Chipbond and UMC will likely strengthen their product R&D and market penetration via strategic partnership

Leading driver IC OSAT company Chipbond and major foundry UMC announced on September 3 that the two companies established a strategic partnership via a stock swap, through which UMC (and its subsidiary UMC Capital) will hold 9.09% of Chipbond’s equity, while Chipbond will hold 0.62% of UMC’s equity. TrendForce believes that this strategic partnership will not only strengthen the two companies’ presence throughout all parts of the driver IC supply chain, but also kick-start a business model that involves the simultaneous development of RF front-end ICs and power devices in the third-generation semiconductor industry.

TrendForce further indicates that, although Chipbond has traditionally dominated the panel driver IC OSAT package and test industry along with ChipMOS, recent aggressive attempts at seizing market share by major OSAT companies from China have persuaded Chipbond to expand its business to other markets, such as PA (power amplifier) or electronic filter packaging, in order to diversity its previously specialized operations. The strategic partnership between Chipbond and UMC is also noteworthy because demand has been constantly growing in the third-generation semiconductor market.

Most of the predominant companies in the third-generation semiconductor industry are major IDMs based in Europe, the US, and Japan. As for foundries, they generally play the role of fulfilling excess client orders outsourced by IDMs whose capacities are fully loaded.

Regarding the technological competencies of foundries in the power devices industry, Taiwanese foundries (including TSMC, VIS, and EPISIL) possess the competitive advantage in terms of manufacturing processes, while WIN and AWSC are also among the most representative foundries in the RF front-end segment.

Although UMC slightly lags behind some of its other competitors in the aforementioned markets, its subsidiary Wavetek has been actively strengthening its competencies. For the RF front-end segment, Wavetek is making strides towards 5G PA manufacturing by leveraging its existing 4G PA successes. On the other hand, Wavetek is also in the midst of developing its own GaN on Si power devices.

It should be pointed out that the production of back-end components such as power devices and RF front-end remains relatively low in scale. Hence, in consideration of order volumes, profitability, and equipment costs, major OSAT companies such as ASE and Amkor generally are unwilling to fulfill package and test orders for these components, most of which subsequently fall to either foundries or IDMs.

For Chipbond, which is attempting to enter the power devices and RF front end markets, the aforementioned situation spells good news, as Chipbond has to compete with only mainstream foundries and IDMs. In spite of the relatively low volume of client orders, the room for profitability is still there. Second of all, by partnering with major upstream foundry UMC, Chipbond’s third-generation semiconductor packaging and testing capacities can be secured and stabilized.

On the whole, TrendForce believes that the strategic partnership between Chipbond and UMC can be said to result in a win-win situation with regards to both revenue and industrial integration, since Chipbond now receives an infusion of cash that can facilitate its R&D into third-generation semiconductor, while UMC on the other hand also benefits from the partnership as upstream IDMs may now be incentivized to input wafers at UMC’s fabs.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

（Image credit: UMC）