As a downstream link in integrated circuit manufacturing, the field of packaging and testing has not yet fully begun in this round of market conditions. Packaging and testing includes packaging and testing, which is located at the back end of the semiconductor industry chain. It

Looking back at the recent semiconductor cycle, the supply chain transmission pattern is generally equipment → manufacturing → materials. The packaging and testing field, as a downstream link in integrated circuit manufacturing, has not yet fully started in this round of market conditions.

packaging and testing is closely related to the semiconductor industry.

packaging and testing includes packaging and testing. It is located at the back end of the semiconductor industry chain and is the last link before the chip is designed, manufactured and put into the market. Specifically, the packaging and testing industry chain also has three parts: upstream, midstream and downstream.

packaging and testing industry chain

Data source: Top Industry Research Institute

packaging and testing has a high correlation with the prosperity of the semiconductor industry for many reasons. First of all, packaging and testing is a necessary process for semiconductor production. The tested wafer needs to be processed according to the product model and functional requirements to obtain independent chips. Secondly, in the context of the slowdown in the development of CMOS technology and the significant increase in costs, advanced packaging technology can reduce chip costs and even improve performance. It can be seen that the production capacity and upgrade of packaging technology not only affect the performance of future semiconductors, but also play an important role in the evolution of the entire electronic system.

The order volume will overflow until the end of the year, and the performance is expected to exceed expectations.

The semiconductor industry is still nervous on the one hand. The production capacity of global fabs is fully loaded, and prices of some important links in the industry chain have continued to rise, indicating the high prosperity of semiconductors. The tight supply and demand of the packaging and testing industry chain will naturally be affected. On the other hand, there is a shortage of 5G mobile phone and Netcom infrastructure, servers and data centers, laptops and personal computers for remote office and teaching applications, and automotive chips, driving demand for high-end and mature chips.

So overall, the current packaging and testing capacity is seriously tight. The current order visibility has been extended to the end of the year, and new orders for closed testing and urgent orders have increased by about 20%-30%, ushering in the boom cycle since 2018. We expect that the tight supply and demand situation will continue at least throughout this year.

The current valuation of the packaging and testing industry is low

In 2018, mainly due to the decline in downstream demand, the packaging and testing industry fell into a downturn. The profit margins of major global packaging and testing companies declined to varying degrees in 2018. According to the revenue of industry leader ASE, it can be seen that the overall profitability of the packaging and testing industry has only shown a gradual recovery trend since Q3 of 2019. However, in the first half of 2020, the economy was curbed by the epidemic. It was not until the second half of 2020, under the influence of China's economic recovery, that the industry gradually picked up.

Sun Moonlight’s 2017-2020 revenue and year-on-year

Data source: Wind

Naturally, the semiconductor industry also began to adjust in July last year. Thanks to chip demand from 5G and the automotive industry, an inflection point did not appear until the first quarter of this year. After a large number of previous reductions in holdings, fixed increases and the release of high valuation pressure, the industry is back on track.

In addition, observing the changes in the stock price of the leading company ASE, we can find that it has increased by more than 20% this year, while the stock prices of most domestic packaging and testing companies have experienced relatively small changes. Therefore, due to the early decline and the lag in stock price reaction, the packaging and testing industry is also likely to return with the trend.

Sun and Moonlight stock price (weekly K)

Data source: Oriental Fortune

In summary, it is due to low valuation, strong demand, and high prosperity. We are optimistic about the packaging and testing industry and believe it has potential investment value.

Global semiconductor packaging and testing market outlook

Data source: Wood Mackenzie

It is recommended to pay attention to : Changdian Technology (600584), Tongfu Microelectronics (002156), Huatian Technology (002185), Taiji Industrial ( 600667), Shenkoda (688328)

Yuesheng Financial Investment Research Department

2021html June 4 30th

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