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Weak demand and competitive pressure
Because the semiconductor market recovery has been weaker than expected, the driver IC industry that benefited significantly in previous years has been substantially affected.
Analyst views and price trends
A recent Morgan Stanley report noted that, given weak consumer demand and intensifying market competition, it takes a cautious outlook on driver IC suppliers; related Taiwanese manufacturers face increased downside risk. The report also stated that as the year progresses, leading manufacturers expect Q3 sequential revenue declines, and with foundry capacity for driver ICs continuing to rise, overall capacity utilization and prices may decline further.
In the IC design sector, Morgan Stanley analyst Yan Zhitian indicated that persistent weak consumer demand, particularly Novatek's expected significant drop in PC business in Q3, could drive a 5% to 10% price decline for large-panel driver ICs (LDDI) in the second half of the year. Demand for integrated driver and touch ICs (TDDI) remains weak; analysts expect greater price pressure in Q4, and some IC design firms could face near-zero gross margins. OLED driver IC prices are also expected to remain under pressure in Q4 due to underestimated peer competition.
Downstream and upstream price pressure
Driver IC designers face accumulating price pressure from both downstream customers and upstream suppliers. On the demand side, many display driver IC (DDI) manufacturers report heavy customer price-cut pressure in the second half. Some products, such as mobile LCD TDDI, have been pushed close to cost, and weak handset market conditions are prompting panel customers to continuously pass profitability pressure upstream.
The impact is not limited to mobile applications; customers are seeking further price concessions across product lines for TV, IT, and automotive large- and mid-size panels.
On the supplier side, most IC designers state that foundry discounts require minimum order volumes. Although suppliers increasingly offer volume discounts, given the current market outlook designers are generally reluctant to expand wafer orders to secure discounts because that would increase inventory pressure. Among Taiwan-based wafer foundries, only one has explicitly reduced list prices; others continue to increase volumes without lowering list prices.
Strategic responses and Q3 outlook
Some DDI vendors said they may shift additional production of specific products to other foundries to improve margins and ease competitive pressure.
For the Q3 outlook, a network-chip vendor indicated limited order visibility and warned that the PC business may not experience the usual seasonal peak. A microcontroller vendor noted that customers continue to actively destock and favor short orders, and expects Q3 results to be flat compared with Q2.
