Insights From Leading Edge

IFTLE 148 The Future of Packaging: A Look From 50,000 Feet

There is a saying in American business that recommends if you really want to understand something you need to take a “50,000 foot look” (for those of you on the metric system, that’s 15.2 km). The logic behind this goes something like: if you’re engaged in a battle and need to know how to position your troops, better to be looking down from above than be in the midst of the battle.  Exactly where the number 50,000 comes from, I haven’t a clue. 50,000 feet is way above the clouds and certainly would not allow you to see troop movements. If I had made up the phrase, I would have said, “Let’s take a hot air balloon look” above the fray, but close enough to the ground to see what is going on.

Anyway, the IMAPS Device Packaging Proceedings have still not arrived (since March!), ditto on the April ICEP proceedings, and the ECTC is yet a week away. So, I thought we might  take  “a hot air balloon look” at our industry.

The front end drives everything

Even though you came to this blog to read about packaging, clearly understand that packaging is driven by IC fabrication (the front-end) and that will never change.

IC fabricators make their big profits on the leading edge node, not on the older, more available nodes.

New materials are introduced on the leading edge, and once these processes are locked down (qualified), they are very hard to change.  This is why equipment suppliers and materials vendors have always spent much of their hard-earned profits on trying to get qualified into the next generation node products.

The End is Coming! Soon. Maybe.

Everyone reading this blog understands the “Moore’s Law Coming to an End” arguments. Exactly when it will happen is, to me, less relevant than the fact that it is happening or has already happened for many mid-tier IC fabricators.

Some top-tier fabs / foundries will find a way to move forward past 22nm to 14nm and beyond, but the important point is that the vast majority won’t. This is not because the technology won’t be available to them, but rather because it will be too expensive. You have seen my slides on this before. Since it is very important that you understand it, I will show them to you again.

The conclusions are simple:
1. There are only a few companies with enough revenue to justify developing and building $6B+ fabs for 22nm and beyond.

2. There are very few products that have enough volume to absorb the design costs inherent to 22nm and beyond designs.

The players that can afford to move forward at this point appear to be Intel, Samsung, TSMC, GlobalFoundries, UMC and Hynix. Maybe one or two more appear through consolidation, but, in general, that’s it.  
Packaging Is Becoming More and More Importantâ??¦and valuable
In the future, product differentiation in most product lines will be achieved by the packaging used, not by the incorporation of chips of the latest node.  What we are seeing in the industry is TSMC, Samsung and maybe others making a strong move into IC packaging.
Equipment Vendors Consolidating as Customer Base Shrinks
For equipment vendors, the leading edge node customer base is shrinking, and thus you see some of them (litho, 450mm) requiring investments from the IC fabricators before putting money into future node developments.
Typical front-end equipment vendors led by Applied Materials, Lam etc. are also  acquiring  back-end equipment vendors to expand their product offerings.
Front-end equipment vendor acquisitions in back-end packaging equipment was, at first, met with skepticism by the packaging community, since front-end equipment has significantly higher margins than back-end packaging can afford. More recently, they have realized that the front-end chip fabricators are moving into the back-end packaging business and are going to their traditional equipment vendors to meet their needs.

Material Suppliers Consolidation Coming ?
It is only logical that the next round of consolidation will come from the materials suppliers.

Materials suppliers have traditionally been quite ignorant when it comes to the actual applications where their materials are to be used. Most blindly follow the roadmaps put out by the industry without really understanding them. In several instances, the low K fiasco of the late 1990s comes to mind. They followed the Pied Piper right over the cliff with many of them loosing tens of millions of dollars, trying to develop spin on polymer dielectrics that were really never going to be used.  

Materials suppliers, once again, need to be very careful when developing for the sub 22nm nodes (on chip or packaging) or for 450mm processes, because the number of companies working on these programs is likely to be significantly greater that the number of potential customers. History tells us that there will only be one or two processes / materials sets chosen by these six-ish players and the potential losses incurred here, by the materials suppliers whose solutions are not chosen, may in fact lead to the eventual consolidations that I predict.

In addition, speaking to many fabs and foundries they all appear to be attempting to minimize the number of suppliers they engage as a cost containment issue. I will not be surprised to see old qualified processes trying to replace generic materials with favored vendor equivalents.
These are not unusual outcomes; in fact, they are natural for an industry that is entering its “mature” stage, and that is certainly where we are headed.  
Hope to see many of you all in Vegas at ECTC.
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