Cost Implications of Package Proliferation
09/01/2004
BY HARRY R. ROZAKIS
Although the proliferation of semiconductor packages has been a part of the industry for the past 20 years, the last several years have seen the rate of proliferation accelerate. Several factors are behind this phenomenon, including but not limited to: the requirement for higher-performing and more reliable packages; lower-cost packaging solutions; environmentally friendly devices; the push by both IDMs and SATS companies to differentiate themselves from their peers; and thinner/smaller form factors required by OEMs. One need only look at a list of JEDEC standardized packages to affirm this ongoing proliferation. What is the business and financial impact of package proliferation on semiconductor manufacturers, SATS companies and end users?
To date, we have yet to see a definitive study that includes the cost impact of package proliferation. We suspect that an in-depth analysis would be daunting and probably reveal the ugly truth about the cost of new packages. The introduction of a new package or incrementally enhanced package is not only expensive to the developer of the package, but it also accounts for increased costs throughout the supply chain. These costs include the actual development of the package, qualification of the package (both internal and external), initial tooling by the semiconductor manufacturer and/or SATS company, qualification and tooling at the EMS company or end user, etc. With new packages, there are often material set changes that also contribute to the overall cost.
Historically semiconductor packages were designed by IDMs who had large package development organizations. These were principally reactive engineering groups that were addressing "die in search of a package." Although there are still some IDMs who engage in package development, the majority of this work is now handled by SATS companies, with the real driver being the needs of the OEMs. There is also the emergence of package development IP companies, such as Tessera. Clearly, for many IDMs the elimination of their package development organizations meant a reduction in workforce and lower cost; in actuality, the cost was simply passed on to SATS companies.
SATS companies such as ASAT, Amkor and ChipPAC became proficient in the area of new package development. These same companies developed their own intellectual property (IP). They began to see package development as a vehicle to differentiate themselves from their peers. In many cases the differences were subtle, yet they were present. These differences, however, carried and still carry with them many added costs for all parts of the supply chain. The tooling costs alone for changes in package technology are enormous.
Differentiating themselves from their peers is not the key driver for SATS companies to develop new packages. The fact is that the dynamics of the end markets have dramatically changed during the past 12 years, driving the need for packages with added performance characteristics and alternative form factors. Cell phones, GPS systems, Internet applications, wireless, etc. and the "green" movement continue to contribute to the development of new package technologies. The need for greater functionality has driven technologies such as SiPs, stacked die, wafer-level packages and high-thermal-performance packages.
We operate in an industry that is cost driven. Our business constantly demands higher value at lower cost. SATS companies and IDMs alike are being pushed toward lower-cost package solutions, but the act of developing lower-cost solutions is responsible for added costs throughout the supply chain. Whether it is the material supplier developing a "green" molding compound; the series of quality and reliability testing that is executed by the SATs provider, semiconductor manufacturer, EMS company, or OEM; or the related tooling required to bring up a new package, each adds cost.
Unfortunately, there is always a cost associated with change and we are in an ever-changing business. The challenge is for all of us, no matter what discipline we support, to manage package proliferation. Managing the situation means having to quantify across the supply chain the true cost of a new package. It also has to be comprehended by the OEMs, who have become the driving force behind new package development. We should never lose sight, however, of the fact that standardizing packages also has associated risks. Old packages never die; they simply become a part of a growing portfolio of packages. The challenge to our business is how we manage package proliferation and still manage the cost of new package development and implementation.
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HARRY R. ROZAKIS, CEO, may be contacted at ASAT Holdings Ltd., QPL Industrial Bldg., 138 Texaco Road, Tsuen Wan N.T., Hong Kong; 852 2408 7811.