Global cloud service providers seeking to rapidly expand presence in India

With the second largest developer community, rapidly growing enterprise IT market and an economy that is growing at heathy rate of 7% per year, India is quickly becoming an attractive market for all the major global Cloud Service Providers (CSPs).  In September 2015, Microsoft announced the launch of three Azure cloud data centers in India, while IBM announced the launch of its first SoftLayer cloud data center in India in October 2015. IHS believes that Amazon Web Services will also launch its own cloud data center in India in 2016..

For CSPs, choosing where to locate their data center for cloud services is becoming an extremely important strategic question.  Market trends, regional, national and local regulatory conditions, security factors, and infrastructure conditions vary by region and country, creating operational and strategic implications for companies when they select territories for data centers.

CSPs evaluating India for data center facilities need to understand the demand for cloud services in the world’s largest democracy, as well as regulatory and infrastructure considerations, including telecommunications and energy.

In particular, it’s important to consider the political and economic dynamics within emerging markets like India, and how they impact the regulatory environment. Expected to be the world’s most populous country by 2050 with 1.6 billion people, India has an enterprise IT market that is being served by data centers that are normally concentrated in cities such as Chennai (Tamil Nadu), Bangalore (Karnataka), Hyderabad (Andhra Pradesh), Mumbai (Maharashtra), and New Delhi.

Regulatory and Security Issues

Cloud service providers face significant regulatory and security issues in India, per IHS Country Risk analysis, which ranks India’s corruption and regulatory burden as “very high.” (See Indian Risk Graphic). There’s also the possibility of terrorism, due to developments in Afghanistan and Syria and elsewhere in the region. Cyber security threats pose a growing concern in India as they do globally.

Looking ahead, Prime Minister Narendra Modi’s BJP party’s strong political mandate should enable his government to push forward a number of “big bang” and incremental reforms that lower the regulatory burden for businesses.  Due to the Modi government efforts during the last 18 months, India’s rating on the World Bank’s latest ease of doing business rankings improved; India now ranks 130th out of 189 countries (representing a 12-place gain).  Privatization, deregulation, and infrastructure spending should aid economic growth and improve business and consumer sentiment, IHS believes.

Telecommunications, Energy Considerations

Today, broadband is available to just 20 million of India’s 200 million Internet users. Future broadband coverage In India will be achieved via mobile broadband networks. Most of this connectivity is through 2G and 3G wireless, although 4G service is coming onto the market. Notably, Reliance Jio Infocomm Limited (RJIL), an upcoming provider of mobile telephony, broadband services, and digital services, plans to provide 4G services across India using LTE technology starting in March 2016. RJIL’s LTE network, which will give 80% of the rural population and 90% of the metro market LTE coverage, represents a sea change in India.

Unfortunately, broadband and other national infrastructure priorities in India have been significantly delayed due to political wrangling. Take India’s $15.3 billion Smart Cities Initiative, which seeks to improve living conditions through efficient urban management using digital technology. The government’s inability to pass legislation easing regulations around the acquisition of land is likely to undermine its Smart Cities program, in IHS’s view. Continued uncertainty about land-acquisition rules mean that Smart Cities projects face risk of delay, protests, and potential cancellation. IHS expects the central government to give state governments more of a hand in passing their own legislation and regulation, meaning that market entrants will need state-by-state regulatory insight.

On the energy front, the continued lack of availability of reliable power supply makes India a less than attractive location for data centers. Presently data centers rely on backup energy sources (typically diesel generators) as they face two to three hours of power shutdown daily. When locating a data center, an enterprise or cloud services provider needs to assess the trade-off between reliability and tariff reforms (leading to a higher cost of power) in a state.  Higher reliability typically comes in states with higher energy costs.

IHS believes India has significant potential for data center growth due to factors such as a skilled labor force, assuming companies find ways to mitigate risks related to power reliability and power cost issues. Additionally, as the Modi government works on power distribution issues, power reliability is expected to increase.

Mike Hartnett is Senior Manager with IHS Economic and Country Risk Consulting

Dr. Jagdish Rebello is a senior Director with IHS Technology 

Posted on 22 January 2016

Costly Counterfeit Electronic Components in the Supply Chain can also be a Safety Concern

Despite government and industry efforts to keep counterfeit electronic components out of the supply chain, they continue to be a safety concern for transportation and critical infrastructure or a security concern for military equipment and infrastructure. Additionally companies affected by counterfeit electronic components suffer brand damage and costly product replacement or repairs with overall costs running as high as $7.5 Billion to US semiconductor manufacturers and over $200 Billion to companies affected on an annual basis according to the Semiconductor Industry Association.*

Simply put counterfeit electronic components are substandard or intentionally misrepresented electronic components that can be as simple as recycled components being sold as new, low reliability components being remarked and sold for high reliability end use or even state sponsored fakes. Since counterfeiting is most often a crime of opportunity, the vast majority of counterfeiting is for components that have significant supply constraints while demand remains strong as companies scramble to locate sources of hard to find critical components. In fact, since Jan 1, 2014, two thirds of the reports on counterfeit components are for parts that have already been discontinued by the original component manufacturer.

Although the source of Counterfeit Electronic components comes from countries in Asia, Africa and the Middle East, over 53% of the substandard or counterfeit electronic components continue to come from China.** Since Jan 1, 2014 the most often counterfeited electronic component device types include the highly dynamic memory and programmable logic or the higher priced core circuit devices like Microprocessors& Microcontrollers. Although all component device types have had some reports on counterfeit activity as evidenced by the associated pie chart 

Much has been done to try to avoid counterfeit components by governments, industry and companies since the problems have materialized over the past decade. The US government issued a rule and supplement by the Defense Acquisition Regulations System concerning Detection and Avoidance of Counterfeit Electronic Parts,  (DFARS Case 2012-D055) effective on May 6, 2014. Among other items, this rule encourages companies to establish a “Trusted” Supplier list and encourages distributors to provide component traceability back to an authorized source. Lacking traceability, the rule encourages  quality testing and inspection of components procured outside of an authorized source. Similar guidance standard have been published by standards organizations such as DIN, IEC, BSI and most notably SAE with publication of the AS5553A, AS6081, AS6462A and AS6301 standards designed help companies put in place policies and practices to limit the risk of exposure to counterfeit electronic components

These counterfeit avoidance publications indicate that the best way to avoid substandard or counterfeit components from getting into a company’s products is to always buy directly from an authorized distributor for the manufacturer. Careful product life cycle planning coupled closely with timely procurement purchasing can help insure critical component inventory quantities are available to produce the products to fill customer orders. A good information resource such as the part solutions products provided by IHS, allow access to a good source for component EOL and obsolescence events and good information on current authorized distributions which helps with planning to avoid counterfeits.

Of course it’s a great idea in theory to only buy from authorized distribution sources but in practice inevitably companies get surprised by component discontinuance or shortages and companies are forced to take their chances acquiring components from the gray market. Once a procurement professional finds themselves in this situation the best advice is to buy from a “trusted” stocking distributor and insure the components have traceability back to the authorized distributor. Lacking traceability the next best alternatives are to investigate reputable aftermarket manufacturing companies for alternatives parts made to original specifications. In the end, if forced to buy from an unknown supplier insure that through component testing and inspection is utilized to avoid the obvious fakes. 

In summary, counterfeit electronic components in the supply chain remain a significant challenge to OEMs, contractors and companies throughout the supply chain. Adopting an avoidance strategy based on government and industry best practices can not only save money, but potentially can save lives as well.

* Source:

** Source:

*** Source: IHS CAPS+4D Parts Database

Greg Wood is a Director in the Electronic Parts business at IHS 
(Contributor: Praveen Hiraskar)

Posted on 6 January 2016

Locating Cloud Services Data Centers: Regional Risks, Examined

Earlier, Alphabet Inc, the parent company of Google announced plans to invest more than $500 million in a cloud data center at the site of Hemlock Semiconductor in Clarksville, TN.

Without a doubt, the Cloud has become an overarching trend, transforming IT organizations and the technology market. The cloud model can help companies reduce upfront capital expenses, increase organizational speed and flexibility and, in some cases, turn IT operations from cost centers to revenue generators. According to IHS research, global spending on public cloud services by enterprises and consumers will grow from about $115 billion in 2012 to approximately $230 billion in 2017. That spending spans every industry segment and almost every region. 

But where should Cloud Service Providers locate their data center for cloud services? Are some regions more attractive than others?

This question is getting harder to answer for enterprises and the cloud providers serving them. People typically think of the cloud as global, but local regulations, security concerns, and infrastructure availability issues require regional data centers to deliver cloud data and applications.

For companies deciding where to break ground on a data center for cloud services, regional, national and local regulatory conditions pose some of the most complex challenges. Market trends, regulatory rules, security factors, and infrastructure conditions vary by region and country, creating operational and strategic implications for companies when they select territories for data centers. Both Cloud Service Providers (CSPs) and enterprise IT managers need to understand those implications and associated risks.

First, regulatory and legislative changes don't move at the speed of technology. As the marketplace clamors for new cloud services, regulators and public policy makers constantly struggle to catch up.

In the European Union, for example, recent legal decisions could usher in dramatically different regulations concerning data exchange and privacy protection. The European Court of Justice (ECJ) ruling on the Safe Harbor principle, which has until recently enabled US companies to self-certify that they adhere to comparable EU policies on data privacy and security, has the potential to further Balkanize the Internet with major implications for CSPs.

Even among EU members, country-specific regulations pop up. For example, data center operators in Germany must adhere to the rule that data belonging to German companies must stay in Germany. In addition, some German data privacy laws apply only to individual consumers, while others apply only to businesses.  

And in places like India, and other developing economies, regulatory frameworks may not be as dependable and/or transparent as they are in more established economies, complicating investment and business decisions.

In addition to regulatory and security concerns, the state of local infrastructure (including telecommunications and energy) deserves close examination by companies choosing a data center location.

In telecommunications, the primary consideration is broadband coverage. High speed broadband may be delivered via cable, DSL or fiber, as well as high-speed wireless (LTE service). Cloud service providers need to know the current broadband situation, plus national upgrade plans for the network, and whether those plans are realistic. Finally, cloud service operators need to know the prices for international connectivity—a relevant question for any service that intends to have a global footprint.

The local electrical grid may pose pricing considerations. In the EU, for instance, energy prices vary by country and region, although the EU aims to normalize prices in the long term. Along with retail cost differences, the CSP or enterprise IT manager needs to understand energy pricing options: retail, wholesale or, in some cases, co-generation—i.e. traded electricity. In Europe, costs for electricity include taxes related to the EU's de-carbonization agenda. As de-carbonization initiatives progress, both network charges and surcharges are increasing.

Along with pricing, country and local regulations may come into play with energy consumption. While the EU aims to create a unified power market, the current situation is neither unified nor harmonized. Relevant regulatory questions include: Is co-generation (wind or solar) permitted? Are there subsidies for energy co-generation efforts? How onerous is the planning and permissions process for grid-connection rights?

When evaluating regions and countries for data center deployments, one reality is that risk assessment is a dynamic process. Without a doubt, Local market conditions, especially security issues and local regulations, require continued and close analysis.

Mike Hartnett is Senior Manager with IHS Economic and Country Risk Consulting
Dr. Jagdish Rebello is a senior Director with IHS Technology 
Posted on 4 January 2016

Technology to play a crucial role as global economies seek to combat climate change

On December 12th 2015, leaders of 196 nations signed a historic accord on a plan to limit climate change, in which all of the world’s economies agreed to take concrete steps to regulate the emission of gases that scientists say are causing the earth to warm. As part of this landmark agreement, wealthy developed economies such as the U.S. and the European Union would pledge $100 billion a year to a fund to assist poor countries trying to reduce greenhouse gas emissions. Simultaneously developing nations, including China and India, would seek to find ways to lower the trajectory of their emissions growth.

The Global Agreement on Climate Change comes at a time when the world faces a raft of critical sustainability issues today as it seeks to address serious problems and consequences attendant to global climate change. At every turn urgent questions of sustainability—environmental, social, and economic—confront modern society. The litany of sustainability-related challenges is long and now a familiar coda to engaged citizens all over the world: localized air and water pollution, global warming, terrorism, displacement caused by large-scale migration of refugees from war-torn or economic disaster zones, and overburdened infrastructure and services in urban centers.

Many have been quick to blame technology for these and other assorted ills that collectively have pushed the planet to an environmentally dangerous tipping point. And yet, technology is a key component toward ensuring a sustainable future. In particular, the wise use of technology makes it possible to utilize resources more efficiently and boost industrial activity, at the same time preventing further environmental harm and still improving quality of life. Technological advancements are responsible for creating alternative sources of energy, global communication and mobility, ecologically friendlier materials, improved healthcare, more efficient manufacturing methods—while also enabling powerful new ways to alleviate the environmental damage caused by technology in the first place.

By making such advances possible, technology also helps foster greater social and economic mobility throughout the world. In cities, smart buildings and smart urban infrastructure enhance quality of life while maintaining judicious use of scarce natural resources like water. For their part, fuel-efficient vehicles and integrated mass-transit systems—already significant in cutting back energy use—are even now giving way to new modes of urban mobility typified by ride-sharing models such as Uber and Lyft, where yet greater benefits could be realized to boost social and economic flow.  IHS provides extensive coverage of different elements of the Smart Cities market through its Smart Cities Intelligence Service.

Technological innovations, then, are necessary in many aspects of environmental sustainability, social mobility, and economic development. Water and energy management, healthcare, transportation, agriculture, manufacturing, communications—all these areas and their potential for advancement lie in technology. The developments achieved by technology generate, in turn, new social and economic behaviors that promote pathways to sustainability. And as sustainability efforts take off, the new benefits feed into a new cycle of more refined sustainability initiatives, fueling a virtuous cycle.

The central role of technology in sustainability initiatives is best supported by both enlightened public policy and private-sector participation. On the one hand, government support such as funding and legislation is critical to building a sustainability framework on a local and national level. But involvement of the private sector is equally crucial. It is in the interest of industries to protect ecosystems, consume less energy, reduce waste, and cut costs.

Why technology companies should care about sustainability

With their own economic imperatives at stake, big business understands that fixing the world’s most complex and pressing problems through the lens of sustainability is the new focal paradigm of the age—an innovative way of thinking and operating that not only leads to greater efficiency and savings, but also gains the prized goodwill and patronage of increasingly conscientious consumers.

With various political leaders and business figures now acknowledging the need to protect the environment, sustainability is expected to become the most important driver of innovation and investments during the next decade. Done correctly, sustainability can create value for technology firms. Those that design solutions responding to evolving consumer preferences as well as global ecological challenges are able to identify and enter new growth markets. By aligning products with consumers’ social and environmental purchasing preferences or customers’ responsible sourcing requirements, technology companies also improve their brand image and set themselves apart from other  suppliers without the same focus.

Firms can achieve positive relations with governments by complying with local policies and regulations, such as the Restriction of Hazardous Substances (RoHS) directives in Europe or with national emissions-reduction goals. Articulating how a company’s operations or products contribute to regional social and economic development goals can similarly result in favorable policies, incentives, and business climates for firms.

To decrease operational risks, sustainability efforts can help reduce product failures, workplace accidents, greenhouse gas emissions, raw materials consumption, and end-of-life waste—in the process improving Environment, Health, and Safety (EH&S) performance while also preventing costly delays and disruptions.

Spending as a whole can be cut by using technologies and processes that enable more efficient use of water, energy, and other raw materials.

Technology companies can look at sustainability not only as a means to improve the environment or demonstrate societal impact, but also as a savvy business strategy toward long-term financial success. Far-seeing technology firms see the world’s sustainability challenges as problems for technology to solve—and, therefore, as a source of new commercial opportunities and competitive differentiation in the marketplace.

The payoff can be huge. Firms that successfully integrate sustainability targets into operations could achieve long-term growth and benefits—or even become market leaders in their field, especially as consumers gravitate to a new model of conscientious consumption. By understanding consumer demand for sustainable products, complying with regulatory requirements around resource efficiency, and through scenario planning using real-time data and innovation experimentation, firms can enhance product performance and reduce recalls; increase supply chain performance and minimize risk; and cut costs and produce less waste—all the while improving resource use and energy efficiency.  Statistics show that sustainability efforts pay off. On the Dow Jones, the Sustainability Index in the North American Composite sector consistently outstrips the Dow Jones Industrial Average, bearing out the market’s enthusiasm for sustainability-minded firms.

In the end, any successful sustainability effort within companies must aim to balance its resources with future market demands as well as the requirements of operating in particular markets. Sustainable development requires the balancing of what could well be competing technological, environmental, social, and economic prerogatives, along with often complex ethical questions. Companies may have to ask themselves hard questions on their commitment to sustainability, which may entail overhauling business models or modifying long-standing production methods.

Jagdish Rebello, PhD is a technology senior director for cloud and semiconductor research;

and Marilyn Johnson is a senior director for corporate sustainability for IHS

Posted on 17 December 2015

Role of private sector critical to the success of Indian e-governance plan

The Digital India campaign announced in July 2015 has drawn investments worth US$78 billion. Through this campaign, India is hoping to connect all citizens digitally and execute the adoption of a single e–governance system across the country. IHS expects the program to drive per capita public sector IT spending in India which was estimated to be less than US$3 in 2008.

Private sector plays a pivotal role in the success of e-governance program adoption in India. Nearly 80% of the investments are backed by companies including the likes of Reliance industries and Bharti group. India’s bureaucratic civil services need knowledge from private companies to promote the culture of technology adoption. The deployment of e-governance will also improve administrative procedures in terms of efficiency and transparency.

However, IHS predicts the realization of the e-governance initiative to be hindered by poor telecommunication infrastructure and the fact that internet speeds are not uniform across different regions within India.  Furthermore, the large scale of implementation, low IT literacy among civil servants and difficulties in procuring and using modern computing hardware in remote areas could further delay the full execution of the plan.

Though it will not happen overnight, IHS is positive that the privates and government will overcome these limitations and continue to create a seamless e-governance setup capable of improving the country’s administration efficiency.

For more information, please visit

Vinita Jakhanwal is a senior director for IHS

Posted on 15 December 2015    

China’s smartphone industry rushing to adopt fingerprint modules

Fingerprint modules expected to become a key component in the Chinese smartphone market in 2016
On 24 November  2015, Xiaomi Inc. released its new Redmi Note 3 with 5.5-inch full high definition (FHD) thin film transistor (TFT)-liquid crystal display (LCD) screen, a metal case, and a fingerprint module at a price of 899 yuan (or about $145). With this, apart from TCL Corp., nine of the top 10 Chinese smartphone brands (Huawei Technologies Co., Xiaomi Inc., ZTE Corp., Lenovo Group Ltd., TCL, Oppo Mobile Telecommunications Corp., vivo Communication Technology Co., Coolpad Group Ltd., Gionee Communication Equipment Co., and Meizu Technology Co.) have released smartphones with fingerprint modules.
As we reported in the Touch User Interfaces Controller, Sensor & Fingerprint Report – 2015, fingerprint modules that are supplied at the $6 range are expensive compared to other components, making up a large portion of the production cost. However, as users can see fingerprint modules from the outside, it is possible to clearly differentiate fingerprint module-applied products from others.  Moreover, since all the competitors are scrambling to adopt the technology, fingerprint modules are considered to be essential to be competitive in the market.
The penetration of fingerprint modules into the top 10 Chinese smartphone brands is expected to reach 14.0–15.0% in 2015. In 2016, with an increase of 120 million shipment units, the penetration will grow to 30–35%.
The sensor, a key component for fingerprint module technology, is currently supplied by Apple Inc, Synaptics Inc., Fingerprint Cards AB (FPC), Goodix Technology Inc., and Sliead Inc. The module companies include ASE Group, Synaptics, CrucialTec Co Ltd , O-Film Tech Co., Q-TECH Corp., Huizhou Speed Wireless Technology Co., Primax Electronics Ltd., Lite-On Technology Co., Truly Opto-electronics Ltd.,Dreamtech Co., Holitech Technology Co., and General Interface Solution (GIS) Holding Ltd. However, since Apple is supplied only from ASE, and Synaptic is the sole provider for Samsung Electronics Co., smartphone brands apart from Apple and Samsung Electronics will determine the future development of fingerprint modules.
In the fingerprint supply chain, except in that of Apple and Samsung Electronics, currently, FPC and Goodix are most distinguished for sensors and Crucialtec and O-film for modules.
O-film pursuing aggressive growth
Crucialtec has overwhelmingly outstripped O-film in terms of fingerprint module shipments up until 2015, but O-film is aggressively expanding its supply capacity, leading to fierce competition with Crucialtec in 2016.
O-film shipped out 450,000 units in May and then 1.6 million units in August, getting much closer to the 2 million mark of CrucialTec. As of October 2015, O-film’s monthly fingerprint module production capacity stands at 6.5 million, and this is expected to reach 10 million in December. It will likely grow to 15 million in the second quarter of 2016, up 2.5 times from October.
Since O-film is supplying touch panels, liquid crystal modules (LCM), and camera modules to most Chinese smartphone companies, it has an incomparable client base compared to its competitors. On top of that, it has sensor supply contracts with fingerprint sensor suppliers, such as FPC, Synaptics, Goodix, and Egis Technology Inc. Moreover, it has recently invested in the system in package (SiP) process, and it is also being aggressive in deploying the coating technology for the surface of fingerprint modules. Once O-film can push up the production yields, it is expected to take over the fingerprint module industry, just like it did in the touch panel market. The fingerprint supply supply is rapidly growing in China. Each smartphone brands in China are facilitating their new models with fingerprint function. This will lead the total fingerprint era of the smartphone in China as we reported in the Touch User Interfaces Controller, Sensor & Fingerprint Report – 2015.
David Hsieh is a display senior analyst for IHS

Posted on 11 December 2015    

The demise of the unicorns is looming

There are serious troubling signs in the Valley these days! If you live in the San Francisco Bay Area, you know the story because you are exposed to the daily mounting concerns about the unicorns, those private tech firms that are valued at $1 billion-plus. If you live somewhere else, chances are you picked The Economist of July 25th and read “The Empire of the Geeks” or more recently (November 21st), you read “The rise and fall of the unicorns.”

Tuesday December 1st, John Doerr, the famed venture capitalist and partner at Kleiner Perkins Caufield & Byers in Menlo Park, CA, told the usual big crowd at the Post Seed conference in San Francisco that there are 90 unicorns in the United States alone and most of them will not go public. In fact, 5 out of 7 exits for tech unicorns this year earned a lower valuation than previous estimates, according to Los Angeles-based Upfront Ventures—the most recent one being the Square IPO at almost $2 billion below initial valuation. He also added that if you can’t go public, you hope to cash out through an acquisition. However, the problem is: there are not that many potential acquirers who can afford to pay big cash for startups. Even Google sitting on a big pile of cash showed that it never overpays for companies. What does this mean then? Carnage is around the corner.

Chatting with VCs in the Valley on a regular basis at events and conferences, I can tell about the chill! The mood among VCs has become more cautious with some already worried about significant lack of returns. For sure, hearing from some of my startup clients, it has become extremely difficult to raise money for early stage startups because the madness comes from later-stage money.  According to PricewaterhouseCoopers and the National Venture Association, investments in later-stage companies during 3Q15 increased 10% YoY while money invested in early-stage companies fell 7%. As John Doerr said “Having a $1 billion valuation can be a real problem and there is going to be a great disaster here.”

As past downturns can teach, healthy and well-capitalized firms have always benefited and firms that have been loading up cash to weather a potential downturn will do well. For example, Airbnb currently valued at $25.5 billion ( will not go away. The firm has $2 billion in cash and a burn rate of $100M a year. Basically, let’s say the unicorn top 10 will survive but for the rest, the future does not bode well and the crash will impact every one of us leaving in the San Francisco Bay Area, one way or another, as seen after the Great Telecom crash of 2000. And after this one, let’s hope we learn the lesson that unicorns have set an unprecedented distortion in the market, I mean imbalance between early-stage and late-stage funding.


Stéphane Téral is a research director, mobile infrastructure & carrier economics for IHS

Posted on 10 December 2015

China to have 28 flat panel display fabs in 2018. Long term oversupply?

Chinese FPD makers have been ambitiously expanding capacity for a while now. More fabs in China have ramped up with a great variety of FPD technologies. The majority have been a-Si TFT LCD fabs, especially for Gen 8 (2250 × 2500 mm), which is also called Gen 8.5 in China.
Panel makers like BOE, China Star, CEC-Panda, Samsung Display, and LG Display are investing in Gen 8 fabs in China. Newcomers like HKC are also investing in Gen 8, as this is currently the best generation line for TFT LCD. Although Gen 10 is the biggest line, both the Chinese government and makers have recognized the huge risk and narrow product mix available from Gen 10. Therefore, the focus has been primarily on Gen 8 investment.
Specific economic conditions in each province in China have encouraged provincial governments to support LCD fabs built in their cities. In many cases, local governments are directly involved in the investment by providing needed capital or by endorsing banks awarding loans to panel makers. Local governments see several benefits brought by LCD fabs:
  • Stock growth: Panel makers’ share prices generally increase from new investments. This in turn helps the local government or capital fund under the government’s surveillance gain profits.
  • Supply growth: As shipment volume grows, the central government can meet its mission of enhancing local panel supply.
  • Tax gains: Revenue from a new fab equates to tax gains on revenue tax or the VAT (Value Added Tax) for local governments.
  • Real estate: The government is the biggest owner of land resources in China. However, land does not generate profit unless it is used productively. With new fabs built on land, employment and business activities create prosperity. Higher land value also represents better tax income for the local government.
  • GDP growth: China is a special economic entity in which investment accounts for a large share of the GDP, rather than consumption. Big LCD investments can stimulate GDP growth. In fact, local government performance is judged by GDP growth because the central government values the nation-wide GDP as an important index for the country’s development. Government officials are rewarded for their efforts in growing the GDP of their cities.
  • Technology upgrades
  • Employment growth

Based on these factors, government support and subsidies for flat panel display investments will not end any time soon. Quite the opposite, panel makers are using these factors as leverage to facilitate new fab investments in China. National capital provides the resources, GDP/real estate/economics in local cities provide the infrastructure, makers’ upgrades provide technology advancements, and enormous domestic market demand provides the motivation.

Based on current investment plans and existing fabs under construction, there will be at least 28 fabs in China by 2018, as shown in the following figure.

BOE will soon build its B10 fab (Gen 8 in Fuqing) and B9 fab (Gen 10.5 in Hefei). The company may also decide to build a B11 (Gen 8 in Mianyang) as a joint venture with Changhong and B12 (Gen 8 in Talian). China Star is also considering building a new Gen 8 or even Gen 10 in Wuhan, dubbed T4. However, detailed investment plans are not settled yet.

CEC (China Electronics Corporation) is a government-owned company and has invested in a Nanjing Gen 8 oxide fab under its CEC-Panda subsidiary. The company is planning to build another Gen 8 in Chengdu, China. Another subsidiary of CEC, CEC-IRICO, is planning to invest in a Gen 8 in Xianyang, China.

If these plans are actualized, there will be five Gen 8 fabs under construction in 2018. Furthermore, not only on the large area fab, China companies are also aggressive investing in the small medium flat panel display fab as the figure shows.

For small medium displays, there are several kinds of panel technology, including a-Si TFT LCD, LTPS TFT LCD, oxide TFT LCD, and AMOLED. LTPS + AMOLED is currently the main theme for small medium investment. LTPS is being invested in for smartphone displays, while OLED is a technology upgrade for flexible form factors. Companies investing in the small medium FPD sector include BOE, China Star, CEC, Tianma, EverDisplay, and Visionox from China and AUO, CPT, and Foxconn from Taiwan.

Foxconn is one of the most aggressive investors, hoping to gain Apple smartphone display orders over the long run. Foxconn plans to invest in three Gen 6 LTPS TFT LCD fabs: one in Taiwan in the Innolux building and the other two in Guizhou and Zhengzhou. Both cities are important manufacturing sites for Foxconn’s smartphone and tablet PC OEM/ODM business.

EverDisplay is the first AMOLED maker in China. It is still struggling with yield rate production stability in its Gen 4.5 AMOLED fab in China, but the company is now planning to invest in a new Gen 6 AMOLED line in Shanghai.

With these huge investment, we can see a great growth of the capacity is coming to the display industry. The question is whether it will result in a long term over-supply and influence the protiability of the industry, as we have been seeing in the solar cell industry a couple of years ago? The display industry is driven by the demand elasticity and the price to encourage the end users to buy the larger and better display. So this is different from the subsidy mechanism in the solar cell industry. For display industry, the area growth is an important element. We can argue that consumers in India and the developing countries will eventually all purchase a 55″ LCD TV and all smartphone display will eventually shift to 5.5″ OLED. On top of this, China companies definitely are the strong believer that the bigger and better will digest these capacity.

David Hsieh is a display senior analyst for IHS

Posted on 10 December 2015

4K TV Display Drives the World, But which 4K? RGB or RGBW?

In 2012, 4K (3840×2160) liquid crystal display (LCD) TV panels were pioneered by Taiwanese companies. The shipments of 4K LCD TVs grew to 3 million in terms of unit in 2013 and then surged to 19 million in 2014 and are expected to record 39 million in 2015. In 2014, 4K LCD TV accounted for 8% of the total market share, drastically up from 1% in 2013 and is expected to take up a 14% share in 2015, securing a double digit market share. The 4K LCD TV panel market is growing steadily despite the sluggish global economy and industry downturn. It has played a critical role in boosting the profitability of display manufacturers as a high-end product.

Like three dimensional (3D) TVs that had two different types—patterned retarder and shutter glass—there exist two different types of 4K (3840×2160) LCD TV panels depending on how the pixel is composed: The RGB type; and the RGBW type. The former creates pixels using the conventional three RGB subpixels. The latter, which includes a white subpixel, has three subpixels in each pixel, but the pixels are aligned in a different way from the RGB type, such as in the order RGB, WRG, BWR and GBW.

Recently, there has been intense competition between the two methods, dividing the 4K LCD TV panel market into two different camps. This trend is similar to the competition between the patterned retarder and shutter glass types in 2010 when 3D LCD TVs were first introduced. At that time, one camp argued that the resolution of the image could be reduced by half due to the 3D delivery method applied by the other. However, according to the other camp, the fatigue on eyes would be aggravated because of the method of sending the left and right images separately with a time lag, which was used by its counterpart.

Currently, a similar debate is going on regarding the 4K pixel composition method. Some argue that a genuine 4K must have all RGB in one pixel and others argue that the RGBW method is beneficial in terms of high definition and energy consumption.

Currently, shipments for both RGB 4K and RGBW 4K are increasing. According to IHS, the shipments of the 4K LCD TV are forecast to increase from 39 million units in 2015 to 66 million in 2016, a 168% jump. The RGBW 4K market should grow fast too, recording 15 million shipment units in 2016, up from 6 million in 2015. Consequently, its market share should increase by 7 percentage points to 23% in 2016 from 16% in 2015. (The outlook for RGBW 4K LCD TV panels is not an official outlook of IHS but is an insight from an industry observation.)

The RGBW 4K market should see more players with Chinese names joining the market on top of Korean brands in 2016. Also, the Chinese market seems to be more positive toward RGBW 4K LCD TV compared to other regions. In fact, a regional breakdown of RGBW 4K shows that Korean companies are expected to have a market share of 98% in 2015, but with the full-fledged participation of Chinese firms, they should take up about 29% in 2016.

However, RGB 4K should also continue rapid growth to reach 51 million shipments in terms of unit in 2016. This is due to the fact that there are a larger number of RGB 4K players than RGBW ones. In particular, Taiwanese panel makers are only concentrating on RGB 4K.

Whether which type will be more successful in the market depends on consumers’ decision.  Higher image quality and affordable price levels will be a key to the success. In this respect, ultimately, both methods will advance mutually with each camp learning from the strengths of the other and improving their weaknesses, providing a positive influence on expansion of the entire market.

Already, there is movement towards 8K, going beyond 4K. Taiwan-based Innolux Corp. showcased 65-inch 8K panels at an exhibition, pioneering the 8K market as it did the 4K market. In addition, Korean companies that were laggards in the initial stage of the 4K market are expected to move quickly to respond to the 8K era. In this sense, the 8K era is not far away. The technology developed for 4K should bring forward the opening of the 8K era.

David Hsieh is a display senior analyst for IHS

Posted on 10 December 2015                                                              

M&A in 2015 Reshapes the Top Ranks of Semiconductor Competition

IHS Technology tracks the revenues and market share data for 143 of the leading semiconductor suppliers on a quarterly basis.  Recently, IHS published market share data based on actual results for Q1, Q2 and Q3 2015 as well as estimates for Q4 2015.  Using this data it is possible to create a preliminary view of the2015 semiconductor market shares for the semiconductor industry. The preliminary 2015 semiconductor supplier market share results for the top 20 semiconductor suppliers is presented in the table below.

The full view of all 143 companies is provided in an Analyst Insight published for subscribers to the IHS Semiconductor Competitive Landscaping Tool here.  You can access amazing, in-depth market share research that is described here.

The results for 2015 illustrate two important outcomes for the year: First – IHS Technology predicts that the semiconductor market will decline by 1.0% in 2015; Second – the record setting level of mergers and acquisitions is significantly reshaping the competitive landscape in the semiconductor industry. The results in the table above show the results from the acquisitions that closed in 2015. The 2015 and 2016 M&A activity is highlighted in the table.

There are several notable changes in the rankings among the top ten suppliers.  SK Hynix moves up to number three in the rankings as Qualcomm struggled with both a weak wireless market as well as renewed competition from key rivals. NXP jumps all the way up to number seven in the rankings with its acquisition of Freescale Semiconductor. Even without closing the acquisition of Broadcom, Avago Technologies breaks into the top ten at number ten.  

However, there are three major, announced acquisitions that are expected to close in the first half of 2016. When the 2016 acquisitions close the top five semiconductor suppliers will control nearly 40% of all semiconductor revenues and the top 10 will control 55% of the revenues. This level of consolidation is very close to what I predicted earlier this year.  When the Broadcom acquisition is finalized Avago Technologies will move up to number five.  This will leave the number ten position open.  STMicroelectronics and Infineon Technologies are locked in a tight battle to capture the number 10 position in the first half of 2016. 


Dale Ford is the Vice President of Thought Leadership for IHS Technology
Posted on 10 December 2015