The low-end market returned to the price war, and the performance of the closed test foundry in 2022 was under pressure

Jiwei Network reported that since the end of 2021, although the upstream wafer foundry production capacity is still fully loaded, the market demand for automotive chips, industrial control chips and other markets is still relatively stable, but the market demand for consumer general chip products has gradually slowed down, and the overall semiconductor packaging and testing industry order volume has also declined.

It is worth noting that while the market demand is declining, due to inflation, raw material prices have soared, the price of semiconductor packaging and testing materials has shown an upward trend, and it is foreseeable that semiconductor packaging and testing manufacturers will face the double pressure of upstream raw material prices and market demand decline in 2022.

Upstream material supply and demand tend to be balanced, but the price increase trend is still there

In fact, since 2020, the global semiconductor industry boom has continued to rise, the packaging and testing market demand in a short period of time rapid outbreak, resulting in most of the upstream supply chain are tight supply situation, as the main raw materials required for packaging and testing lead frame, packaging substrate, bonding wire and epoxy plastic sealing materials and other products, there are different degrees of out-of-stock, stop receiving orders, order delivery time elongation, price increases and other phenomena.

With the active expansion of upstream material manufacturers and the slowdown in the demand for packaging and testing markets, the supply and demand of the overall packaging and testing materials market are gradually balanced.

Zheng Qujiang, general manager of Mingtai Electronics, a well-known domestic packaging and testing manufacturer, said that at this stage, the supply of most raw materials can be guaranteed, and the delivery time has basically returned to normal.

For example, the more scarce lead frame in the packaging and testing market in 2021 has basically reached the state of supply and demand balance, the delivery cycle has also returned to the normal production cycle, and the etched products have also greatly shortened the delivery time.

In terms of epoxy plastic sealing materials, domestic epoxy plastic packaging manufacturers have all carried out different scales of expansion, only the industry leader Suzhou Sumitomo family, the expansion scale is more than 30% of the original production capacity, but due to the soaring oil prices, the next epoxy resin will have a great possibility of price increase, upstream suppliers have also issued a price increase warning letter to customers.

In terms of packaging substrate materials, due to the increasing demand for products such as SIP/LGA, the current production capacity and delivery time are still particularly tight, but with the expansion of upstream suppliers, it is expected that the packaging substrate market will be balanced by the end of this year.

Another industry insider also said that recently, the company's upstream materials only lead frame still has a price increase, packaging substrate company in the product design stage to evaluate the materials of many suppliers, do not specify the only supplier, so there is no shortage, and epoxy plastic packaging materials, the company originally used overseas suppliers of products, are now through the replacement of domestic suppliers to solve the problem, but reduced the cost, there is no shortage of goods.

It can also be seen from the above market conditions that at present, only a few products such as packaging substrates and etched lead frames still have an imbalance between supply and demand, and with the opening of expanded production capacity, the subsequent market supply is gradually improving.

Low-end products have already begun to bargain, and the performance of packaging and testing manufacturers is under pressure

It is worth noting that although the supply of upstream materials is improving step by step, since the fourth quarter of 2021, under the influence of weak demand for consumer products, the market demand for packaging and testing has also slowed down.

Zheng Qujiang pointed out that since the first quarter of 2022, the overall volume of sealed test orders for conventional consumer electronics products has fallen by 20% to 30%.

In this regard, according to an executive of a domestic IC design manufacturer, because a large number of our products are low-end packaging, as early as the end of last year, the company's price of packaging and testing OEM has fallen back to the level before 2020. In fact, the packaging and testing capacity in 2021 is not tight for us, and the reason for the price increase given by the upstream packaging and testing foundry is the price increase of upstream raw materials.

From the perspective of upstream raw materials, the situation of commodity price increases does not seem to have been significantly alleviated, which will drive the cost of upstream raw materials to increase, and there are many packaging and testing foundries, and when the overall packaging and testing market demand is not good, it is difficult for packaging and testing manufacturers to transmit the pressure of rising costs to customers.

Jiwei Network learned from the industry that unlike the successive shouts of packaging and testing manufacturers in 2021, since 2022, the domestic packaging and testing factories have not reported any news of price increases.

"Driven by the trend of inflation, the prices of tin and copper rose greatly last year, and packaging and testing manufacturers will continue to face the pressure of rising costs and declining market demand." Zheng Qujiang pointed out that since the first quarter of this year, the packaging and testing manufacturers who produce conventional products have faced a lot of performance pressure, of course, semiconductor device manufacturers are also facing the same problem.

Another domestic packaging and testing manufacturer also said that at present, in addition to the rise in the price of raw materials represented by copper and the increase in the cost of packaging accessories, the soaring freight rates of foreign sea freight and the shortage of space, containers, and labor costs have also caused unfavorable factors to the company's performance.

Tongfu Microelectric also said that the company's main raw materials are supplied in China, and the company has stable supply channels. However, the proportion of the company's export business is relatively high, overseas customers have higher requirements for lead-free and product quality of packaging, and the main raw materials used for high-end packaging products must rely on imports. Therefore, it is not excluded that the supply and demand relationship in China's raw material market will change, resulting in an increase in raw material prices, as well as unpredictable factors such as insufficient supply of suppliers, raw material price increases or quality problems, or changes in the overseas raw material market, affecting the company's product output and quality, and having a certain impact on the company's operating performance.

Write at the end

It is understood that although the trend of upstream raw materials, logistics and other cost increases is still there, in the field of low-end chips, the price of packaging and testing FOUNDRies has fallen back to before the price increase, and even began to fall into a state of bargaining.

Zheng Qujiang believes that the polarization of customer demand for quality will become more and more serious, and the pursuit of high-demand customers will always be high reliability, and the subtle adjustment of unit price is not sensitive, but for customers with low reliability requirements, subtle unit price changes will be extremely sensitive.

Therefore, it is crucial for packaging and testing manufacturers to seize large customers with high quality requirements, but due to the large number of small-scale packaging and testing manufacturers in China, they are limited by their own technical and financial capabilities, and it is not easy to get rid of low-price competition.

Zheng Qujiang pointed out that high-quality packaging and testing manufacturers need high investment, and a quality-seeking packaging and testing enterprise only invests in reliability testing instruments, which is basically tens of millions of starts, which will also bring new challenges to many small-scale packaging and testing enterprises. (Proofreading/Andy)