IC Substrate - For battery FPC, is there any chance for the local IC carrier board factory now?

For a long time, IC carrier boards have not been taken seriously in the chip supply chain, because the product's gross profit margin is relatively low, and major carrier board manufacturers are unwilling to invest in expansion. However, as the global "chip shortage" spreads, this situation seems to have been reversed. The stock-out and price-rising tide has swept all aspects of the semiconductor industry, and IC substrates have not been spared. What are the factors that gave birth to many phenomena in this industry? When will the boom last? How will local manufacturers take advantage of this wave? Learn about it with the battery FPC editor~

The IC carrier board is also called the package substrate, which is the material used to connect the chip and the PCB motherboard in the IC package. For a long time, due to the relatively low gross profit margin,IC substrates have played a "unpopular" role in the semiconductor industry chain. However, with the accelerated landing of related applications such as 5G, AIoT, and smart cars, which promote the continuous improvement of wafer manufacturing technology, the IC carrier board becomes "hot". Since the second half of last year, news of carrier shortages and price increases have been heard.

The battery FPC editor learned that Xinxing, a large PCB and IC carrier board manufacturer in Taiwan, said at the law conference at the end of July that both ABF and CSP carrier boards are in strong demand. Customers buy as much as they can, and ABF carrier board production capacity It is booked early by customers, and most of the capacity before 2025 is booked. At the same time, it warned that the tight supply and demand of the global carrier board industry will continue for a long time, and high-end carrier boards may still be in short supply from 2025 to 2026. In terms of mainland Chinese manufacturers, Xingsen Technology recently pointed out in an institutional survey that the supply and demand of the IC substrate business is booming, and orders have been scheduled until the end of this year. The company's 20,000 square meters/month production capacity has been at full production, except for the impact of the Spring Festival in February. When the supply of carrier boards is in short supply, the market has even reported that Intel, AMD, Nvidia and other manufacturers are seeking to reach long-term agreements with ABF carrier board manufacturers to ensure sufficient supply by 2025 or even longer. As for the reason for the shortage of carrier boards, on the one hand, downstream demand has surged. PC, tablet, data center and other applications have stimulated the demand for ABF carrier boards. 5G millimeter wave and eMMC have become the driving force of BT carrier boards. According to data from Prismark, a market research agency, the output value of the IC substrate industry in 2020 has exceeded the 10 billion U.S. dollar mark, reaching 10.2 billion U.S. dollars; by 2025, the IC substrate industry output value is expected to reach 16.2 billion U.S. dollars, with a 2020-2025 CAGR of 9.7%, Which far exceeds the overall CAGR level of 5.8% in the PCB industry, and is the fastest growing sub-industry under the PCB industry. On the other hand, the production capacity of the substrate is limited. Jan Vardaman, president of the consulting firm TechSearch International, pointed out that chip companies focus on improving chip performance rather than projects with lower costs and lower profits, so most of them outsource the production of carrier boards; despite the increasing complexity of carrier board functions and the impact on chip performance The importance continues to rise, but chip manufacturers have long pressured carrier board suppliers to keep prices down, resulting in limited investment and difficulty in increasing the production capacity of carrier boards.

In addition, the fire at the Xinxing Shanying Plant in February this year also affected the supply of BT substrates, traumatizing the already imbalanced market. In order to cope with the dilemma of capacity shortages, major manufacturers have put forward production expansion plans. Japanese manufacturer Ibiden plans to invest US$1.6 billion to build a new plant to replace the factory in Ogaki City, which is scheduled to start production in 2023; mainland Chinese manufacturer Shennan Circuit plans to raise funds not to exceed 2.55 billion yuan for high-end flip-chip applications IC substrate product manufacturing projects and supplementary working capital; Dongshan Precision plans to invest 1.5 billion yuan to establish a wholly-owned subsidiary specializing in the research and development, design, production and sales of IC substrates; Taiwanese manufacturer Jingsus invested NT$1.006 billion to order equipment, Used to expand production capacity.

Domestically produced substitutes + Chengsheng chase after the industry has repeatedly warned that the shortage of carrier board supply will continue for several years. Xinxing Chairman Zeng Zizhang also pointed out that although major factories are actively investing, there are still gaps in the actual production capacity and investment of each product, including equipment precision, yield and even application levels.

The battery FPC editor has learned that under the tide of continued shortages, does it mean that local manufacturers have ushered in new opportunities for development? From the perspective of global carrier board competition, the market is highly concentrated, presenting a "three-legged" situation in Japan, South Korea and Taiwan. The top ten carrier board suppliers all come from these three countries or regions, occupying up to 80% of the global market share. The three major industry giants of Japanese Ibiden, Shinko and Kyocera have almost monopolized the high-end carrier market such as FC-BGA and FC-CSP; Korean manufacturers Samsung Electro-Mechanics, Shintae Electronics, and Dade rely on South Korea. The mature storage industry is gradually growing; the prosperity of Taiwanese manufacturers is because the island's electronics and foundry industries have created a good environment for them. Comparing the development of the above-mentioned manufacturers, an industry insider revealed that local carrier board manufacturers have started at least 20 years late and are trying their best to catch up. Cinda Securities pointed out in the report that the main local suppliers include Xingsen Technology, Shennan Circuits, Zhuhai Yueya, etc., accounting for 4%-5% of the global IC substrate market. In a market firmly controlled by the giants, do local manufacturers really have no chance? In fact, Jiwei

Consulting's analysis pointed out that since 2016, the mainland IC substrate market has seen a substantial increase. This node coincides with the golden age of China's semiconductor industry development. The mainland IC substrate industry is expected to be fully developed in the next few years. Benefit from the dividends brought by the expansion of China's wafer production capacity. At the same time, the rising display panel industry in mainland China is also a major pillar for establishing domestic demand in the IC substrate market. In addition to the broad domestic demand market, my country's loose policy environment and sound industrial chain are "boosters."

At the same time, a series of chaos in the industry, such as price increases, shortages, and extended delivery periods, and the Sino-US trade war have led domestic manufacturers to urgently seek domestic substitutes. Local carrier board manufacturers are expected to seize the victory and further seize the market. So where can local manufacturers work? The above-mentioned industry insiders said that efforts can be made from the three aspects of capital, technology and equipment. Specifically, the carrier board is a capital-intensive industry. Many local carrier board manufacturers think that an investment of 300 million yuan to 300 million yuan can build a plant. In fact, this amount is far from enough and needs to increase investment; technically speaking, the domestic start is relatively low. Lately, there is a gap compared with the technology of major manufacturers, and the technology needs to be overcome; from the equipment point of view, the professional supporting equipment and materials for the carrier board are mostly monopolized by Japanese and Korean companies, and there is an urgent need to change the status quo. Conclusion: It can be expected that this wave of out-of-stock price increases will boost the orders of local carrier board manufacturers. Under a loose policy environment and a sound industrial chain, local manufacturers are expected to accelerate the pace of domestic substitution.