Chip Shortage Constraining New Display 'Design Activity,’ Says Photronics
The semiconductor industry is reacting quickly to the “demand dynamics” of the global chip shortage, creating “an inventory-driven semiconductor upcycle,” said Photronics CEO Peter Kirlin on a fiscal Q1 call Wednesday. The company supplies photo masks, equipment tools and ICs…
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to panel makers and offers a telling bellwether of display industry health. “Pending the installation of additional capacity, particularly at the high-end logic node, semiconductor manufacturers are focusing their resources on increasing output of needed chips and not on releasing new products,” said Kirlin. “New design activity has been constrained, which to us, resembles a semiconductor-induced recycle of old.” That's causing design innovation among panel maker customers to lag behind that of “capital equipment suppliers” like Photronics “by one to two quarters,” he said. Once new Photronics “tools” are installed at the panel fabs, and the new capacity comes online and inventory levels are replenished, “the dam breaks, and a wave of new design flows,” he said. Photronics is “oversold” in its photo mask capacity for Asian panel customers in the “mainstream” display segment, including for high-demand smaller-screen TVs, said Kirlin. That “sets the stage to do things that we have never been able to do in the mainstream, which is to start to nibble at raising prices,” he said. “We’re in a dynamic now where we expect to see pricing move up instead of down in the mainstream market segment." Pricing began inching upward in mainstream display photo masks in the current quarter that opened Feb. 1, he said. "As we step through the year, we’ll see how far we can take that.” Price increases won’t have a “big impact” on Photronics revenue “but will have a disproportionate effect on profitability,” he said. “Obviously, we like that trend.” Photronics expects "a lot of AMOLED capacity to come online" among panel makers, especially in China, fueled partly by demand for 5G smartphones, said Kirlin. "The AMOLED capacity we're installing this year, as soon as it comes online, we believe we should be able to fill it. And the entire factory for the rest of the year, we believe should be fully sold. So we're feeling good about AMOLED and what should constrain our revenues is our ability to install and ramp those new tools."