Since September, due to the large number of orders for wire bonding and ball mounting packaging, orders for flip-chip packaging and wafer-level packaging have also been overwhelmed. Upstream customers have placed additional orders almost every 1-2 weeks, and the order-to-shipment

Following the shortage of semiconductor front-end wafer foundry production capacity, there has also been a serious shortage of back-end packaging and testing production capacity recently.

html Since September, due to the large number of orders for wire bonding and ball mounting packaging, flip-chip packaging and wafer-level packaging have also been overwhelmed with orders. Upstream customers have placed additional orders almost every 1-2 weeks, and the order-to-shipment ratio has increased. to 1.4~1.5. Therefore, packaging and testing factories successively raised prices by 20 to 30% for new orders in the fourth quarter.

On November 20, ASE Semiconductor, a subsidiary of ASE Investment Holdings, a major packaging and testing company, notified customers that it will increase the average order price for packaging and testing in the first quarter of 2021 by 5 to 10% to cope with rising costs such as the rise in IC substrate prices, as well as customer Strong demand has resulted in capacity being in short supply.

What causes the shortage of packaging production capacity and the price increase?

Since packaging is priced based on volume, the overall tight production capacity means that the number of chip shipments has reached a new high. As for the reasons why production capacity exceeds supply and prices rise, industry insiders analyze the following four major reasons:

1. Wafer inventories originally accumulated in IC design factories or IDM factories began to be released in large quantities to packaging and testing factories for packaging process production.

2. With the outbreak of long-distance business opportunities and the stay-at-home economy driven by the COVID-19 epidemic, including laptops and tablets, WiFi devices, game consoles, etc., which are out of stock, OEMs and system manufacturers will naturally increase their chip shipments.

3. The automotive electronics market rebounded significantly in the fourth quarter, but chip inventory has already bottomed out, so urgent orders for automotive chips have been released in large numbers.

4. The chip content of hot-selling 5G smartphones has increased by nearly 50% compared with 4G mobile phones, requiring more packaging production capacity support.

At the same time, ASE COO Wu Yutian said that the semiconductor supply chain is currently full of demand for materials such as carrier boards and lead frames. The packaging and testing production lines are also "very full and very tight", and demand is still pouring in. Even if you want to expand production capacity, you must follow the overall expansion. It is expected that the current situation of shortage of supply will continue at least until the end of the second quarter of next year.

Industry insiders analyze that packaging production capacity will be tight in the first half of next year, and price increases will be unstoppable. Due to the replacement of 5G mobile phone generations, these general trends will continue at least throughout next year, so packaging production capacity will be in short supply until the middle of next year. Domestic related concept stocks will also benefit.

Judging from the latest revenue ranking of the top ten packaging and testing manufacturers in the third quarter of 2020 released by Tuoyuan Industrial Research Institute, Taiwan's ASE ranks first with revenue of US$1.52 billion, followed by Amkor in the United States. It ranked second with an annual growth rate of 24.9%. Jiangsu Changdian Technology (600584), Tongfu Microelectronics (002156), and Tianshui Huatian from mainland China ranked 3, 6, and 7 respectively.

Overall, the semiconductor industry in mainland China is becoming more and more influential in the packaging and testing industry, its market share performance is pretty good, and the market size of related companies is constantly increasing. investors can actively pay attention to the investment opportunities of domestic semiconductor packaging and testing leaders.