By Ron Iscoff, Editor The packaging foundry business has grown up bigtime. Thank-fully, it's been several years since the providers of IC package assembly were relegated to the role of second class citizens. Now (thanks also to the blessings of Wall Street), packaging foundries are as important to the world economy, and as vital to the semiconductor industry, as any wafer fab. In addition to the growth of tech-nology-such as flip-chip and wafer-level packaging, which is impacting the independent packaging foundries (IPFs)-a new factor has entered the business-China. Powerful Infrastructure We saw the early signs of a China-based buildup last year, mostly in Shanghai, which already has the makings of a powerful infrastructure for the semiconductor industry. Most of the major IPFs (and several independent device makers) have announced plans to locate there. There are several valid reasons for an IPF to locate in China. Perhaps the two most significant are China's seemingly inexhaustible domestic market (a lot of ICs go into 1.27+ billion radios!) and an unending, inexpensive labor pool. The once traditional use of internal assembly and test by IDMs continues to decline, as they gratefully pass the torch to the IPFs. Ed Combs, senior vice president of ASAT Inc., Fremont, Calif., puts the new role of the IPFs succinctly, "Backend subcontract packagers have become more than bigger backends for the IDMs. They have become a driving force for new assembly and packaging technologies, as well as new subcontracting business strategies."
Significant Growth Jim Kelley, senior vice president of sales and marketing for Walsin Advanced Electronics Ltd., Taiwan, agrees. "More IDMs are either directly involved or plan to be involved in outsourcing," says Kelley. "They simply do not want-nor can they afford-to make the investments (in assembly and test) that were once part of keeping up. This means that the industry should grow at a significant rate, assuming the industry turns like we all think it will." Recent history has shown that the pace of the contract assembly business will quicken or slow down in step with demands in the overall electronics industry, notes Dr. William Chen, senior technical advisor for ASE Inc., Taiwan, the second largest IPF. "We expect this to be the case over the next year or two. Packaging foundries have invested in advanced technology and infrastructure to move in step with customers' roadmaps." IPFs are now the suppliers of cost-effective solutions for customers' leading-edge products, adds Dr. Chen. "Examples are in wafer bumping for flip-chips, wafer-level packaging and stacked-chip packaging." Now, having said that the role of IDMs as suppliers of their own packaging and testing has been greatly reduced, we have to refine that statement to exclude many European companies. Several of the largest continue to pull out their wallets to bolster internal assembly and test needs. We saw ample evidence of the continuing role of foreign IDMs as assemblers only last month, with the announcement of two major building projects. First, Thomsen's STMicroelectronics announced that it will add a new IC assembly and test facility in Morocco.
New Plant in China Within a week, Philips Semiconductors said that it will build a new plant at a cost of $1 billion, in China, to assemble and test its own BGAs and CSPs. While IBM is also planning to build a Shanghai, China-based assembly and test plant at a cost of $300 million, Big Blue will most likely accept contract work, as it does in its East Fishkill, N.Y., and Bromont, Canada, facilities. While the industry slowdown has affected all segments, including the IPFs, like past respites, this, too, will be temporary. Continued Growth Although we are in a retrenchment period, "there are no fundamental reasons why the IC packaging foundry business will not continue to grow over the next year or two," observes Patrick McKinney, senior vice president-corporate marketing, at industry leader Amkor Technology Inc. McKinney says that "the breadth of package offerings, significant increases in end-user needs and the increasing popularity of the fabless semiconductor business model" make the packaging foundry business a "very viable one." Meanwhile, no doubt many IPFs are saying silently, "Thank God for RF." Growth of the wireless market has been a major salvation for many IPFs (as well as the suppliers of RF test equipment). This buoyant growth will continue. "The role of IC packaging will increase because of the growing content and huge volume of portable electronics," says Martin Paul of Kingpak, Taiwan. "Mobile phone volumes are currently in the hundreds of millions annually, and in a couple of years, portable phones and handheld computers will converge." Enter 'Chip-Scale Manufacturing' Paul observes that these products and music players, cameras, etc., are "crammed" with large amounts of mixed semiconductor types, including memory, logic analog, mixed signal, RF and image sensors. "It will take more IC packaging (chip-level assembly, stacking models) as opposed to board-level assembly to build the guts of these devices. Maybe," suggests Paul, "We can call this 'chip-scale manufacturing.'" Kevin Dibelius, marketing director for STATS, Singapore, agrees with Kingpak's Paul. "As cell phones, PDAs, digital cameras and MP3 players continue to cross-pollinate, the need to insert more functionality into a smaller form factor will become critical." Dibelius also believes that IDMs, faced with integrating more functions into each IC, as well as increasing time-to-market pressures, will push adoption of system-in-package solutions. "While the economic softening in the market will cause the packaging foundries short-term revenue pain, the long-term requirement for IDMs and fabless companies to reduce costs will expand the outsourcing model," he adds. The outlook, Dibelius says, could be similar to the growth in board-level contract manufacturing, where unit volumes, revenues and capital expenditures increase as overall profit margins decline. Although the bricks-and-mortar dollars continue for many IPFs during this slowdown, technology, many believe, will ultimately win the day.
Higher Performance Products "I see the packaging foundry business moving into flip-chip, wafer bumping and wafer-level packages in the next few years for some of the higher performance products. However, the migration for other products may take 4-5 years, due to cost and available capacity," says Eleanor Feng, sales manager at Siliconware USA, San Jose. Where are the IPFs heading? Dr. Gerald K. "Skip" Fehr, vice president of packaging technology at OSE subsidiary IPAC, San Jose, answers this way: "Economically, the IC packaging foundry follows the economics of the IC house. In a general downturn, we feel it with our customers. In fact, the foundry will often feel it to a greater extent," Dr. Fehr observes, "since the IC house protects its own in-house assembly. "Two years out, the market should be going again, and the foundry should also reap the rewards. In general, the percent of product built at packaging foundries will increase." Along technology lines, Dr. Fehr says the foundry must not only stay current, but must lead development. "As partnerships with IC houses grow, special packages are often developed." The present work with opto-electronics houses is one example. "Supporting a new technology," Dr. Fehr adds, "is a way of expanding the business level." With wafer-level technology, stacked packages and other new packaging options just entering the mainstream, the role of the IPFs will continue to be as dynamic as it is challenging. |
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