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.
As UMC and GlobalFoundries successively end their respective developments of advanced processes, the advanced process market has now become an oligopoly, with TSMC and Samsung as the only remaining suppliers （excluding SMIC, which is currently affected by geopolitical tensions between China and the US）. According to TrendForce’s latest investigations, TSMC holds a 70% market share in advanced processes below – and including – the 1Xnm node, while Samsung’s market share is about 30%.
As electronic products demand faster data transmission speeds and better performance in response to IoT and 5G applications, the chips contained in these products also need to shrink in size and consume less power. Hence, process technologies need to evolve in order to enable the production of increasingly advanced chips. In this light, suppliers of such chips as smartphone AP, CPU, and GPU primarily rely on Taiwan for its semiconductor industry’s advanced process technologies.
Why is Taiwan able to hold key manufacturing competencies, market shares, and unsurpassed technologies in the global foundry industry?
After TSMC pioneered its pure-play foundry services more than 30 years ago, UMC also subsequently transitioned to a foundry business model. However, the build-out and maintenance of wafer fabs require enormous human resources, capital expenditures, and environmental support, all of which have been skyrocketing since the industry progressed below the 40nm node into the EUV era. Factors including governmental support, human resource development, utility services, and long-term amortization and depreciation are all indispensable for foundries to keep up their fab operations. TrendForce’s findings indicate that Taiwan possesses about 50% of the global foundry capacity, and this figure will likely continue growing due to the persistent demand for advanced processes.
Taiwanese foundries led by TSMC and UMC operate based on a pure-play foundry model, which means they do not compete with their clients outside of foundry operations. Foundries are able to maximize the profitability of the semiconductor ecosystem in Taiwan thanks to Taiwan’s comprehensive PC, ICT, and consumer electronics industries.
In addition, not only are they able to deliver PPA（performance, power, and area） advantages to their clients through technology scaling and node shrinking, they are also unsurpassed in their comprehensive silicon IP cores and longstanding product development services. Other competing foundries are unlikely to make breakthroughs in these fields and catch up to Taiwanese foundries in the short run.
On the whole, the Taiwanese foundry industry is able to maintain its leadership thanks to competencies in human capital, client strategies, process technologies, capital intensify, economies of scale, and superior production capacities.
Furthermore, not only do advancements in semiconductor fabrication technology require developmental efforts from foundries, but they also need support throughout the entire supply chain, including upstream wafer suppliers and downstream client feedbacks, both of which can serve to eliminate yield detractors and raise yield rates. Therefore, the Taiwanese semiconductor industry derives its advantage from foundries（TSMC, UMC, PSMC, and VIS）, as well as from the cross-industrial support across silicon wafer suppliers（SAS and GlobalWafers）, fabless IC design clients, and packaging and testing operators（ASE, etc.）
Some of the advantages of third-generation semiconductors SiC and GaN include their ability to operate under high voltages, high temperatures （for SiC）, and high frequencies（for GaN）. Not only do these advantages allow manufacturers to significantly reduce the physical sizes of chips, but peripheral circuit designs can also be simplified as a result, thereby further reducing the sizes of modules, peripheral components, and cooling systems. That is why SiC and GaN have become important strategic focuses of the global semiconductor industry.
As part of its ongoing goal of semiconductor independence, China has been accelerating the development of third-generation semiconductors in recent years
From the perspective of substrate development, countries find it difficult to procure SiC substrates due to the lack of production capacities worldwide. Hence, the ability to control the supply of SiC substrates equals having more influence in the semiconductor industry. The current ranking of geographical regions that control the supply of SiC substrates is, in order, the US （Cree and II-VI）, Japan （Rohm）, and Europe （STM）.
It should be pointed out that China’s overall standing in the third-generation semiconductor industry is hindered by its insufficient supply of substrates. Hence, Chinese companies are slightly lagging behind other global companies in this industry. At the moment, both TankeBlue and Shanxi Shuoke have successfully developed 8-inch SiC wafers, though their scale of mass production is yet to catch up to global leader Cree.
Despite the vast majority of GaN substrate suppliers being Japanese and European companies, Chinese companies have been making an aggressive push to enter this market. Regarding substrates, Nanowin, Sino Nitride, and Eta Research are all currently investing in R&D and mass production, though their current focuses are limited to 2-inch and 4-inch wafers. Regarding epitaxy, Enkris, GLC, and Genettice have been similarly making progress on R&D and mass production.
Furthermore, Chinese companies are farther ahead in the development and manufacturing strategies for GaN substrates compared to SiC substrates. For the GaN RF segment, Chinese companies span the entire supply chain, including IDM（CETC, Aofengyuan, Chengchang, Dynax, Innoscience, Bofang Jiaxin）, foundries（HiWafer and San’an）, and fabless IC design companies（GaXtrem）.