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According to CINNO Research's survey, the global semiconductor industry continued to face challenges in the first quarter of 2019. In addition to the pressure of oversupply and sharp decline in prices, the logic chip market is also facing considerable pressure.
Under such a background, the sealing and testing industry, which is at the downstream of the industrial chain, naturally cannot escape this cold wave. The performance decline of major large manufacturers in the first quarter of this year was between 15% and 20%. Data from
CINNO Research shows that the global wafer foundry output value reached US$13.3 billion in the first quarter of this year, a year-on-year decrease of 20%, while the output value of the top ten packaging and testing plants in the world was US$4.9 billion, a year-on-year decrease of 16% and a quarter-on-quarter decrease of 10%.
Among them, the decline in revenue of manufacturers mainly in logic chip packaging and testing was followed by the pace of foundries, while the decline in revenue of memory packaging and testing manufacturers was affected by the decline in memory shipment and production cuts.
This week, the latest report of the Tuoqi Industry Research Institute gave the ranking and revenue of the top ten packaging and testing manufacturers in the first quarter of 2019. The total revenue of the top ten packaging and testing factories is estimated to be US$4.71 billion, a year-on-year decrease of 11.8%. Among them, Amkor, Jiangsu Changdian, Tongfu Microelectronics, Tianshui Huatian, Licheng and Liantest all showed double-digit declines in the first quarter.
Source: Tuoqi Industry Research Institute
From the figure, it can be seen that among the top ten manufacturers, 8 of the top ten manufacturers had negative revenue growth year-on-year.
The industry leader Sun and Moonlight had revenue of US$1.12 billion in the first quarter of 2019, a year-on-year decrease of 7.3%; silicon products were US$600 million, a year-on-year decrease of 7.7%. The recession of both companies was caused by the decline in mobile phone sales. Aikel, ranked second, had revenue of US$890 million in the first quarter, down 12.7% from the same period last year.
It is worth noting that JingyuanDian and Chipang are the only two companies with positive revenue growth.
It is reported that in the development of 5G testing layout, JingyuanDi has its own unique solution for testing on SoC and basic equipment - maintaining close contact with customers and providing real-time testing assistance to meet the needs. For example, JingyuanDi's expansion of its cooperation model with Qualcomm, in addition to renting clean rooms, further targeting 5G chip development and testing projects, and continuously investing in joint research and development projects, driving a quarterly increase of 8.6% in the first quarter of 2019, and its revenue in the second half of the year is also worth looking forward to.
Qibang's development in driver IC packaging technology has benefited from customers. China's largest panel manufacturer BOE has increased demand for thin-film crystal-covered packaging tape and reel (COF) technology and TDDI, helping its first-quarter revenue to increase by 14.7% year-on-year. In the future, with JD.com's production capacity continues to be full, Chibang's annual revenue performance will continue to be optimistic.
Comparing the rankings and revenue of the top ten IC packaging and testing factories in the world in the first half of 2018, it can be seen that the ranking and market share have almost no change, but at that time, the revenue growth of 8 companies was positive and only two companies were negative, which is the opposite of the situation in the first quarter of 2019. In just over half a year, the industry has changed so rapidly, which makes people feel moved.
Source: Tuoqi Industry Research Institute
At that time, Licheng benefited from the rise in memory prices and the acquisition of Tera Probe and Micron Akita, which contributed a lot to its overall revenue. Since the fourth quarter of 2018, prices have declined due to factors such as excessive memory inventory, and their influence has become the performance of the memory packaging and testing business, causing its revenue in the first quarter of 2019 to decline significantly year-on-year, reaching -14.2%.
China's seal and testing industry's joys and sorrows
In the first half of 2018, the revenue growth of the top three seal and testing in mainland China was also very strong and performed very well. This is in sharp contrast to the first quarter of 2019.
CINNO Research survey shows that in the first quarter of 2019, in addition to the decline in high-end packaging and testing capacity utilization, mainland Chinese packaging and testing manufacturers have experienced low-priced orders due to intensified competition, which caused the revenue of the three packaging and testing stocks (Jiangsu Changdian, Huatian Technology, and Tongfu Microelectronics) to decline by 19% compared with the fourth quarter of last year.
Observe the revenue status of Jiangsu Changdian, Tongfu Microelectronics, and Tianshui Huatian. Due to factors such as the Sino-US trade dispute and the slowdown in China's economy, the revenue of mainland China's packaging and testing plants fell by double digits in the first quarter compared with the same period last year.As international trade disputes are becoming increasingly fierce and market demand is weak, the revenue performance of the packaging and testing industry may continue to be affected.
As a major chip application player, the sales of smartphones continue to be sluggish. According to statistics, global smartphones have declined for four consecutive quarters, and the Chinese mobile phone market has fallen for six consecutive days. The report on smartphone AP (application processor) in the mainland market released by DIGITIMES Research shows that the domestic smartphone AP application processor shipments in the fourth quarter of 2018 were only 215.6 million. Although it increased by 3.1% year-on-year, it fell by 4.6% month-on-month. You should know that Q4 should have been the best sales quarter of the year.
In this industry background, there is news that the demand for chip packaging and testing of major global IDM manufacturers in mainstream communications, consumer electronics and other applications has gradually slowed down, and it is difficult to see high growth in 2019.
Mainland packaging and testing manufacturers are affected by the cyclical fluctuations in the industry, and the demand side has weakened, resulting in a decline in the capacity utilization rate of packaging and testing companies, which has affected their performance.
In addition, affected by the Sino-US trade dispute, the United States will initiate a 25% tariff measure. In this way, some closed-end orders will shift from the mainland to Taiwan, which will obviously have an impact on the performance of closed-end companies in the mainland. However, this punitive tariff strategy in the United States not only affects relevant companies in mainland China, but also has a negative impact on the global packaging and testing supply and demand chain, including related companies in the United States.
Since many European and American IDMs or Fables have handed over more and more sealing and testing orders to mainland Chinese companies to be close to local production, sales and services, it is reported that 30% of the orders for mainland packaging and testing companies come from local customers, and the other 70% come from chip companies in Europe, the United States, Japan and South Korea, and Taiwan. If these orders are transferred to Taiwan packaging and testing companies, they must re-adjust their strategies, costs, operations and customer relationships, which will bring considerable time and resource cost pressure. In addition, European and American IDM and packaging and testing companies will increasingly build packaging and testing factories in mainland China. If the United States launches tariff measures, it will definitely have an impact on the orders received by these foreign-funded packaging and testing factories in mainland China.
promotes development through acquisitions
For a long time, Chinese manufacturers have increased their market share and consolidated their corporate reputation through mergers and acquisitions of overseas market targets. For example, in order to enhance the market position of semiconductor packaging and testing, Jiangsu Changdian acquired Singapore's Stark Jinpeng in 2015, making its market share successfully squeezed into the top 10 packaging and testing markets.
After Jiangsu Changdian acquired Xingke Jinpeng, because Xingke Jinpeng has high-end packaging technology capabilities, it has world-class strength for SiP (system-level packaging), eWLB (embedded wafer-level gate ball array packaging), TSV (silicon perforated packaging), 3D packaging technology, etc. In the future, Jiangsu Changdian will become the biggest rival of high-end packaging and testing factories such as Sun and Moonlight, the former leader in the market.
Of course, after acquiring Xingke Jinpeng, Jiangsu Changdian also experienced some "indigestion" situations, and it still takes a certain amount of time to run in. To achieve a real chemical reaction, a lot of homework is still needed.
In addition to Jiangsu Changdian, Tongfu Microelectronics acquired 85% of the shares of two AMD's subsidiaries in 2015.
Huatian Technology acquired 28.85% of Xiti Microelectronics' equity in 2013, and in 2014, FCI and its subsidiaries. In 2016, Xinquan acquired 75% of Quanzhike's shares.
After completing the merger and acquisition, Taiwan's status remained basically unchanged, and the US market share increased slightly, from 12% to 17%. Through mergers and acquisitions, mainland Chinese companies have absorbed advanced technologies and won over many industry talents, which alleviated the shortage of local IC talents.
Domestic packaging and testing companies are constantly spending money and taking mergers and acquisitions to accelerate the development of the domestic packaging and testing industry. However, with the importance of foreign countries to the packaging and testing industry, especially the various restrictions on overseas mergers and acquisitions of Chinese capital by developed countries and regions represented by the United States, the trend of overseas mergers and acquisitions of mainland enterprises has slowed down.
M&A is just a measure to quickly catch up with advanced international companies, but to truly become bigger and stronger, you still have to practice your internal skills solidly.While acquiring, our packaging and testing companies are also evolving towards high-end packaging technology, such as increasing efforts to develop advanced packaging technologies such as Fan-Out and SiP, and showing their own technical achievements to the market through customer certification, and continuously improving their competitiveness.
In addition, with the policy support of the Chinese government, it has driven the sustainable development of China's semiconductor industry and gradually took the trend of high-end packaging and testing technology as its development direction.
At present, Tongfu Microelectronics has obtained AMD's 7nm chip packaging and testing orders, and Tianshui Huatian also expects to invest RMB 2 billion to build advanced packaging production lines for automotive purposes. Driven by advanced packaging technology, it will be of great benefit to the development of China's packaging and testing industry, and revenue will have a chance to increase in 2019.
New technology brings development opportunities
mentioned above that developing advanced packaging and testing technology is a common goal pursued by global packaging and testing operators, including mainland Chinese manufacturers. Only in this way can we ensure the initiative in future competition.
So, how do the advantages of advanced packaging be reflected? What are the advanced packaging technologies available now and in the future?
Advanced packaging and testing technology can improve packaging efficiency, reduce costs, and provide better cost-effectiveness. Therefore, advanced packaging and testing technology will be the main development direction of the packaging and testing industry in the future.
At present, advanced packaging mainly includes flip chip, bump, wafer-level packaging, 2.5D packaging, 3D packaging (TSV) and other technologies. At the beginning of its birth, advanced packaging only has WLP, 2.5D and 3D. In recent years, advanced packaging has developed rapidly in various directions, and each company developing related technologies has independently named its own technology, such as TSMC's InFO and CoWoS, Sun and Moonlight's FoCoS, Amkor's SLIM, SWIFT, etc.
Yole predicts that from 2017 to 2022, the annual compound growth rate of global advanced packaging technologies: 2.5D3D, Fan-out, and Flip-Chip's revenue will be 28%, 36% and 8% respectively, while the annual compound growth rate of global packaging and testing industry revenue will be 3.5% during the same period, which is significantly ahead of the traditional packaging market.
So, what is the development of advanced packaging in mainland China?
In 2017, the advanced packaging output value of the packaging and testing industry in mainland China only accounts for 11.9% of the total global advanced packaging value. Relevant packaging and testing companies will also accelerate the increase in production capacity in advanced packaging technology in 2018, mainly Flip Chip and FOWLP.
Before 2015, only Changdian Technology was able to rank among the top ten in the world, and in 2017, the revenue of the three packaging and testing companies increased by 25%, 28%, and 42%, respectively. Changdian Technology has become the third largest revenue in the global OSAT industry.
In terms of technical reserves, among the three leading packaging and testing companies in mainland China, Changdian Technology has the most outstanding advantages in advanced packaging and testing technology. It is reported that it has mastered high-end packaging technologies such as Fan-out eWLB (embedded wafer level BGA), WLCSP (wafer-level chip scale packaging), SiP, Bumping, PoP (package on package). According to Yole statistics, in 2017, Changdian Technology's advanced packaging market share reached 7.8%, which is only from Intel's 12.4% and SPIL's 11.6%.
Future expectations
China's semiconductor market is obviously the highlight of the global market, which has brought huge business opportunities to local cover-to-beta companies. Against the backdrop of today's relatively weak market, what kind of development trend will the industry show in the next few years?
Considering the current international trade environment and the decline in global mobile phone sales, the overall environment has become pessimistic, and Tuoqi Industry Research Institute is conservative about the subsequent closed-beta revenue performance.
and CINNO Research is relatively optimistic.
CINNO Research believes that as the inventory adjustment in the second quarter comes to an end, various terminal demands, such as smartphones, servers and consumer electronics markets, have begun to gradually recover. Coupled with the demand for stocking from new mobile phones, the performance of related chip factories has increased, and the capacity utilization rate of wafer foundry and packaging and testing industries has gradually stabilized.
Even if the semiconductor output value in the second quarter of this year may still decline compared with the same period last year, CINNO Research believes that the foundry and packaging and testing industries in the second quarter will rebound from the bottom, with output value growing by about 0% to 5% compared with the first quarter.
