SINGAPORE Strong IC demand in the consumer-electronics sector will likely cause continued high prices and supply constraints in the high-end, chip-packaging markets, according to industry executives and analysts.
Booming seasonal demand caught the subcontractor community by surprise late last year, causing worldwide shortages of chip-scale packages (CSPs), flip-chip products, plastic ball grid arrays (PBGAs) and other high-end products. Reports also surfaced that there were growing shortages of chip-packaging materials, such as lead frames and substrates.
At that time, strong demand and shortages for chip-packaging services were expected to last until the first quarter of 2006. But now, it appears that the chip-packaging crunch has extended into the second quarter and perhaps beyond.
Scott Jewler, chief strategy officer for Singaporean chip-packaging and test specialist STATS ChipPAC Ltd., said that supply of advanced solutions such as PBGAs and CSPs have been "surprisingly tight" in recent quarters.
In an interview with EE Times, Jewler said this was due mainly to a strong uptake in the PC, mobile phone, and digital set top box markets, "which consume a lot of these parts." The situation has been compounded by the fact that some packaging firms are "hesitant to invest" in the top end of the market, he said.
What’s more, recent substrate and commodity price hikes implemented by various subcontractors have been passed down in the supply chain. "[Price] increases are related to raw materials," he said.
There is more good and bad news in the backend industry. Chip-packaging capacity has been tight “across the board,” said Craig Berger, an analyst with investment banking firm Wedbush Morgan Securities Inc. (Los Angeles). “But people are also scrambling to add capacity.”
In Q1, Taiwan’s Advanced Semiconductor Engineering Inc. (ASE), the world’s largest chip-packaging provider, said that its utilization rate of both assembly and test were above 90 percent.
In 2006, ASE’s capital spending is expected to be around $400 million, as it anticipates a more significant ramp up in the second half of the year. The company plans to expand its capacity for flip-chip and other products.