Semiconductor packaging shortages have brought the race to develop packaging technologies to the forefront of global semiconductor supply chain challenges.
Resolving chip shortages means addressing many complex factors. This includes an often-overlooked step in semiconductor manufacturing: packaging. Previously considered a fairly inconsequential factor in chip production, semiconductor packaging shortages are now a crucial component in the larger semiconductor supply chain. This is leading to a race between semiconductor fabricators and outsourced semiconductor assembly and test manufacturers (OSATs) to fill the much-needed demand for increasingly complex packaging.
Growth in the semiconductor industry — driven by AI and other leading-edge technologies — comes with cycles of high and low demand. Resolving packaging issues could ease current demand. But, of course, resolution is easier said than done, given the complexity of the semiconductor manufacturing process. Let’s take a look.
Demand and development: Semiconductor packaging shortages in recent times
Traditionally, semiconductor fabrication plants, known as fabs or foundries, have lead chip manufacturing while OSATs have lead in packaging and testing. But foundries have expanded their reach in recent years in an attempt to provide the most cost-effective solutions for packaging.
Developments for more specialized packages are also a factor in demand. Historically, developments have focused on improving semiconductor processing, rather than packaging. But now, with developments in packaging making more possible configurations to stack chips, packaging is getting much more complex. This means OSATs will have to contend with the many challenges around increasing complexity of packaging.
Demand for packaging came to the forefront of semiconductor shortages halfway through 2020, when the demand for consumer electronics created shortages in both semiconductors and some packages needed for these products. The ensuing response by both fabs and OSATs is still catching up to demand. But, in line with the semiconductor boom and bust cycle, the overall trajectory will likely move packaging suppliers will into oversupply in the next year or two.
Paths to resolving the current semiconductor packaging shortages
Even with both semiconductor fabricators and OSATs competing for the packaging market, meeting demand with supply is not straightforward given the highly global nature of the semiconductor supply chain. OSATs experienced tremendous growth from the demands in 2020, and will likely continue to grow in response to ongoing demands.
Ongoing investments by fabs — like Intel’s global expansion — may relieve the pressure eventually. Intel is investing in new fabs from Malaysia to Arizona and Ohio. Other major fabs are also targeting the United States for expanding their production facilities. But, this expansion is not expected to relieve current shortages, as it takes years to bring semiconductor manufacturing lines online. Moreover, fabs moving packaging in-house doesn’t eliminate the global web of supply networks underlying chip production, nor does it easy the impending demand from growth in areas like cloud-based computing and 5G technologies.
To summarize: Chip shortages and the need for new packaging technologies are putting fabs and OSATs in competition to resolve semiconductor packaging shortages. But shortage mitigation is not on the near horizon. The chip packaging market is rife with challenges from manufacturing to navigating the complex global supply chain.
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