

All of these present further revenue downward pressure as ASP decline exceed the end market growth. Also, the growth in active matrix is not yet enough to offset the revenue decline in cheap drivers used in CSTN/MSTN.

OLED driver ICs
OLED driver ICs are likely to see revenue growth to ~$150mn by 2012. The OLED volumes are still dominated by mobile communication sub-displays, said Lawson.

The AMOLED move to main displays is likely to be next largest market. It is also getting boost from a market shift from pure-music MP3 players to PMPs.

However, competition from TFT-LCD in the near term is likely to slow the OLED panel volume growth. Also, growth in TVs could be a huge market catalyst, but that is not likely to happen until at least beyond 2011.

Lawson added: "The top line is relatively small as OLEDs are still in a mode of competing against amorphous silicon, LTPS, TFT LCDs, etc.. Until OLEDs can resolve some of the manufacturing issues to get to larger sizes, this will remain one of the smaller markets in the whole driver IC category."

Driver IC process node migration -- 2009-10
A majority are currently built on 0.35micron. As mentioned, a process node transition has been occurring in the driver IC market.

Small/portable display driver designs are leading transition to smallest geometry nodes (90nm from 2010 onward).

Technology trends
As for the technology trends for driver ICs, these include TCON (timing controller) functional integration. Frame rate conversion/MEMC, DisplayPort and other new interfaces becoming more prevalent as well.

In packaging, there is a transition to higher pin count/more channels to save cost (large panel). There is an increased use of COG (chip-on-glass) gate-in-panel technology in monitors/notebooks. These are targeted at smaller screens.

There is also a bit-depth move to 10bit. Here, LCD TV performance is spurred by the DeepColor standard and premium TVs. Another interesting feature is the addition of integrated memory for mobile handset displays.

As for interfaces, handset interfaces will see more of serial high speed to reduce cost, EMI, and interconnectors. Here, there will be a role to play for MIPI (GSM market) and MDDI (CDMA market).

MIPI will probably become the predominant industry standard, but it has yet to take off. MDDI, a Qualcomm standard, has already been deployed in millions of displays.

Next, large panel ICs will move beyond RSDS, LVDS, etc., such as Cascade type, Vx1, PPDS, AiPi, and others. Also, DisplayPort is potentially applicable for panels.

Summary
In summary, the panel driver IC market unit growth is solid, but its revenue presents a different story. The unit volumes growth looks healthy due to primarily large panel applications.

The year 2009 will see improvement from the Q1-09 trough, but it will still not show revenue growth from 2008 level. The ASP erosion is likely to lessen in 2009 due to shortages, but the long term trend remains downward in face of process migration and panel price declines.

Expect more diversification/collaboration from DDI firms, noted Lawson. As the DDI market matures, large companies will be seeking new growth markets, synergy to cut costs and improve efficiencies.

Recent examples include Novatek and Cheertek, Himax Media Solutions and Renesas SP Drivers (Renesas, Powerchip, Sharp combined efforts).

Next, the small LCD and OLED driver markets are dominated by mobile phones. Here, MSTN and CSTN volumes will shrink to less than 15 percent by 2012. Also, TFT, LTPS and OLED will remain the growth areas for small/portable displays.

Finally, the large LCD driver market will see growth in gate-in-panel in LCD monitors, and especially in notebook panels. There will be multichannel, fewer driver ICs per panel, higher reliability, and lower component count. Transition to multichannel is key, as TV transition will impact volumes significantly.