The slow road to recovery: optimism and advanced packaging will help lead us out of the slump.

The last three years have been some of the most difficult for the electronics industry since the 1970s. After riding high on compound annual growth rates in the double digits, many expected the good times to continue to roll. Instead, many electronics manufacturing companies have been through one of the most difficult periods in company history and hundreds of thousands of workers have lost jobs. The good news is that the slow road to recovery has begun. The bad news is that manufacturing--as we once knew it--might not ever be the same.

A National Bureau of Economic Research report says that the U.S. economy is in a recovery that started last November. (1) While this seems laughable to many that continue to join the ranks of the un- and underemployed, many industry leaders and market forecasters believe the worst of the downturn is behind us.

Turning the Corner

Cautious optimism was present at the recent SEMI-CON West trade show, which focused on both front-end processing equipment and materials and back-end assembly. While unemployment rolls continue to rise and a few more layoffs are in store, the general feeling is that conditions are slowly beginning to improve--especially in back-end assembly. Major integrated circuit (IC) package contract assembly houses Amkor and ASE have reported improvements in unit shipments. While average selling prices are down, unit volumes continue to grow. Factory utilization is up, especially in advanced packages. ASE and Siliconware have reported 80% utilization of their plastic ball grid array (PBGA) production capacity. (2)

The growth in contract assembly is partially driven by continued outsourcing, but also by increased unit shipments in the semiconductor industry. IC Insights' recent forecast shows worldwide IC unit volume shipments reaching 90.3 billion units in 2003, an all-time high surpassing the previous record of 86.5 billion units in 2000. IC unit volume shipments are forecast to continue to grow at a fast pace in 2004. At the same time, IC dollar volume sales are expected to fall far short of the all-time high of $176.9 billion set in 2000. The latest forecast projects 2003 IC sales of $136.4 billion.

Advanced Packaging

With continued price pressure, the advanced packaging areas such as flip chip, wafer-level packaging and three-dimensional (3-D) packaging provide greater revenue sources. While unit volumes are dominated by the lead frame-based packages that remain the workhorse of the industry, the highest margins are found in advanced packages.

In a 3-D packaging workshop sponsored by Tessera during SEMICON West, the room was filled with excitement as participants discussed the market growth for stacked die packages and the latest concepts. With increased demand for small form factor packages for portable products, demand for dense packaging has increased. 3-D packaging is one solution that includes many different configurations such as stacked die inside chip-scale packages (CSPs), stacked packages and silicon stacks. While package stacking may take place at either the IC package assembly house or the board-level subcontract assembly service provider, stacking die inside packages will be done by the semiconductor maker or IC package assembler.

Stacked CSPs are targeted at mobile phones, personal digital assistants (PDAs) and other portable product applications. Future applications will also include memory cards and data storage applications. Driven by growth in mobile phones, shipments of stacked die CSPs are expected to grow at a dramatic rate of more than 50% in 2003. Mobile phone makers increasingly need greater functionality in smaller spaces, so die stacking has become a popular option. Some mobile phones contain as many as two stacked die CSPs--as do some Japanese handsets and mobile phones by some of Chinas domestic phone makers.

The most common form of die stacking is a flash memory and a single random access memory (SRAM), but logic devices will increasingly be added. With the height constraint in portable products, the average height of a two-die stacked CSP is 1.2 mm. A few companies offer 1.0 mm-high packages. Future package options include up to eight die stacked in the same package. Wafer thinning is key to the ability to stack die in low profile packages, and many companies have developed special techniques.

A Positive Outlook

If we keep an optimistic outlook, improvement is likely because collective positive actions will result in growth. The difficulty is that, with lower average selling prices and increased unit volumes, achieving high levels of profitability will be challenging. Companies that have focused on maintaining research and development for leading-edge products will be rewarded because the highest margins are found in advanced packaging and assembly.

References

(1.) USA Today, July 18, 2003, p. 1B.

(2.) Lee, A., and Lu, J. ASE and SPIL BGA Capacity Utilization Exceeds 80%. DigiTimes.com. July 10, 2003.

What's A Jobless Recovery?

As the train slowly moves along the tracks between Boston and New York, I peer through the window at the vine-covered buildings that were once major textile manufacturing facilities. I wonder if electronics manufacturing in North America is entering the same phase. Does a jobless recovery mean empty manufacturing facilities across North America? Many manufacturing facilities have closed their doors forever. The electronics industry has been hard hit--especially the telecommunications segment. The fundamental institutional infrastructure of the industry has changed, Continually driven by pricing pressures, goals of lower obtaining cost are driving manufacturing out of North America. The factory of the future may have a completely different look, and the role of the factory worker is uncertain.

E. Jan Vardaman is president of Tech-Search International, Austin, TX; e-mail: [e-mail].