Steve Berry and Sandra Winkler Contributing Editors

Traditionally, semiconductor companies have been classified in terms of their product portfolios, such as logic, processors, memory, analog and so forth.

The Focus Is on Applications

However, the semiconductor business model of today focuses on applications: computers, communications, consumer products, etc. This application focus must also apply at the IC packaging level, since the packaging needs of products varies enormously.

So, what is the breakdown of IC revenue by application? The table gives a summary answer.

The products that comprise the computer industry provide about half of all IC revenues. PCs alone account for nearly one-third of IC revenue. This should remain the case for the foreseeable future, even though the semiconductor industry has been seeking applications to reduce its dependence on computers for years.

The communications segment is the second largest IC market, with revenues of $33.3 billion in 2003. Although communications has been a troubled market since late 2000, this segment will grow most rapidly over the next five years, driven by wireless communications and a variety of products that will be needed to enhance Internet connectivity and bandwidth.

Unlike the PC industry-which marches to the beat set by Intel and Microsoft-communications products are under the control of systems-level OEMs.

Semiconductor companies-and IC packaging foundries-who want to flourish in the communications market must target these OEMs and provide products that meet their needs.

Within the communications market, cellular handsets are king. In 2003, cellular subscribers took possession of about 520 million phones, resulting in an IC market of $19 billion-nearly 57 percent of the total communications market.

The consumer market is the third largest IC market with about $20.6 billion in IC revenue last year. With the maturation of the computer and communications markets, the relatively steady consumer product market has become the subject of renewed interest from semiconductor companies.

Given the frequently high volumes and typically unique nature of many consumer products, the consumer product market is often fertile ground for unique IC packaging solutions.

Within the consumer market, the switch to digital TV/HDTV has finally begun. For the IC industry, the digital TV/HDTV market will grow to nearly $6.5 billion in 2008. In this market, advanced IC packages will be required for power and performance reasons.

New Class of Audio Products

Also, within the consumer market, audio products are important-about $2 billion in ICs per year. Apple's iPod-and the inevitable slew of competitors-are driving a new class of audio products using hard disk drives to store massive amounts of music. The push to reduce the size and cost of these products will be a driving force in the packaging of ICs.

Industrial, medical, automotive, and defense/aerospace applications account for the rest of IC revenue.

The future of the semiconductor industry is bright. To share in the rewards, however, packaging foundries must focus on the applications that will drive the industry.