BY JIM WALKER
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While relatively unnoticed, the packaging industry has been slowly but steadily growing over the past 18 months. Most semiconductor assembly and test service companies (SATS) reported increased sales in 2002 compared with disastrous 2001. Bookings and subsequent sales were up anywhere from 10 percent to 30 percent compared with a similar period in 2001, while the month-over-month increases have been mostly in the single-digit realm.
Prices for the assembly of outsourced packages stabilized in the first half of 2002, only to see a brief wave of erosion occur in the third quarter (depending on package type) and then finally stabilize again at the end of the year.
Test prices also followed a similar pattern. Increases in package volumes were seen in most of the packages, with the small-outline package (SOIC), thin small-outline package (TSOP), quad flat package (QFP) and plastic dual inline package (PDIP) leading the way. However, overcapacity and aggressive price reductions resulted in minimal, if any, profitability at most of the SATS companies. For the first time—and indicative of the advanced packaging trend—array and advanced packaging accounted for more than 50 percent of the revenue for many of the major SATS companies in 2002. These advanced packages will continue to grow in 2003 with system-in-package (SiP), ball grid array (BGA), chip scale packages (CSP) and flip chip leading the way.
While profitability remained elusive for many SATS companies in 2002, the growth rate was not. The positive growth of the packaging industry was welcome news after a decrease of more than 34 percent in 2001. Preliminary estimates indicate that SATS market revenue grew to $8.2 billion in 2002, up from $7.14 billion in 2001. While the shift to array and leading-edge packaging is maintaining growth, it is continuing to be more sophisticated and complex. As such, many integrated device manufacturers (IDMs) and OEMs started to outsource again in the latter part of 2002 and as 2003 begins. These IDMs and OEMs continue to conserve their capital for core businesses. They are now more actively seeking to outsource more of their packaging requirements. As the transition to new packages has occurred in recent months, the result has been the return to growth and increased revenue in the outsourcing market.
Packaging Trends
Array packaging (CSP, flip chip and BGA), SIP and stacked (3-D) packaging all have seen increasing growth in the past few months. Of specific interest is the growth of the quad flat-pack, no lead (QFN) family of packages. As the growth in wireless and portable products grows, this CSP-style package is said to be witnessing the fastest ramp-up of any package previously introduced in the industry. This ramp-up comes as the industry transitions away from the larger, more mature SOIC family of packages.
The industry is now in full transition from the first generation of surface mount packages (SOIC, plastic leaded chip carrier [PLCC] and QFP) to the next generation of smaller leadless and bumped families of packages (QFN, CSP and BGA). Also transitioning is the development of the multichip system-in-package (SiP) concept as a lower-cost approach to the system-on-a-chip (SOC).
With 2003 underway, we see stacking of DRAM memory, and more combined applications of memory/application-specific standard products (ASSPs), memory/microcontrollers and radio frequency (RF)/analog developing for the SiP market. The cost saving and faster time-to-market benefits of a SiP that became evident to many customers in 2002 continues to be adopted in 2003.
More wafer-level packaging (WLP) processes are on the horizon in 2003. Production that started on many new package designs in 2002 is now using this new technology. The benefits of reduced testing processes, decreased manufacturing time, lower cost, and a shorter time-to-market for WLP has resulted in this adoption of the SiP approach over the SOC solution.
Packaging will continue to lead the comeback of the semiconductor industry. IDMs and OEMs will increase outsourcing of advanced packages in 2003, resulting in a SATS industry growth of more than 20 percent. Japan will continue its adoption of the outsourcing model, which began in 2001. Test will continue to grow at a faster rate than any of the other outsourced semiconductor manufacturing services.
Jim Walker, principal analyst, may be contacted at Gartner Inc., 251 River Oaks Parkway, San Jose, CA 95134; (408) 468-8483; E-mail: [email protected].