Vol. 1, No. 1 April 2017 Developments in Advanced Packaging Lead to a New Generation of Suppliers Preliminary OSAT Market Shares, 2016 We are witnessing a trend toward Because these methods of flip chip TAM = $27.7 billion modularization of subsystems for mounting are directly compatible with smartphones, which will, no doubt, surface-mount technology, the assembly ASE spill over to other digital product process now uses both dedicated flip 19.2% Amkor categories as well. Given demand for chip bonders and integrated SMT SPIL thinner and lighter form factors, OEMs placement platforms that combine die- 36.1% JCET increasingly require design flexibility bonding and chip-mounting functions. PTI ChipMOS and faster time to market, as well as This combined IC packaging and 14.0% more flexible and integrated assembly SMT workflow is being used in the Chipbond processes that lower costs. production of FCIP-related SiPs, THT Tongfu Apple is just one of the brands including DRAM and MEMS, as well Carsem 1.2% 9.4% aggressively looking to embrace such as embedded devices. Therefore, Others 2.4% modularization. By increasing the advanced PCB assembly technology is 5.7% 2.8% 2%5.3% number of SiP modules per device, moving upstream into the IC packaging 1.9% important efficiency gains can be world with mixed interconnect Source: NVR made. The same goes for further technologies that address converging component integration into flexible and increasingly modularized SMT and Increasingly, OEMs/IDMs like Apple and circuit assembly, embedded antennas, microelectronics assemblies. Samsung work directly with foundries and etc. Meanwhile, a new generation of Clearly, digital applications, OSATs to reach a higher level of integration module manufacturers is emerging to particularly smartphones and wearables, between wafer, package, and substrate. And follow up on this trend, involving both are the driving force behind Chinese OEMs such as , ZTE, and the IC and PCB assembly sectors. miniaturization and modularization on are building their own ecosystems, First, let’s define the “3D IC the die level, be it in the form of 2.5D asserting firm control over integrated design Integration Market.” These devices stacks, 3D TSV, or intermediary steps manufacturing, fabless design, foundry, include wire bonded, stacked chip such as SiP. Yet automotive and outsourced assembly and test, and PCB assembly solutions, but also systems in package industrial electronics will reinforce this operations. In essence, 3D IC integration (PoPs, PiPs, MCMs, and stacked trend, supported by the adoption of the triggers widespread industry consolidation. WLPs). This semiconductor product Internet of Things, which puts an Building the new supply chain involves category also incorporates embedded additional premium on reduced capex, considerable M&A activity, aimed at critical devices, both passives and die. materials costs, labor costs, cycle time, control points across the value chain, to generate Assembly processes used today in this and floor space. future flows of revenue and opportunity. particular segment are either wire bond (74%), wire bond and flip chip (11%), all flip chip (14%), or flip chip and Some articles in this issue TSV (1%). Driven by the growing Cover Story…………………………………………………………………………..…………….1 popularity of stacked packages and Developments in Advanced Packaging Lead to a New Generation of Suppliers SiPs, flip chip interconnect and the Industry News…………………………………………………………………………………..……………4 emerging TSV technology will gain OSAT Growth and Challenges………………………………………………………………………….5 share from wire bond, and will reach Quarterly Results………………………………………….………………..………..…………………….7 about 35% by the end of 2020. The table at the bottom of this page ASE, also, is the majority partner in a In an interview, Dan Gamota, ’s shows five-year averages of the joint venture (JV) with Japan’s TDK in Vice President, observed that “EMS and revenues, growth, and profitability of Kaohsiung, , to manufacture IC IC packaging is an area that we are the top 15 foundries, along with the top embedded substrates, utilizing TDK’s actively observing and have been 30 OSATs, EMS/ODMs, and back-end SESUB technology, which can realize a watching for quite a while. semiconductor production equipment 60% reduction in the size of PMIC Miniaturization is creating opportunities (SPE) vendors. SPE suppliers have boards. Previously, most of the in different domains such as been consolidating in a low-growth individual process steps used in communications and networking, optics environment where product and process embedded technologies were done by and cameras, automotive, consumer complexity have gone up faster than the discrete semiconductor companies, with lifestyle products, wearables, aerospace, productivity improvements of their parts being shipped around the world. and healthcare, which are all benefiting tools. Some EMS providers can afford Thus, ASE and TDK have integrated, from miniaturization and module to look upstream to the OSAT world in front to back, the entire process from integration. In some cases, we develop order to move up the technology curve bumping, to substrate, all the way up to the capabilities in-house and in other and beat razor-thin margins. And many assembly. The JV company may also situations we are better served through OSATs may want to stop worrying provide part of TDK’s production M&A activities.” about price erosion, and get some help capacity for IC embedded substrates. In 2015, Jabil also expanded its funding the capex required to capture More than any other company, diversified integration capabilities by margin from the foundries. seems to be taking the lead in acquiring Kasalis, a leading active Back-end semiconductor and SMT building a vertically integrated mixed alignment provider for camera and equipment vendors like ASMP and business model in its recent bid to gesture-recognition modules. Siemens, and K&S and Assembléon acquire Siliconware Precision Others, including , Sanmina, and have already merged and streamlined Industries (SPIL), which has also been , have quietly initiated product portfolios and supply chains to pursued by ASE. Foxconn clearly wants semiconductor packaging assembly and extend their market reach and capture to position itself as the leading supplier test projects, responding to the need of higher margins. Some are now shipping of both EMS and IC module packaging high-profile OEMs and IDMs for 20–25% of their equipment to clients in services, and control and dominate the smaller, lighter, and faster packaging the IC assembly industry. Customers revenue real estate that comes from solutions. Also, many more ODMs are include foundries such as TSMC, IDMs higher margin IC packaging services. exploring modules and are pioneering in like and Micron, OSATs Previously, it acquired ShunSin SiP, an area that traditionally has been (Amkor, STATS ChipPAC, and Technology, an SiP module dominated by OSATs. They seek to Signetics), PCB manufacturers (AT&S, manufacturer of RF power amplifiers, develop new or hybrid manufacturing LG Innotek, and Unimicron), and LNA and MEMS products, optical models capable of contributing to faster emerging modules players such as Nari transceivers, and solar photovoltaic time to market and lowering cost by Technology and NeWeb. concentrator modules. SiP accounts for creating miniature SiP modules. This is Likewise, we have seen early merger 85–90% of its revenue. Apple, Avago, to be done all under one roof, rather activity in the OSAT and EMS space. Qorvo, and Skyworks are among its than by three separate operations, as is ASE Group (ASE) owns Universal main customers. currently the case. Scientific Industrial (USI), a global Evidently, the need for ASUSTeK, which has a strategic EMS provider with annual revenue of miniaturization requires lower cost, ownership position in , $3 billion and a leading manufacturer of which serves as an enabler of these indirectly controls AzureWave, a wireless modules for mobile devices. vertically integrated manufacturing wireless module provider, and Kinsus Together, they now offer customers a models. How far up the supply chain Connect, a major IC substrate supplier. complete SiP solution, focused on these companies will go remains to be AzureWave produces wireless biometric touch, sensors, wireless, seen, but MMI has observed that there communication and digital image power management, camera modules, is considerable activity in this space processing–related module products. Its RF front end, and lighting, and currently. main customers include ASUSTeK, encompassing design to manufacturing Jabil Circuit is active in the SiP Pegatron, , and Xiaomi. In 2015, and logistical integration. USI claims a module business, as evidenced by its AzureWave became the supplier of the 10–15% global market share in Wi-Fi acquisition of AOC Technologies in 3x3 MIMO Wi-Fi module card for SiP modules (Wi-Fi + Bluetooth + FM), optical networking modules, and other Apple’s iMac and Mac Pro. Also, it and 50% allocation from Apple. internal investments in RF modules and supplied Wi-Fi SiP modules for iPhones Lenovo is another key customer. in semiconductor photonics. and iPads in 2016.

Revenue Gross Operating Net Capex / Net Debt / ($M) CAGR Margin Margin Margin Sales Equity FOUNDRY $2,250 11.6% 32.4% 23.4% 20.1% 31.5% -5.9% OSAT $887 3.3% 17.8% 8.0% 4.4% 17.1% 29.4% EMS $6,635 2.6% 7.4% 2.9% 2.2% 1.8% -14.6% SPE $1,374 -5.5% 25.2% 7.3% 4.9% 4.4% 9.2%

Source: NVR 2 Manufacturing Market Insider—3DICIM, April 2017 Meanwhile, Kinsus has gained Wistron NeWeb (WNC), which designs On the other hand, EMS suppliers have significant traction in the and manufactures wireless connectivity good ability to purchase and manage communication IC market, involving products aimed at the smart home, materials through the supply chain, can FC-CSP, WB-CSP, and SiP. Its major automotive connectivity, and mobile provide components from multiple sources, customers include , communications markets. and have high-throughput SMT machines Broadcom, Altera, Xilinx, and Further, TSMC and capable of bare die, flip chip bonding, and MediaTek. jointly control Cyntec, a leading passive device placement. There is no has been component maker for miniaturized and technical reason why EMS companies could building a strategic relationship with highly integrated products. Cyntec, the not perform SiP and embedded die ChipBond, which also controls world’s largest notebook power choke assemblies. Chipmore, both OSATs. In addition, maker, successfully penetrated the Vertical integration has been a consistent Compal controls Arcadyan, previously communication arena, including tier-one industry trend over the last decade. As a JV company owned by Philips and and Chinese handset makers, by mentioned, there has been a major battle Accton, which provides broadband supplying 0201/01005 resistors, small raging between ASE and Foxconn over the , multimedia and wireless chokes, RF components, etc. assets of SPIL, while the industry is technology, and wireless equipment and Finally, there is , preparing for a volume ramp-up of fan-out devices to telecom operators and which controls Quanta wafer-level packaging (FO-WLP), which consumer electronics vendors and Microelectronics (QMI), a company will probably materialize in 2018. SPIL has retailers. Major products include that designs and manufactures SiP been evaluating various vertical cooperation broadband (AD, IP-STB, and LTE, 60– modules for handheld devices, PCI-E opportunities since 2010 and ASE has been 65% of sales) and AP/gateway and Wi- modules for PCNB, mini-PCI modules exploring growth potential, focusing on its Fi modules. for embedded applications, and USB EMS and testing and packaging capability. Compal also works with Aptos, dongles. QMI also offers highly Before the introduction of SiP, the key previously a JV company owned by integrated solutions with Wi-Fi, EMS process was to mount components UMC and Hon Hai, in which Bluetooth, GPS, and DVB-H functions onto PCBs, enabled by surface-mount now holds a major stake through in a single module. technology. Upstream and downstream Global NAND Flash, its second largest So, who will assemble these SiPs? alliances can help generate potential fab. Aptos is mainly engaged in Currently, the leading suppliers are the synergies with OSATs and the development packaging and testing of NAND flash– OSATs, of which ASE is the market of SiP and other semiconductor modules related products and expanding into the leader (see chart showing OSAT market underlying innovative products such as the microSD assembly field. Through share, page 1). These subcontractors are next iPhone. innovative research and development, familiar with the design tools for Aptos has also successfully developed modules or packages, including electrical In the next issue, MMI—3DICIM will and integrated various system-in- and thermal modeling and antenna focus attention on Samsung, LG package technologies and applications design, and have a history of obtaining Electronics, , Toshiba, , in the past few years. die from many sources. Also, they have and the China axis, particularly companies Other examples include Acer, the fine-pitch wire, die, and flip chip such as BYD, China Resources, China cradle of TSMC, which has a strategic bonding capabilities, and provide EMI Electronics, Datang, and Nantong Huada relationship with Wistron and Qisda. shielding and package test capability. Microelectronics.

OEM IDM FABLESS FOUNDRY PCB OSAT HYBRID EMS ASE Group is moving downstream into the EMS world (USI) and upstream into the embedded PCB world (TDK), while pursuing vertical integration in the OSAT space (SPIL) and diversification into modules territory (AcSiP) to expand its market.

OEM IDM FABLESS FOUNDRY PCB OSAT HYBRID EMS Foxconn/Hon Hai is aggressively moving upstream from the traditional PCB assembly world into IC modules (ShunSin), embedded PCBs (Zhen Ding), and even IDM/OEM to pursue higher margins. Source: NVR Manufacturing Market Insider—3DICIM, April 2017 3 Industry News the SEMI Generic Model (GEM) for Jim Walker Discusses Communications and Control of New Semiconductor Standard Proposed to Link Manufacturing Equipment,” he said. Gamota called for adopting a version of the Industry Business Models Fabs and EMS Facilities GEM standard because technology is Jim Walker, previously with The industrial Internet of Things is evolving faster than companies’ ability to Gartner, recently gave a plenary talk poised to take a step linking the wafer fab start on something this fundamental from at the IMAPS Device Packaging to the PCB factory. scratch. Conference on the state of the As contract manufacturers move beyond The IPC packaging trade group recently . His processes such as wire bonding to conducted a survey on the topic through its presentation contained some bumping, they are starting to buy connected-factory subcommittee. A key interesting perspectives on emerging equipment used in wafer fabs. The shift is takeaway was the need for standards that new business models. motivating vendors to call for the keep up with the accelerating pace of Projections for 2020 show wireless electronics manufacturing service (EMS) technology change. and computer will still account for sector to adopt automation standards The SEMI trade group is sharing the about 50% of the overall market already in use in fabs. survey results with PCB partners in activity; automotive, storage, and “EMS companies continue to increase Taiwan, Japan, and Korea. It hopes to industrial will show significant growth their manufacturing volume of products organize a roundtable later this year. Last (7–9%) between now and then and with components such as bare die, MEMS, year, the Taiwan group released a proposal account for ~30% of the total market and optical devices, requiring more IC-like for a standard based on GEM. combined. assembly equipment, precision placement A SEMI initiative in smart manufacturing Consolidation will continue: “…with processes, greater cleanliness, and two- is already working on sharing learning and semi companies sitting on $135 billion way communications between tools and extending established models from the in cash and profit margins decreasing, factory systems, blurring the distinction wafer fab to final assembly. there is a need to diversify into new among EMS companies, OSATs, and The group is starting work on a guide to markets.” Specifics include: foundries,” said Dan Gamota, vice ease the integration of advanced – IoT-related M&A activity will drive president of strategic capabilities, automation for chip packaging. It also consolidation in MCU, analog, and engineering, and technology at Jabil formed a collaboration to demonstrate cost sensor technologies. Circuit. savings in the fab from shared – Companies will initiate sales of Some customers say they want the thread development of deep learning software to unprofitable divisions and product of data that follows their products through tackle common problem areas. lines to prepare for M&A. the design and fabrication stages to “Automating a packaging facility is an – China will continue to buy or invest continue to flow through to final systems overwhelming task to start,” said Hem in US and EU companies, even as assembly. Takiar, vice president of packaging governments impose restrictions. “All of this now demands production engineering at SanDisk, who led the effort The industries’ maturation will tools that can communicate using a to automate SanDisk’s packaging result in traditional business model standard protocol,” Gamota said. “It could operation. “Integration of communication changes. serve the industry best if we started with with suppliers and customers has to be an OEMs and electronics brands are something established that has shown its integral part of factory automation,” he being bypassed by a direct relationship capacity to evolve, like a light version of said. between the ODM/EMS and a non- electronics brand owner/buyer who could be in any industry. This model emerged with operator-branded handsets, although those might be recognizable as Nokia or . This (brand) direct-to-ODM/EMS business model is good for chip suppliers but bad for traditional electronics companies. Further, chip companies are being bypassed by a direct relationship between the foundry and the EMS/ODM company and the OEM— the OEM direct model. For example, there could be chips designed by Apple or Facebook and manufactured by TSMC.

Manufacturing Market Insider—3DICIM, April 2017 4 Walker specifically suggests we keep an New Markets Grow in Importance vs. Smartphones eye on Hon Hai (Foxconn), which (Credit Suisse) appears to be building strong and broad manufacturing capabilities through acquisitions of companies like Japan’s Sharp and is currently bidding on the Toshiba memory business. Packaging accounts for almost 17% ($53 billion) of the $265 billion electronics IC market. By 2020, 55% of all packaging is expected to be done at OSATs, with foundries like TSMC (and maybe others soon) becoming competitors with their own wafer-based packaging offerings, like InFO. Walker sees a bright future for IoT packaging, but cautions that it is composed of many small to midsized applications, not one big one like the smartphone, and thus will require many custom packaging solutions.

OSAT Growth and in 2017, up from $27.7 billion in ownership in J-Devices, Japan’s Challenges 2016. In total, capital spending for the largest OSAT, from 65.7% to 100%. Apple’s A10 is housed in TSMC’s OSATs alone is expected to reach Recently, Amkor signed a deal to high-density fan-out packaging $2.4 billion in 2017, down 10% from acquire NANIUM, a move that technology, dubbed Integrated Fan-Out 2016, according to Pacific Crest expands Amkor’s efforts in fan-out. (InFO). This is prompting the OSATs to Securities. Among the OSATs, ASE’s In 2015, JCET, China’s largest race each other and develop similar capital spending is expected to be OSAT, acquired Singapore’s STATS packages for smartphones and other higher in 2017. Amkor’s capex is ChipPAC, a move that propelled China applications. But most other smartphone expected to be flat. The big spender is into the upper ranks of the OSAT OEMs haven’t jumped on the fan-out China’s JCET group, which plans to business. Also, Tianshui Huatian bandwagon just yet. Fan-out provides boost its capital spending by 20% in Technology, China’s second largest more I/Os than existing solutions, but it’s 2017. OSAT, acquired FlipChip also more expensive. Customers insist that the OSATs cut International. System in package (SiP) and other their prices by 2–5% per year. “In In 2016, Nantong Fujitsu, a Chinese segments integrating multiple dies in a order to put the capex in, you must OSAT, acquired an 85% stake in single package are also projected to grow have a bigger revenue base. The AMD’s packaging and test operations in 2017. “The revenue growth rate for the investments that you are making are in Asia. And Tsinghua Unigroup last OSAT industry is expected to be higher also more expensive,” said E. Jan year formed a JV with ChipMOS, a going forward, driven by the emerging Vardaman, president of TechSearch. Taiwan OSAT. Yet Tsinghua’s recent demand for SiP solutions,” said Scott The increase in costs fuels M&A to efforts to buy a stake in Taiwan’s Sikorski, vice president at the STATS support the development, Powertech were scrapped. ChipPAC/JCET group. manufacture, and commercialization The overall IC market is projected to of expensive package types. 2.5D Die Stacking grow by 4.7% in 2017, compared to 1.3% ASE, Amkor, and several According to Raman Achutharaman, in 2016. The total IC packaging and test companies in China are the most corporate vice president at Applied service market, which includes OSATs, active players in the M&A arena. Materials, packaging can be divided foundries, and IDMs, is projected to reach ASE is still in talks to merge with into three main categories: high-end $56.6 billion in 2017, up 8% from 2016, SPIL. Under the plan, the two technologies like 2.5D/3D; midrange according to NVR. Of that figure, the companies will form a holding like SiP and WLP; and low cost like IDMs’ in-house packaging and test sector company. Last year, ASE invested wire bond. is projected to have a share of $26.3 $60 million in Deca, a subsidiary of For years, the industry has been billion in 2017, up from $24.7 billion in Cypress. Deca is a developer of fan- working on 2.5D to boost the 2016. The OSATs’ packaging and test out packaging technology. bandwidth in devices which include a revenue is projected to reach $30.3 billion In 2016, Amkor increased its package, interposer with through- silicon vias (TSVs), and dies. Manufacturing Market Insider—3DICIM, April 2017 5 2.5D and 3D stacking make sense as it According to STATS ChipPAC’s Whether FO-WLP can accelerate its becomes harder to “put everything on a Sikorski, “New OSAT TAM for fan- development depends on yield and cost. single system-on-chip (SoC) amid soaring out WLP will be in the area of SiP. With sufficient improvement, design and manufacturing costs at leading- These designs will support complex companies like MediaTek, HiSilicon, edge nodes. A portion of the road map now functionality, especially for mobile Oppo, and Vivo will join the requires multi-die modules,” said David applications and emerging markets, bandwagon, and FO-WLP will likely McCann, vice president of packaging R&D such as IoT, wearables, MEMS, sensor see an explosive expansion. 2017 and operations at GlobalFoundries. modules, and infotainment.” In WLP should be the year for trials with mobile Although 2.5D has gained traction in fan-in, the I/Os are placed over the customers, while 2018 will be the year high-end applications, such as FPGAs, solder balls. These packages are for volume deployments, though graphics chips, and networking limited to about 200 I/Os and 0.6-mm fortunately we do not see TSMC applications, the big issue in becoming a profiles. They are low-cost solutions extending into advanced packaging mainstream technology is cost. Still, the with small form factors, ideal for beyond its InFO package for Apple in market for TSV technology will grow at a analog chips, power management ICs, 2017. rate exceeding 10% over the next five and RF devices. Smartphone makers years, according to Yole. are happy to adopt them. Smartphone Shipments by Fan-in is running into competition SIP and WLP against SiPs, however, as they Taiwan OEMs, ODMs to WLP involves packaging an IC while it increasingly incorporate power Decline 40% in 1Q17 is still on the wafer. Basically, WLP management and RF devices. Whilst DigiTimes reports that shipments of involves two technologies: chip-scale proliferating in the mobile market, smartphones by Taiwan-based brand packaging (CSP) and fan-out. In fan-out, more of the packages typically tied to vendors and ODMs are expected to individual dies are embedded in an epoxy WLCSP are moving into the multi-chip decline 39.6% year on year to below 10 material. The interconnects are fanned out modules related to SiP. Integrated million units in the first quarter of 2017. in the package, enabling more I/Os. Fan- passive devices are ending up inside Taiwan’s brand vendors and ODMs out does not have an interposer, making it SiP modules as individual components shipped a total of 13.22 million cheaper than 2.5D. rather than standalone WLCSP. This, smartphones in the fourth quarter of Traditionally, smartphone OEMs have in turn, has prompted analysts to lower 2016, up 7% q-o-q but down 26.3% used package-on-package (PoP) forecasts for fan-in packages from 9% year on year. technology, which involves stacking a to 6% from 2015 to 2021. Most clients of Taiwan’s ODMs will memory package on top of an application hold back their orders in the first processor package. Since it runs out of Wire Bond Keeps Stitching quarter. Mobile Communications steam at thicknesses of 0.5 to 0.4 mm, Traditional wire bond packages still will reduce its orders significantly for Apple moved from PoP to TSMC’s fan-out make up 82% of the total chip old models in the first quarter due to package in the iPhone 7. Still, until the cost packaging market, except for the MCP product transition, while shipments of drops, many OEMs may stick to PoP, so segment. BGAs, quad flat packages, new models by ODMs Compal the fan-out market for smartphones is and a plethora of legacy packages are Electronics and Arima limited. For this reason, TSMC and the based on wire bond. In total, the Communications to the Japan-based OSATs are pushing FO in a number of growth rate for wire bond packages is vendor are unlikely to pick up until the markets beyond the smartphone. 6%, according to Kulicke & Soffa, a second quarter. The total FO market, including power supplier of wire bonder equipment. Wistron will receive no more new management, baseband, automotive, The fan-out wafer-level package is orders from BlackBerry starting in the consumer, and industrial applications, is considered an intermediate option first quarter, as the Canada-based expected to grow from $244 million in between the 2.5D and the organic vendor has closed its handset hardware 2014 to $2.5 billion by 2021. substrate system in package (SiP). business, while orders from LG Electronics to Arima in the first quarter will also be lower than those placed a quarter earlier. For all of 2016, smartphone shipments by Taiwan’s brand vendors and ODMs declined 32.6% year on year to 51.59 million units, the lowest level in five years. ASUSTek Computer, HTC, and Compal were the three makers that saw their yearly shipments surpass 10 million units each in 2016, with ASUSTek taking the top spot.

Manufacturing Market Insider—3DICIM, April 2017 6 Quarterly Results progress. Regulatory filings have been Powertech Technology: approved by the Taiwan FTC, and are Rebound Expected After Advanced Semiconductor now under review with China’s 1Q17 Seasonal Decline MOFCOM. Management is also PTI’s sales were up 7% q-o-q in Engineering Eying Market cooperating with the US FTC’s 4Q2016, with strength across the investigation. The company still Share Gains board. Gross margin was up to expects to close the deal in 2017, In 4Q2016, ASE’s consolidated 22.7% on higher utilization, subject to approval by ASE, SPIL’s sales grew 6% q-o-q, with the back-end although operating margins went shareholders, and relevant authorities. business up 1% q-o-q on some upside down to 16.4% on higher R&D across end markets. EMS was broadly in expenses and capacity ramp-up. line with a +11% q-o-q increase on SiP Amkor Technology: Sub- 1Q2017 will probably see a q-o-q ramps for Apple. Profitability was seasonal 1Q17, Likely decline due to a seasonal slowdown higher, with consolidated gross in logic IC assembly and fewer margin/operating profit margin at Recovery in 2Q17 working days, offsetting its ramp-up 19.9%/10.5%, which management Sales improved slightly in 4Q2016, of Xian DRAM production and attributed to its focus on lifting SiP with profitability trending up. Sales healthy NAND demand. Momentum profitability. For 1Q2017, ASE is were reported at US$1,022 million, should pick up in April and grow in guiding its back-end business down down 6% q-o-q due to seasonal 2Q2017. from the normal slowdown in both correction and inventory adjustments PTI management hopes to Android and iOS. The EMS business, in smartphones, offsetting more stable outperform its back-end growth also, will decline, but it is balancing its consumer, networking, and projection of 7% in 2017. The production load better through the year. automotive earnings. GMs were company should continue to ASE is rebalancing its SiP business basically flat at 19.7%, excluding a outgrow the industry, with drivers (three key projects) in order 250-basis-point insurance recovery, including (1) the ramp-up of Xian to improve profitability and gain new which boosted GMs to 22.2% versus assembly with Micron from 5% of customers in 2017. The company 19–23% guidance. sales to 10% of sales by mid-2017; expects to return to market share gains Based on company guidance for (2) the addition of Intel turnkey in 2017 in advanced packaging (flip chip 1Q2017, sales will probably come in assembly, test, and SSD SMT and bump wafer-level packaging). at –8–16% q-o-q due to inventory assembly (~3–5% sales); (3) the 3D- Management believes ASE will corrections and a seasonal lull in NAND ramp-up from Toshiba; and outperform +3–7% y-o-y semiconductor China’s smartphone market. On lower (4) ongoing margin improvement growth in 2017, and is not seeing the utilization and higher operating and logic capacity expansion at its softness linger into 2Q17, as reported by expenses from the K5 ramp, gross subsidiary, Greatek. TSMC. Some wafer supplies may have margin and operating margin will been built up in response to the tight 28- likely decline to the 15%/3% levels, Jiangsu Changjiang nm stocks through last year causing with net near break-even. slowdowns at the foundry vs. the back Business should normalize after Q1, Electronics Technology end; MediaTek noted that its inventory and Amkor’s target for 2017 could Reviews Placement Plan slightly outgrow semis due to greater will increase exiting 1Q2017. JCET guided net income for 2016 Chinese sales (5% of sales in 2016, ASE expects higher capex spending to of Rmb99–114 million, up 90– compared to 30% for Taiwan peers), result in bigger investments in fan-out 120% y-o-y from a low base of and automotive sales (25% of sales), wafer-level packaging and copper pillar FY2015. The miss from consensus plus adding fingerprint IC customers bumping and intends to expand FO- is likely due to the higher and SiP (20% of sales) with rising RF WLP capacity from 10k wpm to 25k expectation of STATS and SiP content. wpm by 2017, compared to business. Improved growth for In February, Amkor announced it JCET/STATS’ 36k wpm eWLB STATS in 4Q2016, excluding Apple would acquire NANIUM in order to capacity. SiPs, was supported by recovering strengthen its FO-WLP capabilities. ASE is reportedly among the back-end major customers’ orders. NANIUM has a solid 12" WLP suppliers for the upcoming iPhone Singapore STATS almost reached production line. The company will series, and is expected to perform break-even in October. JCET has add 1% in sales by adding relatively strongly compared with other successfully phased in HiSilicon NANIUM’s single-die fan-out to its back-end houses during the peak season, orders to Korea STATS and portfolio in 2Q2017. according to MMI’s sources. ASE expected mass production in Capex for 2017 will be maintained estimates that orders from Apple will be 2Q2017. This could improve Korea at US$500 million, implying about more than 60 million ICs per quarter, the STATS’s utilization and mix in US$200 million free cash flow and sources noted. 2H2017. The ASE–SPIL deal is still in some debt repayment.

Manufacturing Market Insider—3DICIM, April 2017 7 ASM Pacific Technology including flip chip and 12" bumping, and Tianshui Huatian gradually move in two main directions: Technology: Fingerprint Benefits from Multiple FO-WLP and SiP. and Margin Improvement Upgrade Trends Based on current camera demand trends, analysts forecast 64% growth of TSHT revenue reached Rmb5.5 The introduction of iPhone 8 should camera image sensor (CIS) equipment billion, while net income was Rmb387 drive demand for finer-pitch and revenues from 2016 to 2018, driven by million, beating expectations thanks to smaller-form-factor components and dual-cam upgrades in Apple and Chinese higher utilization and better margin. printed circuit boards. This will smartphones, further camera demand Q4 saw new capacity additions, a trigger a replacement cycle for from advanced driver assistance systems higher utilization rate, and strong surface-mount technology (SMT) (ADAS) and video surveillance, and fingerprint orders, positive drivers for equipment, starting in 2017. share gain in customers. This should growth in 1Q2017. Capex is expected ASMP will benefit by gaining share support ASMP’s offering of camera to remain flat in 2017 for advanced in China’s SMT market for high-end image sensor packaging and camera packaging. The LED business will smartphones. Management expects module assembly equipment. probably turn around in 2017. the SMT division to contribute In 4Q2016, revenue declined U$208 million in sales revenue, moderately (by 1% q-o-q), but was which adds up to 18% y-o-y growth Publisher: Randall Sherman supported by Huawei Mate 9 in SMT revenue for 2017. Gross Senior Analyst: Frank Klomp fingerprint demand and full production margin should improve due to Editor: Anna Reynolds capacity in Kunshan. Gross margin insourcing efforts and merger improved, thanks to better mix and synergy paying off. Board of Advisors: To be determined higher utilization, the effects of which Meanwhile, the market for will linger in 1Q2017. Positive growth advanced packaging (fan-out WLP drivers are the 20–30% capacity and SiP) will grow about 18% Manufacturing Market Insider—3DICM is increase in 2016, improving market through 2018. OSAT expansion in a monthly newsletter published by New Venture Research Corp., 337 Clay St., Suite demand for fingerprint and MEMS. flip chip and bumping demand should drive 10% growth for ASMP’s IC 101, Nevada City, CA 95959. Phone (530) Capex is expected to remain flat in 265-2004, Fax (530) 265-1998. Copyright assembly and test equipment in 2017. 2017 versus 2016 (Rmb1.1 billion), 2017 by NVR™. ISSN 1072-8651 given continuous capacity growth in ASMP will likely benefit from Xian and Kunshan in advanced global semiconductor capex trends, The information and analysis presented here are based on sources believed to be packaging. although demand from Chinese OSATs (JCET, TSHT, TFME) may reliable, but content accuracy is not The acquired LED business, MIC guaranteed. The publisher shall not be held decrease significantly in 2017. The Optoelectronics, consolidated as of liable for any business decisions influenced June 2016, registered a loss of Rmb majority of investments in SiP and by this publication. 10–20 million in 2016. Management eWLB were already made in 2016. E-mail: [email protected] expects the LED business to turn Still, management strongly believes around as China’s LED industry further that China’s OSATs will put more Website: www.newventureresearch.com recovers. focus on advanced packaging,

Subscription Form

I want an electronic subscription to MMI – Inside the 3D IC I want a print subscription to MMI – Inside the 3D Integration Market. Email me 12 monthly issues (PDF files) IC Integration Market. Send me 12 printed issues for the annual cost of US$615. for the annual cost of US$715. Payment is enclosed to New Venture Research Corp. Mail or fax to: NVR Corp., 337 Clay St., Nevada City, CA 95959. Phone (530) 265‐2004, Fax (530) 265‐1998. Please bill me. Charge my credit card (see below).

Name ______Title ______

Company ______Phone ______

Street Address ______Fax ______

City/State/ZIP ______Email ______

MasterCard _____ Visa _____ AMEX ______Number______Expires ______

Manufacturing Market Insider—3DICM, April 2017 8