Taiwan

We are now in the recovery phase of the current business cycle with SEMI equipment already in a growth mode. However significant economic and geopolitical concerns persist.

The turnaround is not “around the corner” but at least we can follow its progress!

Outsourced Semiconductor Assembly and Test (OSAT) service providers experienced strong growth in 2017, but will this growth continue? In the last few years, OSAT growth has been driven by shipments for packages found in smartphones, but this market is slowing. What will replace it? Growth in power devices is strong and electronic content in vehicles is increasing. Will OSATs participate in this growth? Many OSATs have plants dedicated to automotive package assembly and will see continued growth. Growing demand for connectivity everywhere, called IoT, is generating large amounts of data, creating the need for more servers and datacenters. The adoption of Artificial Intelligence (AI) across a broad range of applications is driving demand for high-performance packages, but will this assembly take place at the OSATs or foundries? In the third and fourth quarters of 2017, growth in cryptocurrency provided unanticipated revenue for a number of OSATs. Given that the most well-known crypto mining companies and the biggest mining pools are all based in China, several OSATs, including major Taiwanese and Chinese service providers, experienced revenue growth in 2017 directly attributed to the assembly of ASICs in flip chip scale packages (FC-CSPs) and GPUs in flip chip ball grid arrays (FC-BGAs) for the cryptocurrency market. However, the first and second quarter of this year has seen decreased demand for GPUs and ASICs for this application. The assembly of packages for cryptocurrency slowed considerably in the first half of the year and therefore can’t be counted on to add as much to the revenue base as in the previous year. Going into the latter half of the year, the demand for Crypto ASICs is expected to pick up as new generation of 7nm chips will drive new investment and replacement cycle while crypto-mining GPU will see a further decline. Three of the top 10 OSATs, Jiangsu Changjiang Electronics Technology (JCET), Tianshui Huatian Technology (Huatian), and Tongfu Microelectronics (TFME), are based in China. China’s share of the top 10 OSATs’ revenue increased from slightly less than 23 percent in 2016 to more than 25 percent in 2017, and this trend is expected to continue. Crypto-related packaging and test business has certainly contributed a big portion of the share gain. Major OSATs such as TFME and Tianshui Huatian plan expansion in their plants and they expect to fill this added capacity in a broad range of packages. Huatian’s new Nanjing plant will include assembly for memory packages. TFME plans to set up a plant in Xiamen, Fujian Province to provide bumping, wafer level packaging, and system-in-packaging (SiP) services. Tracking the capabilities of OSATs is increasingly important. SEMI and TechSearch International have introduced a new Worldwide OSAT Manufacturing Site Database that provides listings of OSAT facility locations and package and test options in each factory. This database indicates the specific packages offered at each location. Finding plants that offer automotive qualified assembly is also possible with the database. Companies that offer bumping and wafer level packaging are identified. Over 120 companies and 300 facilities are tracked in this database covering both OSAT packaging and test facilities. For additional information about this informative database, please visit https://discover.semi.org/osat-database-registration.html E. Jan Vardaman is president of TechSearch International, Inc., and Clark Tseng is director of Industry Research and Statistics at SEMI.

Tracking toward even stronger growth than forecast last year, 200mm fabs worldwide are gearing up to add more than 600,000 wafers per month from 2017 through 2022, an 11 percent growth rate that will lead to a new high of 6 million wafers per month by the end of 2022, according to the SEMI Industry Research and Statistics group in its fourth update of the Global 200mm Fab Outlook report. See chart below. All told, 56 older and newer facilities will add capacity, with the MEMS, power, logic and foundry segments contributing the most. To help meet rising demand, new fabs are under construction. Only six facilities plan to reduce capacity. The global 200mm fab count will increase from the 2017 level of the 194 fabs covered in the report to 203 by 2022. See chart. During the five-year forecast period, China, at 44 percent, is expected to account for the greatest growth, followed by Southeast Asia (19 percent), Taiwan (10 percent) and the Americas (8 percent). However, with strong demand for new 200mm fab equipment, the used 200mm fab equipment market has pretty much dried up. What’s more, the availability of key tools and spare parts has become a primary concern for many device makers. These headwinds notwithstanding, many companies remain bullish with plans to add more capacity. The forecast growth of 600,000 wafers per month may ultimately be a conservative estimate. SEMI’s Global 200mm Fab Outlook report lists more than 300 facilities and lines managed by more than 150 companies, providing details on product type, investment, technology and capacity plans by companies and fabs. The fourth update of the Global 200mm Fab Outlook report covers data and predictions from 2011 through the end of 2022, including milestones, detailed investments by quarter, product types, technology nodes and capacities down to fab and project level. Click here for the Global 200mm Fab Outlook Sample Report. Learn more about other SEMI fab databases at www.semi.org/en/MarketInfo/FabDatabase. Christian G. Dieseldorff is director of Industry Research and Statistics, SEMI, Milpitas, California.

Broad Global U.S. Electronic Supply Chain GrowthThe first quarter of this year was very strong globally, with growth across the entire electronics supply chain. Although Chart 1 is based on preliminary data, every electronics sector expanded – with many in double digits. The U.S. dollar-denominated growth estimates in Chart 1 have effectively been amplified by about 5 percent by exchange rates (as stronger non-dollar currencies were consolidated to weaker U.S. dollars), but the first quarter global rates are very impressive nonetheless. U.S. growth was also good (Chart 2) with Quarter 1 2018 total electronics equipment shipments up 7.2 percent over the same period last year. Since all the Chart 2 values are based on domestic (US$) sales, there is no growth amplification due to exchange rates.We expect continued growth in Quarter 2 but not at the robust pace as the first quarter.Chip Foundry Growth ResumesTaiwan-listed companies report their monthly revenues on a timely basis – about 10 days after month end. We track a composite of 14 Taiwan Stock Exchange listed chip foundries to maintain a “pulse” of this industry (Chart 3).Chip foundry sales have been a leading indicator for global semiconductor and semiconductor capital equipment shipments. After dropping to near zero in mid-2017, foundry growth is now rebounding.Chart 4 compares 3/12 (3-month) growth rates of global semiconductor and semiconductor equipment sales to chip foundry sales. The foundry 3/12 has historically led semiconductors and SEMI equipment and is pointing to a coming cyclical upturn. It will be interesting to see how China’s semiconductor industry buildup impacts this historical foundry leading indicator’s performance. Passive Component Shortages and Price IncreasesPassive component availability and pricing are currently major issues. Per Chart 5, Quarter 1 2018 passive component revenues increased almost 25 percent over the same period last year. Inadequate component supplies are hampering many board assemblers with no short-term relief in sight.Peeking into the FutureLooking forward, the global purchasing managers index (a broad leading indicator) has moderated but is still well in growth territory.The world business outlook remains positive but requires continuous watching!Walt Custer of Custer Consulting Group is an analyst focused on the global electronics industry.

After a record January, Taiwan-listed electronics companies, many of which manufacture in China, reported significant drops in February sales. A number of events likely contributed: Far fewer working days in February due to Lunar New Year factory shutdowns Inflated January production and shipments in anticipation of the February holiday shutdowns Downward adjustment in Apple iPhone X forecasted demand Normal seasonality and traditionally lower post-Christmas consumer products demand – including PCs and mobile phones Results (based upon composite revenues of large groups of Taiwan-listed companies): OEM sales dropped 28 percent from December to January (normal seasonality) and then an additional 24 percent from January to February. This 101-company OEM group saw record high sales in December 2017 followed by a two-year low in February 2018 (Chart 1). ODM sales dropped in sync with OEM sales, with Foxconn/Hon Hai sales declining from 675 billion NT$ (US$22.9 billion) in December to 401 billion NT$ in January and to 278 billion NT$ in February. Chip foundry sales (historically a leading indicator for global semiconductor shipments) also registered a large January to February decline (Chart 2). Other electronics firms (package and test, passive components, printed circuit boards) saw the same type of February declines. We await March results as the sharp February decline is very likely due to multiple causes. Historically, the annual recovery begins in spring.Walt Custer, Custer Consulting Group