2023 Advanced Packaging Industry Report
DATE:  Jun 09 2023

Chapter 1 Industry Overview

1.1 Overview

Packaging is an important step in the semiconductor manufacturing process. In this step, the semiconductor chip (or integrated circuit) is encased in a protective housing. The main function of this housing is to protect the chip from physical and chemical damage, such as protection from moisture, dust, temperature changes and other environmental factors. The packaging process also involves the connection of the chip to other electronic components, such as the connection of the chip to a circuit board through leads or pads.

Advanced packaging (Advanced Packaging) refers to emerging, high-tech packaging technologies designed to meet the needs of higher performance, smaller size, lower power consumption and higher integration. These technologies include three-dimensional packaging (3D Packaging), wafer-level packaging (Chip Scale Packaging), 2.5D and 3D integration. These technologies allow for tighter integration that can improve the performance and power efficiency of electronic devices while reducing size and weight. Therefore, advanced packaging technology has a wide range of applications in many high-performance and miniaturization applications, such as mobile devices, high-performance computing and the Internet of Things.

Figure: Simple comparison of advanced packaging and traditional packaging

Source: Asset Information Network Qianji Investment Bank AVIC Securities

Advanced packaging has become a key technology to integrate more functions into various devices (such as mobile phones and automobiles). It can achieve high device density in a small space, combining and packaging multiple devices such as electronic, mechanical or semiconductor devices into a single electronic device. The global semiconductor advanced packaging market is expected to grow at a compound annual growth rate (CAGR) of 7.65 percent between 2021 and 2029, and is expected to exceed $61.69 billion by 2029, up from $34.62 billion in 2021. The key factors driving the growth of this market are the complexity of semiconductor integrated circuit (IC) designs and the increasing number of functions and features being integrated into consumer electronic devices.

Integrating semiconductor components in automobiles will drive the growth of the global semiconductor advanced packaging market. The increasing demand for vehicle electrification and vehicle automation is driving the semiconductor market in this segment. For example, semiconductor ICs are used for multiple functions in automobiles, such as airbag control, GPS, anti-lock braking systems, display screens, infotainment systems, power doors and windows, autonomous driving, and collision detection technology. In addition, semiconductor packaging technology is expected to increase the value of semiconductor products by increasing their operating functions, improving and maintaining performance, while reducing the overall cost of packaging. This has also created demand for high-performance chips for various consumer electronics products, thereby increasing the demand for 3D and 2.5D packaged chips for smartphones and other mobile devices.

In China, about 1.425 million 5G base stations have been installed, supporting more than 0.5 billion 5G users nationwide, making it the largest network in the world. The rapid development of 5G in this region is expected to drive the demand for 5G devices, thereby increasing the demand for semiconductor packaging.

1.2 development

The historical development of packaging is roughly divided into five stages:

(1) Through-hole plug-in type (Through-Hole Mounting): This is the earliest stage of semiconductor packaging, mainly used in early integrated circuits and semiconductor devices. At this stage, the pins of the packaging device are inserted through the holes of the circuit board and fixed by soldering. The main advantage of this package type is its simple and stable structure, but its size is large and cannot adapt to the trend of miniaturization and high density.

(2) Surface mount type (Surface-Mount Technology,SMT): With the reduction of the size of electronic devices and the complexity of functions, surface mount technology has begun to be widely used. This packaging manner mounts the semiconductor device directly to the surface of the circuit board, eliminating the need for holes through the circuit board. This packaging allows for smaller device sizes, higher densities, and higher production efficiencies.

(3) Ball Grid Array (BGA): As the semiconductor industry continues to develop, ball grid array packaging technology has emerged. This packaging method forms a spherical pin array at the bottom of the device, which can provide more connection points and adapt to more complex integrated circuit designs. BGA packages provide better electrical and thermal performance and signal integrity, and are widely used in high-performance electronic devices.

(4) Multi-Chip Packaging (MCP): With the increasing functions of electronic devices, multi-chip packaging technology has begun to be adopted. This packaging technology can integrate multiple semiconductor chips within a package, thereby achieving higher functional integration. This packaging method can reduce the connection length between devices and improve the performance and signal transmission speed of the devices.

(5) Three-dimensional structure (3D Packaging): This is the most advanced packaging technology, which uses a three-dimensional structure to stack multiple semiconductor chips together to form a three-dimensional integrated circuit. This packaging method can greatly improve the density and performance of integrated circuits, while reducing the delay of signal transmission, but its design and manufacturing process is relatively complex and requires higher technical requirements.

Figure: Integrated Circuit Packaging Development Chart

Source: Asset Information Network Investment Bank Yole

1.3 classification

advanced packaging within the advanced packaging process for the evaluation criteria, and with or without internal connection substrate can be divided into two categories. The division of advanced packaging lies in the advancement of technology and packaging technology. Generally speaking, packages with lead frame (WB) internal packaging are not classified as advanced packages, while packages with advanced technologies such as flip chip (FC) and wafer level (WL) internal packaging can be called advanced packages. Advanced packages can be divided into two parts with or without carriers (substrates) connected internally:

(1) with carrier (substrate type): internal packaging needs to rely on substrate, lead frame or interposer (Interposer). the main internal interconnection is flip chip packaging (FC), which can be divided into single chip or multi-chip packaging. multi-chip packaging will have multiple chips side by side or stacked on the interposer (or substrate) to form a 2.5D/3D structure, the external packages under the substrate include BGA/LGA, CSP, etc. The packages are formed by combining internal and external packages. At present, the most representative and widely used combinations in the industry include FCBGA (flip-chip BGA), Embedded SiP, 2.5D/3D Integration.

(2) no carrier (wafer level): no substrate, lead frame or interposer (Interposer) is required, so there is no internal and external package. wafer level package is represented by using redistribution layer (RDL) and bump (Bumping) as I/O winding means, and then directly connected with PCB board by inverted method. the package thickness becomes thinner than that with carrier. Wafer-level packaging is divided into fan-in type (Fan-in) and fan-out type (Fan-out), and fan-out type can be extended to 3D FO packaging, wafer-level packaging is currently the most advanced technology category in packaging technology.

Figure: Advanced Package Classification and Structure Diagram

Source: Asset Information Network Investment Bank Yole

advanced packaging can include single chip and multi-chip. flip chip packaging and wafer level packaging are widely used to reduce the size, systematically integrate, increase the number of I/O and improve the heat dissipation performance. the technical capability of matching interconnection technology (TSV, Bump, etc.) is improved to promote the progress of packaging. internal and external packages can be matched and combined into different high-performance packaging products.

Chapter 2 Business Models and Technology Development

2.1 industry chain

The industry chain of advanced packaging industry usually includes the following links:

Design: At this stage, the design engineer will design semiconductor products according to product specifications and performance requirements. This may involve circuit design, physical design, and package design.

Manufacturing: After the design is completed, it will enter the manufacturing stage. This typically includes wafer fabrication and wafer dicing. Wafer fabrication is mainly done by semiconductor equipment and material suppliers, while wafer dicing is done by semiconductor manufacturers (such as TSMC or Intel).

Packaging and testing: After the manufacturing process is completed, the chip needs to be packaged to protect its circuits and provide electrical connections. After packaging, functional and performance testing is also required to ensure that the performance of the chip meets the design specifications.

System integration: The packaged chip will be integrated into electronic systems, such as mobile phones, computers, and automobiles. This step is usually done by original equipment manufacturers (OEMs) and manufacturing service providers (EMS).

Sales and service: Finally, products that have completed system integration will be sold to end users through various sales channels (such as retailers or direct sales). Service may include repair and renewal of products.

In this industrial chain, there are special companies involved in each link. For example, the design phase may be completed by a design company, the manufacturing phase may be completed by a semiconductor manufacturing company, the packaging and testing phase may be completed by an packaging and testing service company (OSAT), the system integration may be completed by an OEM, and the sales and service may be completed by various retailers and service providers.

Figure: Overview of Advanced Packaging Industry Chain

Source: Asset Information Network Qianji Investment Bank CICC

The upstream of the advanced packaging industry is the packaging material suppliers represented by Kangqiang Electronics, Xingsen Technology, Daile New Materials and Sanhuan Group, as well as the integrated circuit manufacturing enterprises represented by Shilanwei and SMIC. Midstream, as the main body of the integrated circuit packaging industry, mainly carries out the integrated circuit packaging and testing process. Downstream for 3C electronics, industrial control and other terminal applications.

Figure Advanced Packaging Upstream, Midstream and Downstream

Source: Asset Information Network Investment Bank

Upstream

With the development of packaging technology towards multi-pin, narrow pitch and miniaturization, packaging substrates have gradually replaced traditional lead frames as mainstream packaging materials. The wire bonding substrate accounts for about 40% to 50% of the total package cost, while the cost of the flip chip substrate can be as high as 70% to 80%. Compared with other packaging materials, packaging substrates are more difficult, but they have high profits, many applications and broad market space.

Figure Semiconductor Packaging Material Target

Source: Asset Information Network Qianji Investment Bank Founder Securities

advanced packaging materials market is more scattered, Chinese enterprises in the bonding wire, epoxy plastic packaging materials, lead frame market has a certain influence, the level of localization is high, but in the packaging substrate, chip bonding materials and international leading enterprises still have a large gap.

With the emergence of new high-density packaging forms, many functions of electronic packaging, such as electricityGas connections, physical protection, are gradually being undertaken in part or in whole by the package substrate. In recent years, high-density multilayer substrates account for an increasing proportion of electronic substrates, and are used more and more widely in advanced packaging. As a special printed circuit board, the package substrate is a basic component that connects a higher-precision chip or device with a lower-precision printed circuit board. Compared with the line width/line spacing parameter of 50 μm/50 μm of the PCB board, the package substrate can realize the parameter of line width/line spacing <25 μm/25 μm. The cost of increasing the overall refinement of the PCB board is much higher than the cost of interconnecting the PCB and the chip through the package substrate.

Figure Semiconductor Packaging Substrate Market Trends

Source: Asset Information Network Qianji Investment Bank Founder Securities

Midstream

advanced packaging can be divided into metal packaging, ceramic packaging and plastic packaging according to shell materials. According to the package link structure, it can be divided into internal packaging, external packaging and wafer-level packaging. the inside of the package refers to the connection mode between the chip inside the package and the carrier (lead frame or carrier board), including wire bonding (WB), tape automatic bonding (TAB), flip chip packaging (FC), the external package is the connection mode between the lead frame (or carrier board) and the printed circuit board (PCB). It is the package appearance visible to our naked eyes, such as QFP, QFN, BGA, LGA, etc. Some wafer-level packages are directly connected to the PCB board without the lead frame or wire carrier board, thus jumping off the traditional internal and external packages.

Figure: Basic Situation of Advanced Packaging Materials

Source: Asset Information Network Qianji Investment Bank Oriental Wealth Securities

Downstream

The downstream applications of advanced packaging are mainly mobile devices, multi-pin, high-performance products. Wafer-level packaging is mostly used in small mobile devices, substrate-type is mostly used in products with many pins and no volume restrictions, and multi-chip can be classified as SiP packaging.

advanced packaging can be composed of single chip, multi-chip, wafer level and substrate level. the difference between wafer level and substrate level comes from the difference in manufacturing process. wafer level packaging uses chip manufacturing process and requires deposition, photolithography, glue removal, etching and other processes. compared with substrate level packaging, wafer level packaging can have a smaller packaging volume, so it is mostly used in small mobile equipment, the substrate level is mostly used for products with high pins and no volume restrictions.

Figure: Advanced Packaging Applications

Source: Asset Information Network Qianji Investment Bank CITIC Securities

generally speaking, multi-chip packages form a subsystem inside the package, so multi-chip can be classified as SiP(System in Package). SiP packages focus on the system implementation in the package. no matter whether it is advanced or not, as long as it can form a system by itself, it can be called SiP, siP in the field of advanced packaging includes 2.5D/3D FO, Embedded, 2.5D/3D Integration and more advanced heterogeneous packaging (such as Apple Watch S series chips).

2.2 business model

Advanced Packaging currently includes two business models: internal ATP services performed by IDM and foundries after manufacturing, and OSAT companies for third-party customers, which can include IDM, fabless companies, and foundries.

Figure: Semiconductor Ecosystem

Source: Asset Information Network Investment Bank CSET

As early as the 1960 s, semiconductor manufacturers took advantage of labor costs and established factories in Asia. Today, outside the United States and Europe, the leading companies engaged in semiconductor manufacturing are headquartered in Singapore, South Korea, Japan and China. Leading IDM and foundries in Europe, the United States, South Korea and China have also invested heavily in advanced packaging. However, China-based companies dominated the OSAT segment.

OSAT, IDM, and foundries use materials and equipment to assemble and package finished wafers. If measured by sales, companies headquartered in the United States, China, South Korea and Japan account for the vast majority of the packaging market share. However, judging by the location of the physical facilities, Asia is clearly the leader. Recent statistics show that China leads the pack in total (220, including Taiwan 106), followed by Rest of Asia Pacific (65), North America (35), Japan (27) and Europe (19). The Semiconductor Industry Association, which has its headquarters in the United States and Europe, estimates that at least 81 percent of the world's ATP capacity is located in Asia.

2.3 Technology Development

Advanced packaging processes include flip chip bonding (Flip Chip), wafer level packaging (WLP), 2.5D packaging (Interposer), 3D packaging (TSV), Chip let, etc.

Figure: Summary of Advanced Packaging Technologies

Source: CEIA Electronics Manufacturing

WLP(Wafer Level Package): Wafer Level Packaging

WLP is to perform most or all of the packaging test procedures directly on the wafer, and then cut it into a single chip. With this packaging technology, no lead frame, substrate and other media are required, the package size of the chip is reduced, and the production cost is greatly reduced by batch processing. WLP can be divided into fan-in wafer level packaging (Fan-In WLP) and fan-out wafer level packaging

(Fan-Out WLP) Two categories:

(1) Fan-in type: package directly on the wafer, cut after the package is completed, the wiring is completed within the chip size, and the package size is the same as the chip size;

(2) fan-out type: based on wafer reconstruction technology, the cut chips are rearranged on an artificial carrier board. the distance between the chips depends on the requirements. then wafer-level packaging is carried out. finally, cutting is carried out. wiring can be inside and outside the chip. the resulting package area is generally larger than the chip area, but the number of I/O that can be provided increases.

Figure: WLP Wafer Level Package

Source: Asset Information Network Qianji Investment Bank Crystallization Technology

Figure: Fan-in and Fan-out Packages

Source: Asset Information Network Investment Bank Silicon (SPIL)

Flip Chip: Flip Chip

Flip-chip process: refers to the direct deposition on the I/O pad of the chip, or the bump (Bump) is deposited after RDL wiring, and then the chip is turned over and heated to make the molten solder and the substrate or frame Combine, the chip electrical face down.

Bump process: The flip-chip process is necessary. It is one of the core technologies of advanced packaging.

2.5D and 3D packages

(1)2.5D package: The dies are placed side by side on top of an interposer with through silicon vias (TSVs). Its base, the interposer, can provide interconnection between chips.

(2)3D packaging: also known as stacked chip packaging technology. 3D packaging can adopt bump or through silicon via technology (Through Silicon Via,TSV). TSV is a method to complete interconnection between chips by using vertical through silicon via. due to shorter connection distance and higher strength, it can realize smaller and thinner packages with better performance, higher density and significantly reduced size and weight, it can also be used for interconnection between dissimilar chips.

SiP:System in Packag, System-in-Package

SIP integrates a variety of functional chips, including processors, memory, FPGA and other functional chips, into a package to achieve a basic and complete function. Corresponding to the System on Chip (SoC), the difference is that the system-in-package is a side-by-side or stacked packaging method using different chips, while the SoC is a highly integrated chip product.

Figure: Advanced Packaging Technology Used in Apple S7 Watch and A15 Chip

Source: Asset Information Network Qianji Investment Bank Prismark

Chiplet

Chiplet technology is a form of packaging that realizes heterogeneous integration through buses and advanced packaging technology.

Figure: Chiplet

Source: CEIA Electronics Manufacturing

By counting the number of patents of various patent applicants in the domestic advanced packaging industry, the top companies are: Changdian Technology, Shengyi Technology, Tongfu Microelectronics, Guoxing Optoelectronics, Cambrian, Deep Technology, Zhengye Technology, etc.

figure number of patents of listed enterprises in advanced packaging industry TOP 10

Source: Asset Information Network Investment Bank iFinD

2.4 Policy Regulation

Administrative supervision department

(1) Ministry of Industry and Information Technology: mainly responsible for studying and formulating informatization development strategies, guidelines, policies and overall plans; promoting the strategic adjustment and optimization and upgrading of the industrial structure; formulating industry laws and regulations, issuing administrative rules, and organizing the formulation of industry technical policies, Technical system and technical standards, and macro-control the development direction of the industry.

(2) Ministry of Science and Technology: mainly responsible for formulating national innovation-driven development strategies and scientific and technological development, introducing foreign intellectual plans and policies and organizing their implementation; taking the lead in establishing a unified national science and technology management platform and scientific research project fund coordination, evaluation and supervision institutions; formulating national basic research plans, policies and standards and organizing their implementation; preparing national major science and technology project plans and supervising their implementation; leading the construction of national technology transfer system, formulate relevant policies and measures for the transfer and transformation of scientific and technological achievements and the promotion of the integration of production, education and research, and supervise the implementation.

Self-Regulatory Association

(1) China Semiconductor Industry Association: it is the self-regulatory organization and coordination organization of the industry, with professional organizations such as integrated circuit branch, semiconductor discrete device branch, semiconductor packaging branch, integrated circuit design branch, etc; investigate, research, and predict industry industries and markets, gather enterprise requirements, and reflect the voice of industry development; extensively carry out economic and technological exchanges and academic exchange activities; carry out international exchanges and cooperation; formulate (revise) industry standards, national standards and recommended standards and other tasks.

(2) China Electronic Special Equipment Industry Association: mainly responsible for providing member units and government departments with industry surveys, market trends, economic operation forecasts and other information; on behalf of member units to put forward industrial development suggestions and opinions to government departments; do a good job Policy-oriented, information-oriented, and market-oriented work; extensively carry out economic and technological exchanges and academic exchange activities, develop contacts with foreign groups, and promote industrial developmentpromote the internationalization of the industry, etc.

(3) China Integrated Circuit Testing Instrument and Equipment Industry Technology Innovation Alliance: It is supported by the Institute of Microelectronics of the Chinese Academy of Sciences, and is composed of my country's industry-university-research units engaged in integrated circuit testing technology on a completely voluntary basis. The alliance adheres to the tenet of "openness, collaboration, sharing, and win-win", guided by the needs of my country's integrated circuit testing industry, and relying on the talents, technology and market resources of the alliance's member units, strengthen information exchange and sharing, carry out domestic and international cooperation, and integrate Testing industry resources, highlighting the overall advantages of the alliance, enhancing the role of alliance members, and jointly promoting the technological innovation and industrialization of my country's integrated circuit testing instruments and equipment.

Industry Policy

Figure industry main policies

Source: Asset Information Network Qianji Investment Bank View Research

Chapter 3: Industry Valuations, Pricing Mechanisms, and Global Leaders

3.1 industry comprehensive financial analysis and valuation methods

For the financial analysis of the advanced packaging industry, we need to consider the following key financial indicators:

Revenue growth: Checking a company's annual or quarterly revenue growth rate can help us understand the company's performance in the market and the demand for its products or services. For the advanced packaging industry, as the demand for more complex and smaller semiconductors for electronic devices increases, we can expect the revenue of this industry to continue to grow.

Profitability: Profitability is an important measure of a company's operating efficiency. We can understand a company's profitability by examining its profit margins, such as gross margin, operating margin, and net margin.

Capital expenditure: Because the advanced packaging industry requires a large amount of R & D and production equipment investment, capital expenditure is also an important financial indicator. We can look at the company's capital expenditure data to understand the company's investment in technology research and development and production capacity improvement.

R & D investment: In an industry with rapid technological development, R & D investment is very important. We can get an idea of a company's investment in future growth by looking at its R & D spending.

Market share: Market share can help us understand a company's position in its industry. For the advanced packaging industry, market share can be measured by a company's sales or production volume.

Financial health: We also need to consider the company's financial health, such as its current ratio (a measure of the company's ability to repay short-term debt) and debt ratio (a measure of the company's long-term solvency).

Figure: Index performance

Source: Asset Information Network Investment Bank iFinD

advanced packaging industry valuation methods can choose price-earnings ratio valuation method, PEG valuation method, price-to-book ratio valuation method, market-to-market ratio, P/S market-to-sales ratio valuation method, EV / Sales market-to-market ratio valuation method, RNAV revaluation net assets valuation method, EV/EBITDA valuation method, DDM valuation method, DCF cash flow discount valuation method, NAV net assets valuation method, etc.

Figure: Main Business of Changdian Technology

Figure: Main Business of Tongfu Microelectronics

Source: Asset Information Network Investment Bank iFinD

3.2 industry developments and drivers

Policy funding support

As the foundation and core of the information industry, the semiconductor industry is a strategic industry for national economic and social development, and the state has given great attention and strong support. In order to promote the development of China's semiconductor industry based on integrated circuits and enhance the innovation capability and international competitiveness of the information industry, the state has issued a series of encouraging and supporting policies to establish an excellent policy environment for the semiconductor advanced packaging industry and promote the rapid development of the semiconductor advanced packaging industry.

Transformation and Upgrading of the Integrated Circuit Industry

According to WSTS statistics, from 2017 to 2020, the global integrated circuit market size increased from US $343.19 billion to US $361.23 billion. In 2019, the global integrated circuit industry's total revenue was $333.35 billion billion, down 15.24 percent from 2018, as a result of the U. S.-China trade friction. With the easing of trade disputes, the gradual control of the global epidemic, and the continuous vigorous development of emerging application fields such as 5G, Internet of Things, artificial intelligence and wearable devices, the market scale of the global integrated circuit industry will return to growth in 2020. It is expected that the global integrated circuit market scale will continue to grow to US $747.862 billion in 2026, of which the integrated circuit design will reach US $277.457 billion. Integrated circuit manufacturing reached 383.405 billion billion. Integrated circuit sealing and testing reached $87 billion.

source: asset information network thousands of international investment bank billion crossing data

The rapid rise of the consumer electronics industry

my country's consumer electronics production and marketing scale ranks first in the world. my country is an important global manufacturing base for consumer electronics products. Most of the world's major electronics production and foundry companies have established manufacturing bases and R & D centers in my country.

Increasing number of industry-related engineers

3.3 industry risk analysis and risk management

Market risk

(1) Industry volatility risk

The integrated circuit industry is characterized by cyclical fluctuations, and the frequency of the semiconductor industry cycle is much higher than the economic cycle, in the economic cycle of the upward or downward process, there may be a completely opposite semiconductor cycle. Due to the impact of the industry volatility cycle, there is uncertainty as to whether the semiconductor industry will continue to recover in the future, which may adversely affect the operating results of the cash sealing industry.

(2) Industrial policy change risk

The government's industrial policy on the integrated circuit industry provides a good policy environment for China's advanced packaging and testing enterprises. If the national industrial policy changes adversely, it will have a certain impact on the industry. At the same time, the proportion of products sold abroad is relatively high. If the national industrial policy, import and export policy or the relevant policies, regulations or rules of the country or region where the company's products are exported are adjusted, it may adversely affect the company's business. In addition, the company has factories in foreign countries, and changes in the industrial policies of the countries to which it belongs will also have an impact on the company's business operations.

Countermeasures: Companies in the industry should continue to pay attention to changes in market trends, macroeconomic situation, relevant policies, customer needs, etc., and establish a benchmarking system to adjust business development goals and investment directions in a timely manner to reduce the impact of relevant market risks.

Operational Risk

(1) trade friction risk

Industry companies as semiconductor chip finished product manufacturing and testing enterprises. If trade frictions between relevant countries and China continue to escalate, restricting imports and exports or raising tariffs, companies in the industry may face risks such as equipment, raw material shortages and customer loss, which in turn may lead to production restrictions, reduced orders and increased costs, which will adversely affect the Company's business and operations.

Response measures: Companies in the industry should follow up the progress of trade disputes with relevant countries and disclose relevant information in a timely manner, and will actively take relevant response measures to reduce production and operation risks as much as possible.

(2) Equipment supply risk

The semiconductor chip manufacturing and testing industry has higher requirements for equipment, and some important core equipment comes from abroad. In the future, certain core equipment of companies in the industry may be in short supply, prices may rise sharply, or the supplier's countries and regions may have trade frictions, diplomatic conflicts, wars, etc. with China, which may affect the export license of the corresponding equipment, which may adversely affect the company's production, operation and sustainable development.

Response measures: The company should actively take a series of measures such as promoting the supply chain diversification plan to minimize the adverse impact of insufficient equipment supply on production and operation.

(3) Risk of epidemic affecting production and operation

Since the global outbreak of the epidemic in early 2020, most regions and industries have been affected to varying degrees, with domestic outbreaks recurring in the first half of this year. Quarantine control, logistics restrictions and other epidemic prevention and control measures during the epidemic may delay the company's personnel attendance, equipment procurement and installation and maintenance, sales and delivery, as well as customer development and other market activities are subject to certain restrictions. Outbreaks in the locations of corporate customers and suppliers in the industry will also affect the daily business activities of companies upstream and downstream of the industry chain, thereby adversely affecting the entire integrated circuit industry.

Countermeasures: Companies in the industry should continue to pay close attention to the development of the new crown epidemic, assess and actively respond to its impact on the Company's financial position, operating results and other aspects.

(4) Increased risk of market competition

the demand for traditional consumer electronics will gradually slow down from the first quarter of 2022. the inventory level of IC end users, including mobile phone manufacturers, is significantly higher than that of 2021, and there is a risk that the demand for semiconductor packaging will decline in the second half of the year. In addition, the epidemic is still widely spread around the world, overlaying international political events including the war between Russia and Ukraine, which will affect the supply chain and then sales. When market demand falls, the price competition brought about by the idle capacity of some domestic sealing and testing capacity, which in turn has a certain impact on industry sales and profit margins.

3.4 Competitive Analysis-Using the SWOT Model

Advantage

Compared with traditional packaging, the new form is rapidly rewriting the industry characteristics of low threshold, low unit price competition and high degree of homogeneity. With the entry of IDM (vertically integrated manufacturers) and fabs, the penetration of front and middle-channel processes continues to raise the barriers to advanced packaging technology. At the same time, advanced packaging highlights the integration and interconnection between chip devices, and designers need to consider the design and optimization of the entire system level, including packaging, in the initial stage of chip development. The scope of EDA tool services has been expanded, taking into account the fact that advanced packaging brings more design points such as heat dissipation and mechanical mechanisms..

Disadvantages

As chip designs become more heterogeneous and applications more targeted, the resulting changes bring more and more problems, which makes it difficult to determine the root cause of the problem or predict why and when it went wrong. There are also differences in the bonding/debonding and interconnects used in advanced packaging. For example, there are wire bundles of large-scale reflow, thermo-compression and laser-assisted bonding interconnect options, or wire bundles plus flip-chip combinations with various passive components. For each process, there are many variations in temperature, stress residues, and possible invisible microcracks.

Opportunity

On the equipment side, although the sealing and testing industry is the most mature link in my country's semiconductor industry chain, the localization rate of post-packaging and testing equipment and packaging materials is still low, and there is a large room for substitution. With the rapid development of middle road manufacturing, domestic front road equipment manufacturers have successfully entered the production line of head customers and have formed a strong competitiveness. New opportunities are coming.

Threat

Global mainstream packaging manufacturersAt present, all in the field of advanced packaging to increase investment, but the domestic packaging is still mainly traditional packaging, long electric technology, Tongfu micro-power through independent research and development and mergers and acquisitions, the current advanced packaging industrialization capacity has reached a certain level, but China's advanced packaging accounted for about 25%, lower than the global level.

3.5 important participating companies

China's major enterprises include China Resources Microelectronics [688396.SH], Changdian Technology [600584.SH], Shengyi Technology [600183.SH], Shengmei Shanghai [688082.SH], Huatian Technology [002185.SZ], Tongfu Microelectronics [002156.SZ], Cambrian [688256.SH], Zhenhua Fengguang [6884.S21.8SH], Z5, etc.

according to Yole Group, based on the company's sales revenue in high-performance chip manufacturing, including companies providing outsourced semiconductor assembly and testing (OSAT) services and DRAM manufacturers, the top 16 global advanced packaging companies in 2023 are: ASE technology, Amkor technology, JCET, TSMC, SPIL, Intel, Samsung motor, huatian technology, Samsung, Unisem, KYEC, ME, ChipMOS, Greatek electronics, tongFu Microelectronics, UTAC.

Chapter 4 Future Outlook

The advanced packaging market is experiencing significant growth and is expected to continue to grow in the coming years. The global size of this market is expected to reach more than $61 billion billion by 2029, with a compound annual growth rate of 7.65 percent. Key factors driving the growth of this market include the complexity of semiconductor integrated circuit (IC) design, and the demand for miniaturized and high-performance semiconductors in automotive and consumer electronics.

TSMC, the world's largest contract chipmaker, is accelerating its investments in advanced packaging to meet the demands of artificial intelligence. As the demand for advanced packaging solutions exceeds its current production capacity, the company intends to accelerate its investment and expansion in advanced packaging.

Yole Group's report pointed out that due to strong market trends, the share of advanced packaging in the overall semiconductor market is increasing. It has become the most attractive and dynamic business segment, attracting large companies at all levels of the supply chain. Yole Group expects the semiconductor packaging market to be worth more than $100 billion in the next five years, with industry giants such as TSMC, Intel and Samsung driving the development of advanced packaging.

The mobile and consumer markets are currently the main revenue sources for the advanced packaging market, with annual growth expected to exceed 8% over the next five years. At the same time, the automotive and broader transportation segment is the fastest growing segment of the advanced packaging market. The telecommunications and infrastructure sectors also play a key role in the advanced packaging industry, with growth similar to that of the mobile and consumer sectors.

In the future, advanced packaging will drive unprecedented levels of investment. Data processing needs continue to grow, and heterogeneous functions such as data storage, data processing, and sensing need to be integrated in the same package. Because front-end manufacturing has boundaries in terms of performance and cost, packaging and advanced packaging provide the core elements that meet the needs of OEMs and module manufacturers, as well as integrated equipment manufacturers (IDMs).

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