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 Huawei, ZTE, and the IC and PCB assembly sectors. miniaturization and modularization on Lenovo 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, Jabil’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, Taiwan, 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. Foxconn 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 Flex, Sanmina, and have already merged and streamlined Industries (SPIL), which has also been Celestica, 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 Intel 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 Wistron 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 Pegatron, $3 billion and a leading manufacturer of which serves as an enabler of these indirectly controls AzureWave, a wireless modules for mobile devices. vertically integrated manufacturing wireless module provider, and Kinsus Together, they now offer customers a models. How far up the supply chain Connect, a major IC substrate supplier. complete SiP solution, focused on these companies will go remains to be AzureWave produces wireless biometric touch, sensors, wireless, seen, but MMI has observed that there communication and digital image power management, camera modules, is considerable activity in this space processing–related module products. Its RF front end, and lighting, and currently. main customers include ASUSTeK, encompassing design to manufacturing Jabil Circuit is active in the SiP Pegatron, Google, and Xiaomi. In 2015, and logistical integration. USI claims a module business, as evidenced by its AzureWave became the supplier of the 10–15% global market share in Wi-Fi acquisition of AOC Technologies in 3x3 MIMO Wi-Fi module card for SiP modules (Wi-Fi + Bluetooth + FM), optical networking modules, and other Apple’s iMac and Mac Pro. Also, it and 50% allocation from Apple. internal investments in RF modules and supplied Wi-Fi SiP modules for iPhones Lenovo is another key customer. in semiconductor photonics. and iPads in 2016. Revenue Gross Operating Net Capex / Net Debt / ($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%