Due to a confluence of events — the U.S.-China trade war, COVID-19 pandemic and an overall chip shortage — tiny drivers needed for LCD screens are causing headaches across industries

While the recent chip shortage makes most consumers think it must be microprocessors – the brains of personal computers – that are causing the most recent supply headaches, it turns out that a tiny, $1 chip is wreaking the most havoc in the PC market.

The chips are called liquid crystal display, or LCD drivers, and are used in monitors, PCs, laptops, automobiles, smartphones, and nearly all products with a digital LCD panel, giving instructions to the pixels. While the chip shortage has been the talk of the semiconductor industry, little-known integrated circuits, or ICs, are playing a much bigger role in the shortage than their more expensive brethren.

“The No. 1 component in shortage is a component that goes into the panel, the driver IC,” said Linn Huang, an analyst who covers personal computers at IDC.

“Anything with an LCD panel, a TV, a phone or a tablet, but notebooks predominantly, you will need a chip that has an LCD driver, telling the panel what pixel to light up or not,” said Shane Rau, an IDC analyst who covers semiconductors. He said smartphones and TVs are both are experiencing LCD shortages, but the pain of the shortage is being felt by the purchasers of notebook computers, which have become hot items.

“The more of a hot potato it is, people want to get it to market, to earn their $500 or $2000,” he said. “That is more of an opportunity lost than holding back a lower cost phone.”


HP Inc. HPQ, +0.10% Chief Executive Enrique Lores confirmed the issue just last week, at the Bernstein Research Strategic Decisions Conference. When asked by Bernstein analyst Toni Sacconaghi what components are currently the most constrained and putting the most pressure on the company, the first one cited by Lores was LCD drivers.

“Today, the situation on processors has significantly improved,” Lores said. “And now, we see the biggest shortages in panels, not driven by the glass, but driven by the components that panels used.” He added that other low-cost components, such as Wi-Fi controllers, were also a problem.

The factors behind the overall global semiconductor shortage are many and varied, from the U.S. – China Trade war to the COVID-19 pandemic to the overall structure of the semiconductor industry. The result is some shortages, and rising prices. The shortage of LCD drivers has already affected the prices of televisions.

“In the case of TV panels, prices have gone up by 100%, prices have doubled in the last 12 months,” said Bob O’Brien, co-founder, principal and CFO of DSCC (Display Supply Chain Consultants) in Austin, Texas. “The whole picture of demand was so tremendously distorted by the pandemic, it didn’t matter what the price was, people would still buy.”

Prices for personal computers increased at a record annualized rate of 81% in April, according to the Bureau of Labor Statistics’ monthly U.S. Consumer Price Index report. While that rate fell to 8% in May, in line with overall consumer price increases reported last week, experts see more price increases ahead. Huang of IDC believes prices will begin to rise when the holiday shopping season begins.

“It’s very, very plausible that a same device, spec by spec, could be $100 more expensive,” Huang said. “The risk is it could be even higher.”

In their most recent earnings calls, both HP and Dell Technologies DELL, -1.08%,  mentioned price increases. Dell also referred to inflationary costs of some components. Indeed, the price of the usually low-cost LCD drivers has jumped, but these are prices that start at around $1 a part.

“Pricing varies on the size of the display, the resolution. The higher-end displays need more sophisticated LCD drivers,” IDC’s Rau said. “For something that is so cheap compared to a microprocessor in your notebook — that costs from $50 to $100 — something that is so relatively inexpensive can hold up the shipping of the entire system. That is the crux of the concern.”

O’Brien expects prices to rise in PCs and notebooks. “It’s probably going to take some time, maybe as long as a quarter, maybe, for the dynamic to shift into the PC, but it’s only a matter of time,” he said.

Planning out capacity usage is a big part of the process, and no one could have predicted the huge boom in PC and notebook sales a couple of years ago.

“Two years ago, when they were making plans for LCD drivers they were going to manufacture, they did not plan to have a pandemic,” Rau said. The pandemic disrupted the manufacturing of all semiconductors, as well as their materials, and there have been several other additional events that have disrupted both the manufacturing and the shipping of parts and materials. Power outages and explosions at two glass factories, and the Suez Canal blockage, piled onto what has become an unprecedented situation.


“We have never, never experienced this, never seen this before,” said Jordan Wu, Chief Executive of Himax Technologies Inc. HIMX

Himax is one of the two biggest makers of LCD panels in Taiwan, and Wu explained that the chips are in shorter supply compared with the higher cost CPUs, GPUs or memory chips because the LCD drivers use a much lower end manufacturing processes, which are being phased out the semiconductor foundries that contract out manufacturing services. While microprocessor companies like Intel Corp. INTC, -2.64% and Advanced Micro Devices Inc. AMD, +0.11% are battling over who has the most advanced manufacturing at 10 nanometers, 7 nanometers or lower, companies like Himax manufacture chips at process nodes from 40 nanometers to 150 nanometers.

A nanometer is used to measure the atomic scale and is used in the semiconductor industry to calculate the size of the increasingly minute transistors on semiconductors. The head of a straight pin is approximately one million nanometers across, and the 10 nanometer process, for examples, measures the transistor density per square millimeter.

“Display drivers use mature nodes,” Wu said in a phone interview. “We are a big consumer of mature nodes, that is why we are facing a more severe situation than the others.” Foundries like Taiwan Semiconductor Manufacturing Corp. TSM, -2.80% and United Microelectronics Corp. UMC, -4.98% are investing in building newer manufacturing and converting their older foundries into more leading-edge plants, so no companies will build more facilities using the older nodes.

In the first quarter ended March 31, Himax saw its revenue soar 67% to $309 million, compared with the year-ago period. One big area of growth came from drivers for notebook computers, which climbed 70% sequentially, but monitor IC sales fell sequentially because of foundry incapacity. The company’s stock, too, has seen astronomical growth. A year ago, it was trading at around $3.30. In the past year, its shares have soared over 366% to around $14 today.

As consumer appetite for personal computers and laptops has been surprisingly insatiable during the pandemic, companies had not planned for specific parts, such as LCD drivers, to be in huge demand. The PC has been seeing its biggest growth in years, with world-wide unit growth surging 55.2% in the first quarter of 2021, according to IDC.

“In 2015 to 2018, the consumer PC market was incredibly anemic,” Huang said. “Where we are seeing the astronomical growth right now is all on the consumer and education side.” He added that as consumer buying is expected to slow as more people return to the office, the corporate side will begin to pick up again. “We believe we are looking at strength into 2022.”

For Wu at Himax, there is currently no light at the end of the tunnel. One bright side of the desperate situation of customers is that they are much more open to accepting any engineering changes in the products, or to conducting any testing or qualifying that may be needed for new parts.

“In the past,” Wu said, his customers were notorious for not accepting any engineering changes. “Now they even encourage us to make engineering changes.”

He does not expect the supply/demand situation to be in balance until 2023. “I don’t know how it is going to end,” he said. “In 2023, we will start to see the light.”