AI Chips and High-Performance Computing (HPC) have been continuously shaking up the entire supply chain, with CoWoS packaging technology being the latest area to experience the tremors.

In the previous piece, “HBM and 2.5D Packaging: the Essential Backbone Behind AI Server,” we discovered that the leading AI chip players, Nvidia and AMD, have been dedicated users of TSMC’s CoWoS technology. Much of the groundbreaking tech used in their flagship product series – such as Nvidia’s A100 and H100, and AMD’s Instinct MI250X and MI300 – have their roots in TSMC’s CoWoS tech.

However, with AI’s exponential growth, chip demand from not just Nvidia and AMD has skyrocketed, but other giants like Google and Amazon are also catching up in the AI field, bringing an onslaught of chip demand. The surge of orders is already testing the limits of TSMC’s CoWoS capacity. While TSMC is planning to increase its production in the latter half of 2023, there’s a snag – the lead time of the packaging equipment is proving to be a bottleneck, severely curtailing the pace of this necessary capacity expansion.

Nvidia Shakes the foundation of the CoWoS Supply Chain

In these times of booming demand, maintaining a stable supply is viewed as the primary goal for chipmakers, including Nvidia. While TSMC is struggling to keep up with customer needs, other chipmakers are starting to tweak their outsourcing strategies, moving towards a more diversified supply chain model. This shift is now opening opportunities for other foundries and OSATs.

Interestingly, in this reshuffling of the supply chain, UMC (United Microelectronics Corporation) is reportedly becoming one of Nvidia’s key partners in the interposer sector for the first time, with plans for capacity expansion on the horizon.

From a technical viewpoint, interposer has always been the cornerstone of TSMC’s CoWoS process and technology progression. As the interposer area enlarges, it allows for more memory stack particles and core components to be integrated. This is crucial for increasingly complex multi-chip designs, underscoring Nvidia’s intention to support UMC as a backup resource to safeguard supply continuity.

Meanwhile, as Nvidia secures production capacity, it is observed that the two leading OSAT companies, Amkor and SPIL (as part of ASE), are establishing themselves in the Chip-on-Wafer (CoW) and Wafer-on-Substrate (WoS) processes.

The ASE Group is no stranger to the 2.5D packaging arena. It unveiled its proprietary 2.5D packaging tech as early as 2017, a technology capable of integrating core computational elements and High Bandwidth Memory (HBM) onto the silicon interposer. This approach was once utilized in AMD’s MI200 series server GPU. Also under the ASE Group umbrella, SPIL boasts unique Fan-Out Embedded Bridge (FO-EB) technology. Bypassing silicon interposers, the platform leverages silicon bridges and redistribution layers (RDL) for integration, which provides ASE another competitive edge.

Could Samsung’s Turnkey Service Break New Ground?

In the shifting landscape of the supply chain, the Samsung Device Solutions division’s turnkey service, spanning from foundry operations to Advanced Package (AVP), stands out as an emerging player that can’t be ignored.

After its 2018 split, Samsung Foundry started taking orders beyond System LSI for business stability. In 2023, the AVP department, initially serving Samsung’s memory and foundry businesses, has also expanded its reach to external clients.

Our research indicates that Samsung’s AVP division is making aggressive strides into the AI field. Currently in active talks with key customers in the U.S. and China, Samsung is positioning its foundry-to-packaging turnkey solutions and standalone advanced packaging processes as viable, mature options.

In terms of technology roadmap, Samsung has invested significantly in 2.5D packaging R&D. Mirroring TSMC, the company launched two 2.5D packaging technologies in 2021: the I-Cube4, capable of integrating four HBM stacks and one core component onto a silicon interposer, and the H-Cube, designed to extend packaging area by integrating HDI PCB beneath the ABF substrate, primarily for designs incorporating six or more HBM stack particles.

Besides, recognizing Japan’s dominance in packaging materials and technologies, Samsung recently launched a R&D center there to swiftly upscale its AVP business.

Given all these circumstances, it seems to be only a matter of time before Samsung carves out its own significant share in the AI chip market. Despite TSMC’s industry dominance and pivotal role in AI chip advancements, the rising demand for advanced packaging is set to undeniably reshape supply chain dynamics and the future of the semiconductor industry.

(Source: Nvidia)

According to TrendForce research, driven by strong demand for 5G mobile phones, base stations, automobiles, and HPCs, the global output value of packaging and testing (including foundry and IDM) reached US$82.139 billion in 2021, or 25.83% YoY. This upward momentum is forecast to continue in 2022, taking output value to US$101.185 billion in 2022, or 23.19% YoY. From the perspective of regional distribution, China’s IC packaging and testing output value in 2021 was approximately US$39.443 billion, increasing 31.7% compared with US$29.941 billion in 2020, becoming the world’s fastest-growing major market in terms of packaging and testing output value.

Shanghai pandemic lengthens overall lead time, hinders China’s packaging and testing growth in 2Q22

In 2Q22, Shanghai was locked down due to the COVID-19 pandemic. Although wafer fabs and packaging and testing plants were still operating normally, the pandemic hindered logistics and the materials required for packaging could not be effectively shipped from Shanghai, affecting transportation efficiency and logistics costs to a certain degree. Overall, China’s packaging and testing industry was not significantly affected by the pandemic in 1Q22 but, in 2Q22, the industry will bear the brunt of the COVID-19 situation, with packaging and testing companies experiencing prolonged overall lead times and sluggish revenue growth.

NEVs and HPCs to become new growth drivers, fabs and packaging and testing companies accelerate deployment

The growth rate of smartphones, a core driving force behind IC packaging and testing output value, is slowing down. Since smartphone shipments peaked at 14.575 million units in 2017, volume has not surpassed this number in the ensuing years. Even though the upgrade from 4G to 5G brought about a wave of replacements, the overall smartphone market has reached maturity, with slowing growth or even negative growth, so its demand on wafer manufacturing and packaging and testing is likewise slowing down.

Aside from mobile phones, growth in HPC and new energy vehicles (NEV) is becoming a new revenue engine. At present, the world’s major automobile production countries are accelerating the penetration rate of NEVs, and packaging and testing companies are also accelerating their investment in the automotive and HPC sectors. From the perspective of fabs, TSMC’s HPC revenue accounted for 41% of total packaging and testing revenue in 1Q22, surpassing mobile phones for the first time and becoming the largest source of the company’s packaging and testing revenue.

（Image credit: Unsplash）

As the global vaccination rate rose, and border restrictions in Europe and North America eased, social activities also began to enter a period of recovery, with the consumer electronics market seemingly ready for the arrival of the traditional peak season in 2H21, according to TrendForce’s latest investigations. At the same time, however, the global supply chain was affected by delays in maritime transport, skyrocketing shipping costs, and component shortages, in addition to already-prohibitive price hikes for certain components in 1H21. Given the parallel rise in both material and manufacturing costs, the market for end products has not undergone the expected cyclical upturn in 2H21. Even so, the overall demand for and shipment of smartphones, notebook computers, and monitors experienced QoQ increases in 3Q21, thereby driving up businesses for major OSAT (outsourced semiconductor assembly and test) companies. For 3Q21, the revenues of the top 10 OSAT companies reached US$8.89 billion, a 31.6% YoY increase.

Certain major OSAT companies experienced a slight dip in their capacity utilization rates due to the ongoing shortage of key components including chips and substrates, as well as the electricity rationing that limited both energy intensity and energy consumption in Jiangsu, Zhejiang, and Guangdong at the end of September. Nevertheless, this dip has had virtually no impact on the OSAT industry because certain OSAT companies shifted their operations to substrate-less packaging technologies and reallocated the previously affected capacities. Hence, TrendForce is bullish on the performance of the OSAT industry in 4Q21.

Market leaders ASE and Amkor registered revenues of US$2.15 billion and US$1.68 billion, which represent YoY increases of 41.3% and 24.2%, respectively, for 3Q21. While both companies had some of their capacities hindered due to the shortage of chips, lead frames, and substrates, ASE had its lead times further extended given that its Suzhou-based fab was affected by China’s power rationing. Notably, as the demand for packaging and testing smartphone APs, network chips, and automotive chips remains strong in 4Q21, ASE and Amkor will continue to expand in the 5G, IoT, and AI end-product markets in 2022.

SPIL is currently aiming to strengthen the R&D operations for advanced packaging technologies at its new fab in Erlin, Changhua, since it will be unlikely to compensate for the loss of smartphone AP packaging business from Huawei in the short run. SPIL’s revenue for 3Q21 reached US$1.04 billion, a 15.6% YoY increase. While KYEC previously suffered lowered capacity utilization due to the COVID-19 pandemic, it has since made a gradual recovery and registered a revenue of US$323 million, a 28.5% YoY increase, for 3Q21, thanks to testing orders for 5G chips from Qualcomm and MediaTek. PTI, on the other hand, primarily benefitted from its DRAM packaging and testing business. The company posted a revenue of US$802 million, a 24.0% YoY increase, for 3Q21. Nonetheless, PTI’s memory packaging capacity will likely undergo a sharp decline going forward, as Intel gradually finalizes the sale of its Dalian fab to SK Hynix by 2025, and the agreement between Micron and PTI regarding the assembly and testing services PTI provides at Micron’s Xi’an fab expires in 2Q22. In response, PTI reallocated some capacities at its new fab in Hsinchu to other strategic priorities such as CIS packaging and FOPLP technologies in 3Q21.

Major Chinese OSAT companies JCET and Hua Tian continued to benefit from China’s pursuit of domestic semiconductor substitutes. The two companies expanded their supply of OSAT services for 5G smartphones, base stations, automotive chips, and consumer electronics. As a result, JCET and Hua Tian registered revenues of US$1.25 billion and US$502 million, representing YoY growths of 27.5% and 57.6%, respectively, for 3Q21. Owing to strong sales by its client AMD this year, TFME recorded a revenue of US$636 million, an impressive 59.8% YoY increase, which represents the highest revenue growth among the top 10 OSAT companies in 3Q21.

Although ChipMOS and Chipbond, which specialize in packaging and testing display panel driver ICs, were affected by the slight drop in small-sized TV panel shipment in 3Q21, they were able to compensate for this loss owing to the gradual increase in packaging and testing demand for such driver ICs as TDDI and DDI. This increase can primarily be attributed to the growing demand for mid- and large-sized TV panels, as well as the ramp-up of OLED smartphone panels, which certain smartphone models began to adopt. For 3Q21, ChipMOS and Chipbond grew their respectively revenue by 32.5% YoY and 29.5% YoY to about US$257 million and US$255 million. At the same time, as IC design companies from the upstream supply chain redirected certain orders to ChipMOS and Chipbond in response to China’s power rationing at the end of September, these two companies will likely reach new revenue records in 4Q21.

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

As the COVID-19 pandemic wreaked havoc on the global electronics supply chain, the packaging and testing operations of mid-range and high-end chips were subsequently confronted with prolonged lead times. This can primarily be attributed to the fact that IC substrate suppliers were unable to raise output or expand their production capacities in the short run in order to meet the skyrocketing volume of client orders. Hence, products that are packaged using BGA (Ball Grid Array), Flip Chip, or SiP technologies, all of which require the use of IC substrates, had their lead times lengthened. Certain IC design companies are therefore considering the feasibility of packaging technologies that do not require substrates.

Regarding the trend of advanced packaging development, technologies such as 2.5D/3D IC, SiP, and FOPLP (Fan-out Panel Level Packaging) remain the current mainstream R&D targets. Given the ongoing shortage of semiconductor components, including IC substrates, FOPLP, in particular, has garnered the most attention among the aforementioned three packaging technologies as it can be operated without substrates. At present, most OSAT companies and other chipmakers have successively invested in FOPLP-related technological and manufacturing development in order to capitalize on potential new commercial opportunities.

Despite FOPLP’s advantage of packaging chips across large areas, technological development remains problematic

Regarding the history of FOPLP development as well as the technology’s evolution going forward, its earliest roots can be traced to existing packaging applications including Flip Chip and BGA. As end-products continued to experience performance upgrades, leading to the number of I/O pins being insufficient for meeting the increase in performance demand, new types of wafer-level packaging technologies such as Fan-in and Fan-out subsequently emerged to fulfill the packaging demands of mid-range chips, high-end chips, and other emergent applications.

Although Fan-in and Fan-out packaging technologies are able to effectively raise the number of I/O pins, they also result in a substantial increase in manufacturing costs compared to previous-generation technologies such as Flip Chip and BGA. For both 8-inch wafers and 12-inch wafers, packaging costs have only been on a very slight downtrend. That is why the packaging industry has placed a top priority on simultaneously lowering production costs while raising the number of chips packaged at once. Hence, FOPLP technology has emerged in response to this demand for large-area packaging technology.

Regarding the actual implementation of FOPLP, a potential solution may be found in wafer-level packaging RDL (Redistribution Layer) designs, such as chip first or chip last. It should be noted that chip first FOWLP or chip last FOWLP processes do in fact serve as feasible concepts for FOPLP development. However, the FOPLP process involves stacking massive amounts of packaging materials and chips together, and their combined weight may lead to such issues as panel warpage. In addition, it remains difficult to maintain a consistent uniformity and yield rate during the FOPLP process, meaning further collaborations and optimizations on the parts of OSAT companies and semiconductor equipment suppliers are necessary for FOPLP to succeed going forward.

（Image credit: Unsplash）

Despite the intensifying COVID-19 pandemic that swept Taiwan in 2Q21, the domestic OSAT (outsourced semiconductor assembly and test) industry remained largely intact, according to TrendForce’s latest investigations. Global sales of large-sized TVs were brisk thanks to major sporting events such as the Tokyo Olympics and UEFA Euro 2020. Likewise, the proliferation of WFH and distance learning applications propelled the demand for IT products, while the automotive semiconductor and data center markets also showed upward trajectories. Taking into account the above factors, OSAT companies raised their quotes in response, resulting in a 26.4% YoY increase in the top 10 OSAT companies’ revenue to US$7.88 billion for 2Q21.

TrendForce indicates that, in light of the ongoing global chip shortage and the growing production capacities of foundries/IDMs in the upstream semiconductor supply chain, OSAT companies gradually increased their CAPEX and expanded their fabs and equipment in order to meet the persistently growing client demand. However, the OSAT industry still faces an uncertain future in 2H21 due to the Delta variant’s global surge and the health crisis taking place in Southeast Asia, home to a significant number of OSAT facilities.

Regarding the performances of individual OSAT companies in 2Q21, market leader ASE and Amkor each recorded revenues of US$1.86 billion and US$1.41 billion, which represented YoY growths of 35.1% and 19.9%, respectively, for the quarter. Both companies benefitted from strong demand for 5G smartphones, notebook computers, automotive chips, and networking chips. In particular, ASE allocated some of its capacities to KYEC (which suffered a drop in its IC testing capacity due to the pandemic) and therefore experienced a surge in its revenue. Also posting a revenue growth in 2Q21 was Amkor, which took second place on the top 10 list owing to the high demand for automotive chips, HPC chips, and 5G handsets released by Apple and other smartphone brands.

SPIL’s revenue for 2Q21 reached US$931 million, a modest 2.3% YoY increase. The company’s relatively muted growth can be attributed to the fact that smartphone IC packaging demand from Huawei, one of SPIL’s major clients, had plunged, while other smartphone brands did not place orders sufficient for making up for this plunge. As previously mentioned, some of KYEC’s testing capacities were adversely affected by the COVID-19 pandemic, resulting in a 6.8% YoY increase in KYEC’s revenue to a mere US$274 million for 2Q21. PTI gradually recovered from difficulties resulting from the closure of its Japanese and Singaporean subsidiaries. For 2Q21, PTI’s revenue reached US$742 million, a 14.3% YoY increase.

Regarding Chinese OSAT companies, JCET and Hua Tian both expanded their capacities in order to meet the massive demand from the domestic 5G telecom, base station, consumer electronics, and automotive markets. While JCET and Hua Tian continue to operate in accordance with China’s goal of achieving domestic semiconductor substitutes, the two companies’ revenues for 2Q21 reached US$1.1 billion and US$467 million, which represented YoY growths of 25% and 64.7%, respectively. It should be pointed out that TFME also benefitted from the aforementioned market demand. TFME’s revenue reached US$591 million, a 68.3% YoY increase, which was the highest increase among the top 10 OSAT companies in 2Q21. TFME’s impressive growth took place primarily because the company is the main OSAT provider for AMD. As AMD captured some of Intel’s market share, both AMD and, by extension, TFME, experienced a resultant revenue growth.

Finally, ChipMOS and Chipbond, which specialize in panel driver IC packaging and testing, benefitted from major sporting events such as the Tokyo Olympics and UEFA Euro 2020. Given the skyrocketing demand for display panels, IC testing demand for driver ICs, including TDDI and DDI, also underwent a corresponding rise. Notably, due to a shortage of packaging materials, ChipMOS raised the price of its packaging services for memory products and subsequently registered a spike in both revenue and gross profits. While both companies’ revenues reached US$251 million, ChipMOS and Chipbond each registered revenue growths of 38.4% YoY and 49.6% YoY, respectively.

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