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

The rise of such products as automotive, industrial, telecom, and networking chips in recent years has resulted in continued advancements in packaging and testing technologies, and the market revenue of these technologies has seen a corresponding rise as well. Demand for advanced packaging has been relatively strong thanks to high demand for 5G smartphones, consumer electronics, and high-performance processors.

In particular, the mainstream development of advanced packaging and testing is currently concentrated on three major fields: HPC chip packaging（2.5D/3D）, FOPLP（fan out panel level packaging）, and SiP（system in package）. Some of the other factors driving forward the technological development of advanced packaging also include improvements in end product functions, advancements in transistor gate sizes, reduction in advanced packaging L/S, and migration of chip interconnect technology from micro-bumping to hybrid bond.

According to TrendForce’s investigations, the advanced packaging market last year reached a revenue of US$31.037 billion in 2020（which was a 13% increase YoY）and accounted for 45.8% of the total packaging market. At the moment, most packaging and testing companies have successively entered the advanced packaging market, with Flip Chip applications accounting for the majority of applications across smartphone AP, WiFi chips, entry-level processors, and high-end PMICs. Flip Chip applications make up more than 80% of the total advanced packaging revenue.

In spite of continued growth, advanced packaging will unlikely overtake traditional packaging in terms of market share within 5-10 years

In spite of the multitude of companies that are eager to enter the advanced packaging industry, not all of them possess the technological competence to progress in R&D, thus making acquisition the fastest path to advanced packaging success. With regards to technological competence, foundries and IDMs are the likeliest candidates to enter the industry, as they already possess ample experience in chip development.

At the moment, TSMC, Intel, and Samsung are the most well-equipped to do so, respectively. With regards to outsourced operations, Taiwanese companies such as ASE, SPIL, and PTI lead the industry in terms of packaging technologies, while U.S.-based Amkor is able to compete for neck-and-neck with ASE. Although these aforementioned companies are not specialists in chip fabrication, they have an extremely strong grasp of the downstream assembly ecosystem, hence their superiority in advanced packaging.

On the other hand, thanks to China’s Big Fund, the trinity of Chinese packaging and testing operators（JCET, TFME, and Hua Tian）were able to acquire major global players, including STATS ChipPac, AMD-SUZ, and Malaysia-based Unisem, respectively, during the 2014-2019 period.

Hence, not only have the Chinese trio been able to raise their market shares and rankings in the global packaging and testing market, but they have also been able to acquire certain competencies in advanced packaging technologies.

The current market would seem to suggest that advanced packaging has been gradually cannibalizing the market share of traditional packaging. However, as applications including home appliances and automotive electronics still require traditional packaging, TrendForce believes that only after 5-10 years will advanced packaging overtake traditional packaging in terms of market share.

（Cover image source: TSMC）

National governments in Southeast Asian countries, including Thailand, Vietnam, and Malaysia, have been instituting increasingly stringent pandemic control measures in response to the intensifying COVID-19 pandemic in these countries. Remarkably, these countries are all hotspots in the electronic component supply chain, and Malaysia, home to many semiconductor packaging and testing facilities as well as passive component fabs, has now come under the international spotlight as a result. In particular, Malaysia’s MCO 3.0 (Movement Control Order 3.0) lockdown, which was extended on June 1, specifically excludes the semiconductor industry, as this industry boasts relatively high market revenue. As such, packaging and testing facilities are currently operating normally in Malaysia, according to TrendForce’s latest investigations.

On March 18, 2020, the Malaysian government first implemented similar pandemic control measures, under which only about 50% of private businesses were allowed to operate. The semiconductor industry and medical services were notably excluded from the restrictions at the time, given the former’s high revenue and the latter’s critical importance during emergencies. Despite the heightened lockdown of the MCO 3.0, under which only certain essential economic activities are allowed to function, some aspects of the MCO 3.0’s restrictions are relatively more lenient, as this policy specifies only 40% of private business employees must adopt WFH. Incidentally, as previously mentioned, the MCO 3.0 does not apply to the semiconductor industry.

As manufacturing operations and lead times of passive components become constrained, end clients’ procurement activities remain uncertain in 2H21

On the other hand, TrendForce indicates that the passive component market, which is also a key industry in Malaysia, will likely face supply-side bottlenecks as a result of the MCO 3.0, affecting such suppliers as Taiyo Yuden, Walsin Technology, NDK, and Epson. Under the latest restrictions, product lead times in the passive component supply chain, along with the state of the transportation industry (which determines shipping and delivery schedules of passive components), will become key determinants of whether client orders can be fulfilled on time.

In addition, brands in Europe and North America will begin adjust their orders for late-3Q21 in June and July. Notebook brands including Dell and HP are not only expected to maintain their orders for 2H21, but also taking measures to ensure a steady supply of IC components, while Apple will begin procuring components for its upcoming iPhone 13 from the passive component supply chain in July. Although these orders are expected to provide upward momentum for the passive component market in 2H21, the resurgence of the pandemic in Southeast Asia, as well as whether the shortage of semiconductor components will be alleviated going forward, will affect clients’ procurement activities for MLCC (multilayer ceramic capacitors) in 2H21.

On the whole, although the packaging and testing operations of major IDMs (Intel, Infineon, and Texas Instruments) and OSAT operators (ASE, Amkor, TFME, and Hua Tian) in Malaysia remain unaffected for the time being, TrendForce believes that the MCO 3.0 will likely have an impact on the supply and demand of the global passive component market in 2H21.

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