CSP and FCCSP use BT resin materials, with a low number of product layers. They are mainly used in application processors, storage and other fields of mobile phones and wearable devices. The FCBGA packaging substrate retains glass fiber cloth pre-impregnated BT resin as the core,

(report producer/analyst: Kaiyuan Securities Liu Xiang Lin Chengyu)

, packaging substrate : Matching the evolution of packaging technology, high competitive barriers form first-mover advantages

.1. The packaging substrate is used to carry chips, and the products follow Terminal application upgrade

packaging substrate is used to carry the chip and connect the chip to the PCB motherboard. packaging substrate is a type of circuit board used to carry chips. It is a technical branch of PCB and is also the core semiconductor packaging and testing material. It has the characteristics of high density, high precision, high performance, miniaturization and thinness, and can be used for chips. It provides support, heat dissipation and protection, and also provides electrical connection and physical support between the chip and the PCB motherboard. The product technology of packaging substrates continues to evolve with packaging forms, and in the field of high-end packaging, it replaces the original lead frame, epoxy molding compound, bonding wire and other traditional materials.

Advanced processes continue to iterate, promoting packaging substrates to become the fastest growing segmented product in the PCB field . There are two major development trends in electronic products. One is that the size of electronic equipment is becoming lighter, thinner and smaller. The other is that it is evolving in the direction of multi-function, power saving and low cost, which requires highly integrated products, chip processing technology and packaging form. Change accordingly. Correspondingly, the application fields of packaging substrates, mainly BGA (ball grid array packaging), CSP (chip substrate packaging), FC ( flip chip ), etc. are expanding, and packaging substrates are moving towards thinner and smaller line widths/ The development of line spacing corresponds to the increase in the added value of packaging substrates.

According to Primark's forecast, the overall PCB industry market will grow by 4.8% from 2021 to 2026, and packaging substrates are expected to grow from US$14.2 billion in 2021 to US$21.4 billion in 2026, with a compound growth rate of 8.6%, exceeding the overall growth of the PCB industry. level.

The development of packaging and testing technology is the core driving force for IC packaging substrates. flip chip packaging technology (FC) is a product developed by IBM in 1960; chip scale packaging technology (CSP) was proposed by Mitsubishi Corporation of Japan in 1994 and is used to package memory sticks DRAM, Flash memory, and portable electronic products with a small number of pins. etc.; Ball Grid Array Package (BGA) solves the process problems and is used for products mainly composed of logic circuits (microprocessors, computer peripheral circuits, microcontrollers , standard components and silicon intellectual property modules, etc.), 2001 It has been promoted on a large scale by packaging manufacturers. The development of

packaging substrates has promoted the birth of CSP, FCCSP, and FCBGA type packaging carrier board products. Packaging substrates can be divided into FC-BGA/PGA/LGA, FC-CSP, FC-BOC, WB-PBGA, WB-CSP, RF& Digital Module (radio frequency and digital module).

CSP and FCCSP use BT resin materials with low product layers. They are mainly used in application processors, storage and other fields of mobile phones and wearable devices. The FCBGA packaging substrate retains fiberglass cloth pre-impregnated with BT resin (mainly made by Japan's Mitsubishi Gas and Hitachi). Chemical supply) as the core, each layer is laminated to increase the number of layers, and ABF resin (Ajinomoto build-up film, mainly supplied by Ajinomoto, Japan) is introduced into the construction process as a laminated dielectric film.

packaging substrate subdivision process corresponds to different products, which can be mainly divided into three levels. refers to " Printed Circuit Information ". Entry-level products include CSP and PBGA, which are used in chipsets, DRAM, and Flash products; general categories include general FCCSP and FCBGA (non-CPU categories), which can be used in communication chipsets and SiP packages. Modules; high-end categories include complex FCBGA (CPU type) products, which can be used in CPU, GPU and other products.

Globally, Taiwan's Xinxing, Jingshuo, Nanya, Japan's Ifei Electric, Austria's AT&S all involve high-end products.

FC-BGA packaging substrate products are driven by high-performance computing such as AI, and will be products with greater growth potential among packaging substrates.FC-BGA is a high-density semiconductor package substrate that can achieve high speed and multi-function of the chip. It can be used in CPU, GPU, high-end servers, ASIC for network routers/converters, MPU for high-performance game consoles, high-performance ASSP, FPGA As well as ADAS in vehicle equipment, etc. Compared with FCCSP products,

FC-BGA has many layers, a large area, high line density, small line width and line spacing, and can carry high-performance computing.

Before 2019, BGA packaging substrates were mainly used for graphics card applications. The industry was disturbed by mining demand, and the market size fluctuated. After 2019, high-performance computing demand drove the server CPU market, and AI applications drove the GPU market demand. In addition, Some consumer electronics manufacturers' self-developed chips have switched from FCCSP to FCBGA packaging substrates, and the market has shown rapid expansion.

According to calculations by industry consulting organization Prismark, the compound growth rate of the packaging substrate industry from 2021 to 2026 will reach 8.6%, of which the compound growth rate of FC-BGA products exceeds 10%, while the compound growth rate of FC-CSP products is approximately 5%.

.2. The packaging substrate industry has high processing difficulty and investment threshold

Packaging substrate products are different from traditional PCBs. High processing difficulty and high investment threshold are the two core barriers of packaging substrates.

From the perspective of the number of product layers, board thickness, line width and line spacing, and minimum ring width, the packaging substrate tends to be more precise and miniaturized, and the unit size is less than 150*150 mm. It is a higher-end PCB. Among them, line width/line spacing is the core difference of the product. The minimum line width/line spacing range of the packaging substrate is 10~130um, which is far smaller than the 50~1000um of ordinary multi-layer hard board PCB.

1.2.1. Processing difficulty: FC-BGA is more difficult than FC-CSP, and yield is the key to profitability.

In terms of processing difficulty, the process technology of the packaging substrate is more complex than traditional PCB products.

As the line width and line spacing of packaging substrates continue to evolve to below 15/15um, the subtractive process used in ordinary multi-layer PCBs (line width/line spacing corresponds to the 30/30 um range) is no longer applicable. The semi-additive process can achieve ultra-fine line manufacturing with 10/10um line width/line spacing. Therefore, in the manufacturing process, advanced manufacturing methods such as the semi-additive process are increasingly used instead of the subtractive method.

In addition, as the fine circuits of IC packaging substrates develop toward 10μm/10μm ultra-fine wire "hyperconnection technology", the technical difficulty of fine circuit manufacturing technology has increased exponentially.

FC-BGA is more difficult to process than FC-CSP products due to the increased number of inner circuit steps. The processing of

package substrate is more difficult than that of ordinary circuit boards. On the one hand, the line width and line spacing precision are high, and some processes require laser drilling instead of mechanical drilling. On the other hand, the production process is more difficult than that of ordinary circuit boards. The inner lines of The steps are more complicated, and require surface roughening and insulation layer coating.

Since the number of layers of FC-BGA products is usually 8-14 in high stacking, while FC-CSP is 2-4 layers, the FC-BGA built-up layer (Build-up Layer) requires multiple lamination processes. It includes ABF lamination on the double-sided core board, laser drilling of specific holes, exposure and development, and then electroplating and etching processes. The higher the number of built-in layers in

and the greater the number of process processes, the yield will be affected accordingly. In addition, FC-BGA is usually shipped in the form of pellets. The substrate area is fixed, the size of a single pellet is specified by the customer, and the material cutting rate is affected.

Raw material costs account for nearly half, and process yield affects profitability. (1) has a high proportion of raw materials: Referring to the Shennan Circuit prospectus, the packaging substrate direct materials account for more than half of the operating costs. In 2017H1, direct materials accounted for 58%, manufacturing expenses accounted for 28%, and direct labor accounted for 28%. Ratio is 11%, outsourcing expenses account for 3%, and production yield rate affects profitability. Due to the additional production equipment, the depreciation cost of ABF type carrier boards is higher than that of BT type carrier boards; (2) FC-BGA products involve customer-specified product sizes that affect the material cutting rate.

1.2.2. Investment threshold: Fixed asset investment amount is high, early investment return rate is low

From the perspective of project investment, packaging substrates have higher investment thresholds and longer return cycles than traditional PCB products.

(1) has a large investment scale: the corresponding investment for every 10,000 square meters of annual production capacity of packaging substrates is about 30 million yuan, which is higher than the investment of 15 million yuan required for the monthly production capacity of multi-layer hard board PCB units, and is also higher than the flexible circuit board The investment required for unit annual production capacity is 20 million yuan;

(2) has a low input-output ratio (annual operating income/fixed asset investment): According to the calculation of the company's Guangzhou Xingsen integrated circuit board packaging substrate project, the input-output ratio is 0.86, which is lower than 1.2 for the multilayer board PCB project;

(3) has a low internal rate of return and a long investment return cycle: since the packaging substrate is the carrier of the chip, it affects the operation function of the equipment. When the end customer chooses a supplier, Relatively cautious, it requires a customer introduction period of 2-3 years. In addition, the packaging substrate production line process is complex and the production time is also lengthened. The packaging substrate investment project usually requires a 2-year construction period and a 2-year production period. The initial investment time is longer than traditional The 2-year internal rate of return of PCB is lower than that of traditional multi-layer PCB products.

The difference in investment in fixed asset equipment for packaging substrates mainly comes from LDI exposure machines and laser drilling equipment.

Compared with traditional multilayer boards and HDI boards, the difference in production line investment for IC packaging substrates mainly comes from the addition of ultra-fast laser drilling equipment in the drilling process, and the exposure process requires laser direct imaging equipment with higher precision (below 15/15um) (LDI).

refers to the equipment investment plan of Shenghong Technology Nantong factory. The average unit price of laser drilling machines for IC packaging substrates reaches 5 million yuan/unit, which is higher than the average price of laser drilling machines for high-end multi-layer boards and high-end HDI investments. The unit price is 3.41 million yuan/unit, and the average unit price of LDI exposure machine equipment for IC packaging substrates reaches 17.01 million yuan/unit, which is 2-3 million yuan/unit higher than the average unit price of LDI exposure machine equipment used in the multi-layer board field by domestic manufacturers.

In addition, due to the intensive expansion of FC-BGA production capacity by overseas packaging substrate manufacturers, the delivery time of core link equipment has been further lengthened.

.3. Packaging substrate manufacturers have first-mover advantages, creating a high degree of concentration in the industry.

manufacturers have mass production experience in related products, and the rate of ramping up production capacity is expected to accelerate. Referring to the production and production experience disclosed in the annual reports of Trial production started in June 2020, and the yield rate reached 96% in December 2020.

The high investment threshold brings relatively limited supply, and manufacturers that deploy in advance are expected to obtain excess profits.

The fixed asset turnover rate of Nanya Circuits, a Taiwan-funded company known for its FC-BGA products, has increased from 44% in 2019Q1 to 62% in 2021Q3. This is due to the fact that Xinxing Electronics is the only manufacturer in the world that has participated in large-scale investment in the early stage of the high-end FC-BGA segment. Five companies including , Nanya Circuits, Ibiden, Samsung Electro-Mechanics (SEMCO), and Shinko have tight production capacity driven by high-performance computing demand, driving the net profit margin to increase significantly from -4.4% in 2019Q1 to 22.0% in 2021Q3.

The packaging substrate industry has obvious first-mover advantages, forming a concentrated and stable supply pattern.

In terms of global market share, the concentration of the top five suppliers of packaging substrate products is much higher than the overall concentration of the PCB industry. The concentration of the top ten packaging substrate manufacturers in 2020 is as high as 83%, which is much higher than the overall concentration of PCB manufacturers. 48 %, and the ranking of packaging substrate manufacturers is more stable. The top ten manufacturers have basically been locked in. PCB manufacturers as a whole are still in the process of continuous shuffling and iteration. In 2020, Dongshan Precision, Shennan Circuit, and Huaxin Circuit Board Group will rank among the top ten in the world. Manufacturer.

It can be seen from this that although the packaging substrate industry has a low initial return rate in the early stage of production capacity due to factors such as long customer introduction time and rising product production yields, it will have a clear first-mover advantage once it can gain a foothold in the industry.(Report source: Yuanzhan Think Tank)

. Inspiration from the growth of leading manufacturers: Industrial support and technological iteration resonate

Taiwanese manufacturers in China have reached the top level in the world in terms of technology and scale.

Taiwanese manufacturer Xinxing Electronics has surpassed Japanese and Korean manufacturers, and among the three Taiwanese manufacturers among the top ten in the world, Xinxing Electronics can achieve full category coverage from simple FCCSP to complex FCBGA. Nanya Circuit focuses on complex FCBGA layout , Jingshuo Technology is famous for its FCCSP products and is gradually entering into complex FCBGA.

.1. Industrial support and technology iteration, Taiwan-funded manufacturers are latecomers.

The founding background of Taiwan-funded manufacturers includes packaging and testing manufacturers, PCB manufacturers, and group investments.

(1) IC packaging substrate factory invested and built by the original packaging manufacturer: packaging and testing manufacturer Sun Moon Light founded Sun Moon Macro Materials, and Silicon Products Technology invested in Quanmao Precision (merged with Xinxing Electronics in 2009), showing strong product supporting capabilities Characteristics;

(2) Investments by PCB manufacturers or vertical integration of the PCB industry chain: Huatong Computer , Nanya Plastics Investment Nanya Circuits, packaging substrates and PCB processing technology have the same roots, and are regarded as new product lines or PCBs Upstream and downstream vertical integration;

(3) Group investment: Xinxing Electronics belongs to United Microelectronics Responsible Business Group, and the main shareholder of Jingshuo Technology is ASUS Computer , which is easy to meet the needs of end customers.

From catching up, approaching and surpassing their peers, Taiwan-funded manufacturers are booming.

(1) catch-up period: In the early stage of the development of packaging substrates, Japan took the lead in occupying most of the world's IC packaging substrate market;

(2) is approaching in the near future: the stage of rapid development of packaging substrates, with Taiwan, South Korea, and Japanese manufacturers standing in a tripartite position. In 2004, China Taiwanese manufacturers have a 70% market share in mature PBGA packaging substrates through cost advantages, and Japan has more than 50% market share in the FC (FC-BGA, FC-PGA, FC-LGA and other packaging substrates) market. At the same time, CSP packaging Substrates are booming, but there is still a gap between Taiwanese manufacturers and Japanese manufacturers;

(3) transcendence period: Taiwanese manufacturers are in a leading position in the world in packaging and testing, providing space for industrial support. Taiwanese manufacturers in China continue to accept overflow orders from Japanese manufacturers, and technology The capabilities are comparable to those of the Japanese Ibiden. Xinxing Electronics merged with Quanmao Precision and became the world's number one. Jingshuo Technology and Nanya Circuit ranked among the top five in the world. We believe that the absorption of experience, technology iteration and industrial support are the core elements for the successful development of Taiwanese manufacturers.

2.1.1. One of the development factors: absorb overseas technical experience and seize the low-end market share

Chinese Taiwanese manufacturers initially absorbed Japanese and American teams to achieve high market share in the low-end PBGA market. From 1998 to 1999, Japanese manufacturers took the lead. Then, as PBGA products matured and profit margins declined, Japanese manufacturers gradually withdrew. From 2004 to 2005, Taiwanese manufacturers absorbed teams from Japan and the United States, and their PBGA market share reached 66%, higher than 10% of Japanese manufacturers.

2.1.2. The second development factor: downstream demand drives packaging substrate supporting

packaging and testing manufacturers in Taiwan, China, occupy the first place in the global market share, providing space for packaging substrate industry supporting.

In 2005, Taiwanese manufacturers represented by ASE ranked first in the world in terms of output value in the packaging and testing outsourcing field, and they still maintain a leading market share until 2021. According to statistics from Tuopu Industrial Research Institute, ASE, Silicon Products, and Licheng The global share is 19.2%/9.9%/7.0%, providing location advantages for product matching of packaging substrates.

Correspondingly, in 2010, the global market share of packaging substrate manufacturers in Taiwan, China, was 29.1%, lagging behind Japan's 37.8%. In 2017, the global market share of packaging substrate manufacturers in Taiwan, China, reached 38%, ranking first in the world, surpassing South Korea 28% of Japanese manufacturers and 26% of Japanese manufacturers. End customers promote the adoption of advanced packaging processes in new products, further strengthening packaging substrate technology innovation and supporting capabilities.

2.1.3. The third factor of development: new packaging substrate technology will provide backward manufacturers with opportunities to overtake in corners.

The process iteration of complete machine technology and chip manufacturing technology has given rise to new IC packaging technology, and backward manufacturers have opportunities to overtake in corners. .

As chip manufacturing technology evolves from 3 microns to 8 microns to 0.3 microns to 3 microns, the overall machine technology upgrades from reflow soldering technology to area array packaging, and the corresponding IC packaging technology evolves from BGA to CSP, giving birth to the corresponding PBGA and CSP packaging substrates further gave birth to FC-CSP, FC-BGA and other substrates matching the packaging form.

In the new round of product iterations, original manufacturers may seek new process paths, or manufacturers that are relatively lagging behind in the original field may have opportunities to catch up. Due to the differences between the manufacturing process of FC-BGA products and the previous CSP manufacturing process, Taiwan-funded manufacturers have the opportunity to surpass them. For example, according to the data of "Proceedings of the Seminar on the Development of Advanced Semiconductor Packaging Technology and Related Materials", 2004-2005 Taiwan-funded manufacturers lag behind Japanese manufacturers in market share in the CSP field. However, in the FC-BGA field, the market share gap is narrowed. Taiwan-funded manufacturers have a market share of 27%, second only to Japanese manufacturers at 52%, and surpassing Korean manufacturers by 11%.

.2. Leading manufacturers have accumulated experience and become a model for domestic manufacturers to follow.

2.2.1. Xinxing Electronics: PCB full category layout, leading customers lead packaging substrate process iteration

Xinxing Electronics started from the UMC responsible enterprise group and developed into a global company. The largest packaging substrate factory.

company was established in January 1990 as a group of responsible enterprises of UMC. It leased land, factories and equipment and put into production; in August 2002, the stock was transferred to the market; in January 2005, Suzhou Qunce Technology Co., Ltd. was established, specializing in manufacturing boards; in March 2006, the new flip-chip carrier board plant was officially put into mass production; in October 2009, it merged with Quanmao Precision, ranking the world's largest packaging substrate manufacturer in terms of revenue.

’s existing departments include PCB Division, Carrier Board Division and IC OEM Burn-in Test Division. There are 13 factories in Taiwan, China, located in Taoyuan County and Hsinchu County , six PCB factories, six carrier board factories and one IC pre-burning and testing factory; there are five production bases in mainland China, each in Shenzhen , Suzhou , Kunshan (two buildings) and Huangshi .

Xinxing Electronics has strong capital expenditure and has entered the harvest period.

Xinxing Electronics’ capital expenditures have a compound growth rate of 13.8% from 2012 to 2021. Total capital expenditures in 2021 will reach 5.33 billion yuan, exceeding Nanya Circuit’s 1.96 billion yuan. Since the company has a full range of PCB products, its profits were relatively stable from 2012 to 2019, and there was no loss. The

packaging substrate business has improved year by year and has become the company's main growth driver. Its proportion has increased from 42% in Q4 2019 to 55% in 2022Q1. Correspondingly, the company's overall gross profit margin and net profit margin levels have been boosted. The gross profit margin has increased from 2019 to 2019. 13.7% increased to 32.3% in 2022Q1, and the net profit margin increased significantly from 4.0% in 2019 to 19.1% in 2022Q1. Correspondingly, the company's ROIC and ROE levels reached 24.2%/7.6% respectively.

We believe that Xinxing Electronics’ operating advantages lie in its full-category layout from PCB advancement to high-end packaging substrates, its production capacity actively cooperates with customer expansion, and its technical cooperation with customers. It is a template for domestic packaging substrate manufacturers to follow.

(1) Full-category layout: The company has the most complete PCB types from FPC, PCB, HDI to packaging substrates, which can benchmark Japanese manufacturers. The company's packaging substrate business revenue proportion has increased. In 2021, the company's packaging substrate business revenue ratio will reach 55%;

(2) Capacity expansion and product advancement to cooperate with customers: The company's product FC-BGA products have a short iteration cycle driven by core customers, with an increase in product layers, expansion in volume, reduction in minimum line width/line spacing, and annual technical parameters The company is actively supporting customers to expand production capacity, with the most widely distributed factories, and plans to support the Xinmei factory in Taiwan, China, with Intel ABF products.

2.2.2, Nanya Circuit: vertical integration characteristics, focusing on the FC-BGA market

Nanya Circuit was invested and established by Nanya Plastics. Nanya Circuit was established in 1997. It was established by Nanya Plastics with a 99.9% shareholding ratio. It was operated independently in 1998. The first phase expansion of the third plant was completed in July 1999. In August 2001, the flip-chip packaging substrate expansion of the fifth plant was completed. In 2021 In 2016, the board of directors approved the expansion of the first and second phases of the ABF carrier board in Shulin Factory.

As of the 2021 annual report, Nanya Plastics, Formosa Plastics Industries, Taiwan Chemical Fiber, and Formosa Petrochemicals hold 33.0%/13.4%/13.3%/13.3% of the company's equity respectively.

IC packaging substrate FC-BGA business has been growing steadily, and the industry boom has driven the company's profitability to rise significantly. As FC-BGA products benefit from the boost in demand for AI computing and industry supply is tight, the company has achieved rising profits by relying on FC-BGA’s leading advantage. The ROE and ROIC in 2021Q3 reached 20.3%/15.4% respectively. The company has made steady progress. Although the company's profitability was weak from 2012 to 2018, the compound growth rate of capital expenditures from 2012 to 2020 reached 15.3%.

We believe that Nanya Circuit’s operating advantages lie in segmented product slots, solid customer base, and resource integration and division of labor under vertical integration.

(1) Segmented product card position: one of the earliest manufacturers to enter the IC packaging substrate, mature BGA process (the most experienced among the top three in Taiwan, China);

(2) solid customer base: IC carrier board products belong to customers Traction, technology iteration type products, with demand for product reliability and production capacity, early cooperation with company customers, production capacity lock;

(3) Resource integration and division of labor under vertical integration: inheriting Formosa Plastics’ management experience, integrating group resources and division of labor, able to obtain a stable source of raw material supply and bargaining power for external procurement. (Report source: Yuanzhan Think Tank)

. Domestic manufacturers have high aspirations and welcome opportunities for domestic substitution.

Domestic manufacturers are different from Taiwanese manufacturers. The mainstream entrepreneurial camp comes from traditional PCB manufacturers. The advantage of

is that the subtractive and semi-additive process production paths are extensible. The disadvantage is that it lacks the product development vision of the packaging industry and is far away from the advanced processes and actual needs of end customers.

Domestic manufacturers seek to break the situation, starting from CSP storage applications where Japanese and Taiwanese manufacturers have successively withdrawn from investment, supporting domestic downstream Yangtze River Storage and Hefei Changxin's newly expanded production capacity to run through the yield rate and undertake market demand; in high-end FC -Forward-looking deployment of BGA products, introducing the mature production experience of overseas teams, and planning in advance the product supporting needs of domestic CPU and GPU design manufacturers in the future.

.1. Competition in the multi-layer PCB industry has intensified, and layout and packaging substrates are expected to reverse the downward trend in profitability

Competition in the multi-layer PCB industry has intensified, and the industry's return on investment is facing a decline.

The leading listed PCB manufacturers still maintain high capital expenditure growth. From 2018 to 2021, the total capital expenditure growth rate of 13 PCB companies was 45%/30%/40%/27% respectively. However, industry demand has been disturbed by macroeconomics. The inability to fully digest the new production capacity has resulted in most manufacturers needing to compete with price advantages in the mid- to low-level multi-layer PCB market, and the net profit rate level has declined. The corresponding industry average ROE and ROIC have dropped from 16.4%/19.7% in 2014 to 2021 respectively. 9.6%/12.2%.

Against the background of continued decline in profits from the original business, domestic manufacturers are seeking to break through the high-threshold products of HDI and packaging substrates and undertake the trend of overseas production capacity transfer.

Domestic manufacturers’ packaging substrate industry has ample room for growth compared with traditional PCBs. Looking at the background of manufacturers, the leading manufacturers belong to Japanese, Korean and Taiwanese backgrounds. Compared with the traditional PCB business, domestic manufacturers have a broader space for substitution in the field of packaging substrates.

Domestic manufacturers have achieved full localization in the traditional PCB field. In 2019, the area of ​​ownership accounted for 32%, and the manufacturing area accounted for 57%. For packaging substrates, divided according to the manufacturing place, mainland China accounted for 16%, and the area of ​​ownership accounted for 16%. The proportion is only 4%. Compared with traditional PCB products, packaging substrates have wider room for growth.

.2. The iteration of packaging substrate products has slowed down, and domestic manufacturers are seeking to break through domestic supporting products.

The domestic semiconductor industry is becoming increasingly mature, providing a high-quality supporting environment for the development of domestic packaging substrate manufacturers.

(1) Packaging link: domestic outsourced packaging and testing manufacturers occupy a place in the global field. According to the Changdian Technology announcement and the statistics of the Core Thought Research Institute, the three major domestic packaging and testing manufacturers in 2021 are Changdian Technology and Tongfu Micro. The proportions of electronic and Huatian Technology are respectively 10.8%/5.1%/4.2%, and the total proportion reaches 20.1%, and the advanced packaging process is still improving. Considering that some packaging substrate products directly cooperate with packaging and testing manufacturers, the domestic packaging and testing industry provides high-quality soil for the development of packaging substrates.

(2) Manufacturing link: foundries and IDM manufacturers have successively expanded production, and the trend of localized manufacturing is strong. According to IC Insights estimates, mainland China will account for 16.7% of the global semiconductor output value in 2021, which is higher than 12.7% in 2011, with an annual increase of 0.4 pct. It is expected that the compound annual growth rate of mainland China's output value will reach 13.3% from 2021 to 2026. Its share of global output value will rise to 21.2%, with an annual increase of 1.6 pct, exceeding the past ten years.

Domestic semiconductor manufacturing, especially represented by storage products, is rising rapidly.

In the flash memory market, in 2019, Samsung , Hynix , Kioxia, Micron and other manufacturers together accounted for more than 90% of the market supply. With the Yangtze Memory National Memory Project 3D NAND Factory Phase I and II The total production capacity is 300,000 wafers/month; in the DRAM field, the global memory production capacity will be 1.5 million wafers/month by the end of 2021, of which Samsung, Hynix, and Micron account for 85%, and CX 12-inch memory wafer manufacturing project The gradual release of production capacity is expected to expand from 60,000 pieces/month to 120,000 pieces/month in 2022, and the future target production capacity is expected to reach 300,000 pieces/month, which is expected to promote the localization and supporting process of domestic packaging substrate manufacturers.

(3) Design link: Domestic manufacturers’ CPU, GPU and FPGA camps are becoming increasingly mature. The CPU field involves PCs, servers, embedded systems, video and multimedia processing, automobiles and other applications. GPU products are closely related to overseas leading manufacturers Nvidia, AMD There is still a gap, but advantages are gradually forming in the field of AI applications. These links will bring supporting needs for high-end FC-BGA packaging substrates to the domestic market in the future.

The tight production capacity of packaging substrate competitors coupled with the trend of domestic substitution in downstream industries makes it difficult to fill the gap in domestic demand.

(1) The expansion of leading companies from 2016 to 2020 has been relatively conservative, causing the industry to face tight supply and demand: Some head packaging substrate manufacturers have relatively conservative capital expenditures, and the growth of fixed assets has also been relatively slow. Take Jingshuo Technology as an example, in 2016 -The compound growth rate of Jingshuo Technology's fixed assets in 2021 will be 9.4% respectively. Considering that it takes 2-3 years to launch new production capacity, and downstream demand is experiencing rapid growth, the mismatch between supply and demand and the improvement of the semiconductor industry's prosperity have led to the decline in FC since 2020Q4. -The production capacity of high-end packaging substrates represented by CSP and FC-BGA is in short supply.

(2) The new round of production capacity will be released in 2023-2024, and the leading overseas and Taiwan manufacturers have a small proportion of production capacity that directly faces the demand of the Chinese market: The top ten packaging substrate manufacturers in the world have successively proposed to expand production According to the plan, the production capacity is expected to be launched intensively in 2023-2024, and the products are oriented towards FC-BGA (mostly using ABF materials for flip-chip assembly processes). However, there are few plans for these production capacities to directly face the demand of the Chinese market. Among them, only Xinxing Electronics One manufacturer estimates that 30% of its IC substrate capital expenditure will be used to invest in a factory in Suzhou, China, to serve customers in mainland China. The rest of the manufacturers are expanding production in their respective countries or in Southeast Asia, providing supporting space for Chinese packaging substrate manufacturers.

.3, the first echelon of domestic manufacturers has begun to take shape, leading the development of high-end products

The first echelon of domestic manufacturers such as Shennan Circuit, Xingsen Technology, and Zhuhai Yueya have begun to take shape.

In terms of revenue scale, Shennan Circuit ranks first in terms of production capacity and revenue volume. Xingsen Technology’s revenue scale is second only to Shennan Circuit and Zhuhai Yueya, and its product process capabilities can reach that of general packaging substrates. Level (that is, including general FCCSP, CSP, etc.).

Shennan Circuit extends its MEMS module products to the storage category, and its production capacity ranks first in the country; Zhuhai Yueya's products are mainly radio frequency products, with a relatively high average product price and a production capacity comparable to Xingsen Technology. In terms of product types, Shennan Circuit and Xingsen Technology are both domestic manufacturers that can mass-produce storage packaging substrates.

Domestic manufacturers’ original production capacity yields increased and profits were released.

Domestic packaging substrate manufacturers have already achieved full production capacity in the field of mid-range packaging substrate processes such as CSP and FC-CSP. Shennan Circuit’s Wuxi factory was connected for trial production in June 2019. In 2021, the packaging substrate business achieved operating income of 2.42 billion yuan. The gross profit margin reached 29.1%. Xingsen Technology’s packaging substrate business revenue in 2021 reached 670 million yuan, with a gross profit margin of 26.4%. Based on domestic supporting advantages in basic industries such as water and electricity and labor cost advantages, domestic manufacturers have surpassed Taiwanese companies in general products The manufacturer's gross profit margin level from 2012 to 2019.

Shennan Circuit and Xingsen Technology expand FC-CSP production capacity and expand their competitive advantages in the storage market.

The storage market is less profitable than high-end applications such as mobile phone processor APs in the CSP and FC-CSP markets. Japanese and Korean manufacturers are turning to high-end products, leaving domestic manufacturers to fill the gap. The release of domestic Yangtze River Storage and Hefei Changxin production capacity has brought strong demand, and Shennan Circuit and Xingsen Technology have increased their production capacity layout.

Domestic manufacturers have deployed in the advanced FC-BGA market and are expected to match the potential supporting demand for domestic semiconductors.

Domestic first-tier manufacturers plan to expand FC-BGA product production capacity. After Shennan Circuit and Xingsen Technology reach production, their corresponding annual production capacities can reach 200 million and 240 million respectively. With the rise of domestic CPU, GPU and other design companies, packaging substrates Manufacturers are expected to accompany the development of product processes for core customers. When product capabilities are fully improved, they are expected to introduce them to overseas core customers.

Core customer traction will be the core driving force for domestic manufacturers to complete process iterations under coordinated development.

Most domestic manufacturers start from the PCB link and complete the catching up of FC-CSP and FC-BGA product processes by attracting teams with mature experience. Different from Taiwan-funded enterprises, the main driving force for the current technology iteration of packaging substrates comes from changes in the needs of end customers, rather than from the evolution of packaging processes. Domestic manufacturers are expected to complete process iterations under the coordinated development of the domestic semiconductor industry.

. Report summary

After nearly ten years of accumulation and development, domestic manufacturers’ packaging substrates are ushering in the best opportunity for domestic substitution.

Early stage packaging substrate manufacturers, as supporting suppliers of module products, already have mass production experience in low-end processes, and are gradually moving into the CSP and FC-CSP fields, combining the production capacity of domestic storage manufacturers and the packaging and testing industry to achieve global supply. capabilities, overseas competitors and leading Taiwanese manufacturers are gradually withdrawing from relatively low-end products, which is conducive to the large-scale mass production of packaging substrate manufacturers and can effectively absorb new production capacity. In addition, domestic manufacturers have advantages in labor costs and water and electricity supporting links. , the profit is expected to surpass that of overseas manufacturers.

In the field of high-end FC-BGA, domestic manufacturers have entered the production capacity layout stage with the support of domestic semiconductor industry funds and a friendly financing environment. In the future, they are expected to start with the products of domestic CPU and GPU manufacturers, work together to complete process iterations, and gradually enter the market. Overseas core customers. Manufacturers with leading domestic packaging substrate production capacity scale and technology and long-term packaging substrate layout strategy: Shennan Circuit and Xingsen Technology.

, risk warning

Competition in the packaging substrate industry is intensifying, production capacity is not ramping up as expected, downstream demand is declining, customer introduction progress is not as expected, and raw materials are in short supply

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