BY JIM WALKER
Last week, the Microelectronic Packaging and Test Engineering Council (MEPTEC) held what it hopes to be the first of many semiconductor assembly and test services (SATS) investor conferences. The mood was upbeat as many companies presented their view of their role in the industry and discussed where the industry is headed.
The SATS industry will experience continued expansion in 2004, more than 30 percent increase in revenue over 2003, based on improved supply conditions and continued advances in unit demand and volume.
The revenue situation in the first quarter of 2004 for many companies was fairly strong, considering that the market low for this cyclic SATS industry generally occurs in the first quarter of the year. Stronger gains are still anticipated in the second half of 2004 as demand continues. By the end of 2004, overall SATS utilization rates will be in the 90 percent range, while leading-edge usage will be about 95 percent. The general consensus is for a strong 2004, leading into a strong first half of 2005.
In the total quarterly picture, improvements in overall SATS use — and associated foundry and wafer fab markets — have led to this continued growth. Because substantial amounts of packaging equipment is being ordered and sold, capacity upgrades to newer, more advanced packages will continue — to meet the anticipated demand for the last half of this year and the beginning of next year. These increases are required, because leading-edge (that is, fine-pitch, wire-bonded packages and flip chip) utilization rates have been near max in the past few months.
From a package market driver view, flip chip technology for graphics and advanced microprocessors will continue to grow in 2004, as consumer and automotive markets demand faster speeds. The drive for higher-frequency packaging and wireless products will pressure SATS enterprises to install additional advanced packaging and test capacities, especially in the leadless-lead-frame style of package families. These packages, such as quad flat no-lead (QFN) and small outline no-lead (SON), will see continue rapid growth in 2004 and also be used as replacements for the small outline IC (SOIC) packages and the small outline transistor (SOT) packages.
Demand for PCs will grow and the replacement cycle will continue to increase for the remainder of 2004. In addition, DRAM modules in the single in-line memory module/dual in-line memory module (SIMM/DIMM) format will continue transitioning to 3-D stacking and system-in-a-package (SIP) to meet the higher speeds required by the double data rate (DDR) architecture and the smaller form factor for portable products. In the past, most major SATS companies have stayed away from the DRAM packaging market. This opportunity, however, is now receiving renewed interest by many.
The shortage of capacity for display driver packaging has caused more SATS companies, such as SPIL, to enter this market as packaging prices rise due to capacity limitations while demand blossoms.
The outsourcing of packaging and test, initially adopted by Toshiba, Fujitsu, and more recently NEC, will continue to gain momentum as other OEMs and IDMs in Japan try to redefine their manufacturing strategies.
Thinner die and associated package styles will see continued increase in demand, with bond pad spacing and size continuing to be driven to smaller dimensions.
The development of SATS manufacturing facilities in China is accelerating as market demand increases. Lower manufacturing costs, government incentives and a huge, untapped end market for computers, consumers and telecommunications products will produce a growing semiconductor manufacturing base for many years.
Consolidation of the SATS industry was also a hot topic. The SATS industry generated more than $10 billion in revenue for 2003. There are more than 120 SATS companies worldwide; 24 of these companies had combined packaging and test revenue exceeding $100 million. While there has been some recent consolidation this year of the top players (STATS/ChipPac and UTAC/UTC), more will be forthcoming this year as the outsourcing packaging market grows at almost double the rate of the semiconductor market.
Although it seems like the industry just started growing again a few months ago, it really bottomed in late 2001. The semiconductor market recovery has been underway since then, slowly at first, then accelerating in 2003 and even more this year. The strong second half 2003 sales and increased demand in the first half of 2004 has resulted in many forecasters raising their growth assessment of the worldwide semiconductor industry to 25 percent or more for 2004. As the Semicon West Conference and Exhibition approaches, we will see what the temperament of the industry is. Hopefully we will see consistent growth in 2005 and into 2006, and less of the mood swings that have typified this industry in the past.
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JIM WALKER, vp Research, Semiconductor Packaging and Assembly, may be contacted Gartner-Dataquest, 251 River oaks Parkway, San Jose, CA 95134; (408) 468-8483; e-mail: [email protected].