Packaging Materials Booming

Dan Tracy, Senior Director, Industry Research and Statistics, SEMI -- Semiconductor International, 6/1/2007

Advancements in materials technology allow semiconductor manufacturers to improve the functionality and reliability of electronic systems and gadgets. The importance of materials technology is especially apparent in the packaging segment of the semiconductor industry, where the packaging materials market is estimated to be 5-6× larger in revenues than the size of the assembly and packaging equipment market.

The innovation that is required of semiconductor makers and packaging subcontractors is exciting when one examines all the new package form factors and new materials that are now available or being developed. Advancements, such as system-in-a-package (SiP), package-on-package (PoP), wafer-level packaging (WLP) and through-silicon vias (TSVs), are changing how devices are thinned, die attached, wire bonded (or interconnected) and encapsulated. These packaging technologies are materials and process driven and, as such, there have been a number of new materials developments, from new substrate resins to smaller diameter wires, to address various challenges.

The expectation for 2007 is for the global packaging materials market to reach ~$16.6B, with the strongest growth expected in China. The China market is growing from a smaller base, as numerous semiconductor makers and packaging subcontractors have invested and continue to ramp production there. The packaging materials market in China is currently larger than the fab materials market there, with numerous materials suppliers expanding capacity and technical capabilities.

For the other market regions, increased consumption of advanced packaging materials will be the key revenue growth driver in 2007.

Chip-scale packaging (CSP), flip-chip packaging (FCP) and various SiP technologies require organic substrates, new mold compound formulations, smaller diameter wire and, for some packages, customized underfill materials. The largest contributor to the 13% growth rate for packaging materials in 2007 will be organic substrates, which are required for the rapidly growing ball grid array (BGA) and FCP applications. The organic substrates market, which is the largest segment of the overall packaging materials market, will approach $6.3B this year, compared with $5.1B last year. Without organic substrates in the year-over-year growth rate calculation, the total packaging materials growth rate drops to 7% from 13%.

While there is healthy revenue growth expected for packaging materials, there are pressing challenges for the material suppliers and their customers. Foremost, cost-down pressures abound — a consequence of the consumer electronics driven marketplace. While there are cost-down pressures, basic materials costs have increased. High oil prices have impacted the raw material costs of the resins consumed in mold compounds, underfills and other materials. High gold prices have increased the manufacturing costs of wire bonding, so wire suppliers and customers are working to transition to smaller diameter gold wire or introduce copper wire for some packaging requirements. Everything is cost-driven, and raw material pricing will continue to be a challenge for materials suppliers and their customers.

Supporting R&D activity in a cost-driven market is a challenge throughout the entire electronics industry supply chain, including packaging companies that are addressing the technical challenges with emerging FCP and 3-D packaging designs. An aspect of the challenge can be illustrated with the development of “green” packaging materials. Over the past five years, material suppliers and their customers dedicated a significant part of R&D to “green” packaging activities; there has been an almost complete change of materials that cost a lot in manpower and package requalification. It is generally recognized that cost adders for “green” materials are not fully reflected in the average selling prices, especially for mature packages.

Packaging technology delivers solutions for integrating multiple devices and increasing the functionality of electronic devices. New materials technology will be critical in further enabling innovation in a cost-driven marketplace.