1 Packaging and testing industry: optimistic about investment opportunities in advanced packaging

Global packaging and testing industry: long-term steady growth

Packaging and testing refers to the packaging and testing of integrated circuits, and is the bridge from the processed wafer to the chip. In the semiconductor industry chain, packaging and testing is located after IC design and IC manufacturing, and before the final IC product, which is a downstream process of semiconductor manufacturing. Packaging refers to cutting the processed wafers, wire bonding and plastic packaging, so that the integrated circuit and external devices can be electrically connected and signal connected, while at the same time providing physical and chemical protection to the integrated circuit. Testing refers to the use of professional equipment to test the functions and performance of the packaged integrated circuits. The packaging process accounts for most of the value of packaging and testing. According to Gartner statistics, the packaging process accounts for 80-85% of the entire packaging and testing market share, and the testing process accounts for about 15-20% of the entire packaging and testing market.

According to whether wire bonding, the packaging process can be divided into traditional packaging and advanced packaging. The basic connection system of the traditional package mainly adopts the wire bonding process, that is, the electrical connection between the chip and the external electronic components is realized by drawing out metal wires. Because the higher density may cause mutual interference or even short circuit between the electrical performance of the leads, the I/O density of the traditional package is limited. As the complexity of integrated circuits led by downstream applications continues to increase, advanced packaging has emerged. Advanced packaging refers to a variety of packaging methods that mainly use bumping to achieve electrical connections, aiming to achieve more I/O and more integrated two major functions. There is no absolute distinction and substitution relationship between traditional packaging and advanced packaging. The increasing demand for high computing power and integration in downstream applications has made advanced packaging technology a future development trend.

The value of the packaging and testing industry has been leading the mainland semiconductor industry chain for a long time before 2016. It is expected to benefit from the synergy brought by the improvement of the vertical structure of the mainland semiconductor industry and usher in the acceleration of development. The packaging and testing link is a subdivision of my country’s semiconductor industry chain that has a small gap with the international leading level. From 2004 to 2015, it occupied a high value in the mainland IC design, manufacturing, and packaging and testing links, but the proportion of value is generally declining year by year. In 2020, it will occupy 28.4% of the market size of the mainland semiconductor industry. The market share of design, manufacturing, and packaging and testing in the mainland semiconductor industry chain is gradually approaching the international average of 3:4:3, and the industrial structure tends to be balanced. We believe that with the advancement of the structural improvement of the mainland semiconductor industry chain, the synergy between IC design, manufacturing and packaging and testing is expected to appear, and the development of the packaging and testing industry is expected to accelerate.

The long-term steady growth of the global packaging and testing market. According to Yole data and China Industry Information Network, under the calibre of OSAT vendors, the global packaging and testing market has grown from US$45.5 billion in 2011 to US$59.4 billion in 2020. The CAGR of the packaging and testing market from 2012 to 2020 is 3.0%. The packaging and testing market is in a state of long-term steady growth. Under the OSAT&IDMs caliber, according to Yole data, the global packaging and testing market in 2019 reached 68 billion U.S. dollars. It is estimated that the market size will reach 85 billion U.S. dollars by 2025, and the CAGR is expected to reach 4% in 2020-2025.

The growth of the packaging and testing market in Mainland China continues to be higher than the global level, and the inflection point of the growth rate may have been reached. According to data from the China Semiconductor Industry Association, the packaging and testing market has grown from 97.57 billion yuan in 2011 to 250.95 billion in 2020. The CAGR of the packaging and testing market in China from 12 to 20 years is about 11.1%, and the growth rate is significantly higher than that of the global market in the same period. level. According to the forecast of the Foresight Industry Research Institute, the packaging and testing market in Mainland China will reach 442.9 billion yuan by 2026. The CAGR of the 21-26 market scale is about 9.9%, which is higher than the 19-20 CAGR (7.0%) of the market scale. With the restoration of the global supply chain and the increase in market demand brought by emerging applications such as 5G communications, HPC, automotive electronics, and smart wearable devices, the growth rate of the packaging and testing market in mainland China may have reached an inflection point, and the future growth rate is expected Up.

The global outsourcing packaging and testing (OSAT) market is highly concentrated, and mainland manufacturers have entered the first international echelon. According to Chipinsights, in 2020, the global OSAT market has a CR3 of 56.7% and a CR10 of 84.0%, indicating a high degree of industry concentration. Taiwanese manufacturer ASE is the global leader in the packaging and testing industry, with a market share (by revenue caliber) of approximately 30.1% in 2020; American manufacturer Amkor ranks second with a market share of 14.6%; China Mainland manufacturers Changjiang Electronics Technology, Tongfu Microelectronics, and Huatian Technology ranked 3rd, 5th and 6th in terms of revenue, with a market share of 12.0%/5.1%/3.9%, and Changjiang Electronics Technology has ranked first in the world. In the echelon, Tongfu Microelectronics and Huatian Technology are in the second echelon in the world. If Foundry manufacturers are included, TSMC's packaging and testing business revenue can rank fourth. In terms of regions, 5 of the top ten OSAT manufacturers are from Taiwan, 3 companies are from Mainland China, and there is only 1 manufacturer in the United States. In recent years, with the continuous occurrence of capital mergers and acquisitions and the intensification of industry competition, industry concentration has shown a further upward trend.

Extensional mergers and acquisitions help the rise of mainland manufacturers, and capital mergers and acquisitions may still be one of the main themes of the industry. In recent years, acquisitions by mainland packaging and testing manufacturers have occurred from time to time. For example, in 15 years, Changjiang Electronics Technology acquired the world’s fourth largest packaging and testing company Xingke Jinpeng, Tongfu Microelectronics acquired AMD Suzhou in 2016, and Huatian Technology acquired Malaysian packaging and testing manufacturers in 19 years. Cases such as Unisem have brought significant improvements in technology, scale, and market structure to corresponding companies. With the support of the National Integrated Circuit Industry Fund, mainland packaging and testing companies have achieved technological synergy, market integration and scale expansion through external capital mergers and acquisitions, and superimposed endogenous continuous high-intensity capital expenditures to promote technology research and development and industrialization, achieving rapid growth. In the international market, cases such as the acquisition of Silicon Electronics by ASE in 2017 and the acquisition of J-Devices by Amkor in 2016 have also accelerated the formation and concentration of packaging and testing market giants. We believe that capital mergers and acquisitions may still be one of the main themes of the packaging and testing industry.

Operating income from 1Q16 to 2Q21 showed obvious seasonal fluctuations, and operating profit from 1Q20 to 2Q21 increased for six consecutive quarters. We observe that Q1 is usually the low point of the annual revenue and operating profit of the packaging and testing industry, and it usually ushered in a month-on-month decline. In 1Q21, the operating profit of major packaging and testing companies ushered in a month-on-month increase due to the impact of global packaging and testing prices. In 2016/2017/2019/2020, the single-quarter revenue of the packaging and testing industry has shown a quarterly increase during the year. We believe that the quarterly rise is mainly due to the packaging and testing capacity arrangements of the consumer electronics industry during the off-peak season. The year-on-year growth rate of operating profit in 2Q21 and 1H21 was much higher than the growth rate of revenue, which was mainly due to the increase in the average price of packaging and testing products caused by the tight global packaging and testing capacity in 1H21. In addition, the growth rate of the operating income of major global packaging and testing companies from 16 to 20 years continued to be higher than the growth rate of the corresponding global packaging and testing industry market size that year, reflecting the further increase in the concentration of the global packaging and testing industry.

Benefiting from the boom in the global packaging and testing industry, the gross profit margin of major global packaging and testing companies has risen for two consecutive quarters (1Q21-2Q21), and the net profit margin has risen for the third consecutive quarter (4Q20-2Q21). The profitability of mainland manufacturers has gradually surpassed that of international leaders. In the past, the profitability of mainland packaging and testing companies was weak, and the profitability was more severely eroded by labor costs and depreciation and amortization. With the gradual improvement of asset operation efficiency and cost dilution brought about by economies of scale, mainland Chinese manufacturers are gradually at the same level as leading companies such as ASE and Amkor in terms of gross profit margin and net profit margin. According to our statistics, if the gross profit margin and net profit margin of Changjiang Electronics Technology, Huatian Technology, Tongwei Fudian, and Jingfang Technology are weighted by revenue, the average gross profit margin will increase from 13.8% (1Q16) To 21.2% (2Q21), the average net profit margin rose from -1.0% (1Q16) to 11.1% (2Q21), compared with 2Q21 global packaging and testing leader ASE (gross margin: 19.5%; net margin: 8.2%), Amkor (gross Interest rate: 19.1%; net interest rate: 8.8%), the profitability of mainland manufacturers has gradually surpassed the international leaders.

Through the analysis of DuPont analysis method, we believe that asset operation efficiency is one of the key elements for packaging and testing companies to build core competitiveness, and the total asset turnover rate of mainland packaging and testing companies is the key to improving the return on equity (ROE). The return on equity is a key indicator to measure the profitability of the company’s shareholders. The DuPont analysis method divides the return on net assets into the product of the net sales interest rate, the total asset turnover rate, and the equity multiplier. The factors are attributed to profitability, asset operating efficiency and leverage. Mainland packaging and testing vendors have reached the industry's leading level in terms of sales profit margins; on the equity multiplier side, the 20-year weighted average of mainland packaging and testing vendors is 1.99, which is close to the industry average. At the end of total asset turnover rate, the gap between mainland packaging and testing manufacturers and leading companies in the packaging and testing industry is obvious. In 2020, the total asset turnover rates of Changjiang Electronics Technology, Huatian Technology, Tongfu Microelectronics, and Jingfang Technology are 80.3%, 47.4%, and 57.6, respectively. %, 36.5%, with a weighted average of 61.0%, which is a significant gap with the industry's leading companies ASE (total asset turnover rate of 81.8%) and Amkor (total asset turnover rate of 103.9%). We believe that continuous optimization of production and sales management through methods such as promoting refined management, increasing capacity utilization, and equipment utilization, and improving asset operation efficiency are key elements for packaging and testing companies to build core competitiveness.

Under the background of accelerated domestic substitution, the proportion of overseas revenue of mainland Chinese manufacturers is declining, and the overseas epidemic hits the overseas production lines of mainland manufacturers, which has accelerated the decline in the proportion of overseas revenue. For mainland manufacturers, major packaging and testing companies have certain overseas production capacity layouts. For example, the main production capacity of subsidiaries such as Changdian Xingke Jinpeng, Tongfu Penzhou, and Huatian Unisem are all located overseas. We have observed that in the context of repeated overseas epidemics, the proportion of overseas revenue of major packaging and testing plants in mainland China has shown an accelerated decline. The proportion of overseas revenue of major packaging and testing plants has dropped from 75.0% in 2019 (before the epidemic) to 1H21. 61.4%. Taking into account the acceleration of domestic substitution under the influence of uncertainties in international trade, and the synergy of the booming IC design and foundry sectors in mainland China on the packaging and testing industry, we believe that the proportion of major packaging and testing plants' overseas revenue may further decline. Considering that the overseas production capacity of mainland Chinese manufacturers may be further increased after the overseas epidemic has eased, we believe that the decline in the proportion of overseas revenue of major packaging and testing plants will slow down.

In the context of repeated overseas epidemics, major mainland packaging and testing companies have ushered in structural opportunities. We selected Changjiang Electronics, Tongfu, Huatian, and Jingfang as the main packaging and testing vendors in mainland China, and ASE, Amkor, Licheng, Jingyuan, Nanmao, and Qibang as the main packaging and testing vendors outside the mainland. Compare orders before and after the epidemic. The quarterly revenue growth rate over the same period found that the 1Q21 sales growth rate of mainland packaging and testing vendors and non-mainland packaging and testing vendors were 32.3%/15.1% year-on-year, and the year-on-year growth rates of 2Q21 revenue were 29.5%/12.3%. Since the outbreak of the epidemic in mainland China in 1Q20, the single-quarter revenue growth rate of major mainland packaging and testing vendors has surpassed that of major packaging and testing vendors outside the mainland for the first time in 1Q21. We believe that the main reason for the difference in 1H21 in the revenue growth of major packaging and testing vendors in the mainland and outside the mainland is due to the repeated overseas epidemics. In the context of continuous overseas epidemics, we are optimistic about the structural opportunities for mainland packaging and testing companies.

1H21 packaging and testing foundry review: strong performance, A-share packaging and testing valuation under pressure

In 1H21, the world's major packaging and testing companies ushered in strong performance, and 2Q21 packaging and testing segment operating profit, gross profit margin, and net profit margin reached high levels since 1Q16. We selected 10 companies including ASE, Amkor, and Changjiang Electronics as the target companies of the global packaging and testing sector. The total operating income of the global packaging and testing sector in 2Q21 reached 62.41 billion yuan (QoQ: +7.3%, YoY: +15.9%), 1H21 revenue The total amount is 120.59 billion yuan (YoY: 17.1%). The total operating profit of the global packaging and testing sector in 2Q21 reached 7.80 billion yuan (QoQ: +24.8%, YoY: +59.8%), reaching a high level since 1Q16. The 2Q21 net margin of the packaging and testing sector reached 10.0% (QoQ: +1.44pct) (weighted average of single-quarter revenue). The net margin level has risen for three consecutive quarters since 3Q20, and profitability has improved significantly. We have observed that the gross profit margin of major global packaging and testing vendors has increased for six consecutive quarters. In 2Q21, the gross profit margin of major packaging and testing vendors reached 20.9% (QoQ: +1.24pct) (weighted average of single-quarter revenue), reaching a historical high level since 1Q16.

We believe that the strong performance of major global packaging and testing companies in 1H21 is mainly due to: 1) 1H21 demand side drives the global semiconductor industry boom; 2) 1H21 global packaging and testing capacity shortages led to higher prices of packaging and testing products; 3) major packaging and testing The company's expanded production capacity gradually reached production, effectively boosting the release of performance under the background of tight production capacity. We have noticed that the global major OSAT vendors in 22 years Bloomberg unanimously expected capital expenditures to fall by 10.9% compared to 21 years, or it may indicate that the demand for expansion in the packaging and testing industry has declined slightly, and the industry's capacity shortage may be alleviated from 4Q21.

1H21 global packaging and testing sector valuation fluctuated upward, the global packaging and testing industry ushered in Davis double-click. We selected 10 OSAT vendors such as ASE, Amkor, and Changjiang Electronics as the targets and weighted them by market value. The global packaging and testing sector rose 18.6% in 1H21, and rose by 8.0% from the beginning of the year to September 30; the Philadelphia Semiconductor Index rose by 20.2 in 1H21 %, a total increase of 17.0% from the beginning of the year to the close of September 30.

In 1H21, the valuation of the sub-sectors of the semiconductor industry chain is gradually diverging, and the valuation of the A-share packaging and testing industry is under pressure to a certain extent. We selected 4 A-share listed OSAT manufacturers from Changjiang Electronics Technology, Tongfu Microelectronics, Huatian Technology, and Jingfang Technology as the target and weighted by market value. The A-share packaging and testing sector rose by 6.2% in 1H21 (the global packaging and testing sector over the same period: +18.6 %). Selecting 20 A-share listed companies such as Weir shares as the targets of the IC design sector, and selecting 7 A-share listed companies such as China Resources Microelectronics as the targets of the foundry/IDM sector and weighted by market value, the 1H21 IC design sector rose 27.7%, and foundry/ The IDM sector rose by 24.6%; although the semiconductor industry is booming in 1H21 and the performance of major companies in the packaging and testing industry in mainland China is delivering strong performance, the valuation is still certain compared to the global packaging and testing sector and the A-share IC design and foundry/IDM sector Degree of pressure.

We believe that the valuation pressure is mainly due to: 1) the market has divergence on the timing of the loosening of the production capacity of packaging and testing manufacturers; 2) the market has divergence on the performance increase after the price of packaging and testing products peaks in the future. We believe that the performance of major companies in the 2H21 packaging and testing industry is still expected to benefit from the rising volume and price of packaging and testing products and continuing the strong momentum of 1H21, and the incremental packaging market led by advanced packaging technology and new applications will provide the core for the mid- to long-term growth of the packaging and testing industry kinetic energy.

Grasp investment opportunities in advanced packaging

The mobile phone and PC end customers are helping together, and advanced packaging is the general trend. With the advent of the 5G era, leading AP manufacturers such as Qualcomm and MediaTek have successively released 5G chips, and leading mobile phone manufacturers such as Apple and Huawei have also launched self-developed 5G chips. With the increase in the number of built-in components of 5G mobile phones and the continuous improvement in space utilization requirements, packaging solutions such as SiP, CSP, and WLP have rapidly become popular with the wave of 5G replacement due to the advantages of smaller size and higher integration. In the PC field, Nvidia’s GPU products use TSMC’s CoWoS 2.5D advanced packaging technology; AMD’s market share in the mid-to-high-end CPU/GPU field continues to increase, and at the same time, it has launched new products based on the 5nm process Zen-4 architecture, which has a negative impact on FCBGA, FCPGA, FCLGA, etc. The demand for advanced packaging such as packaging and 2.5/3D remains strong. We believe that with the new 5G cycle and the slowdown of advanced manufacturing processes, downstream customers' demand for advanced packaging that can meet both complex performance and miniaturization is accelerating.

Changjiang Electronics' advanced packaging revenue dominates, and the proportion of Tongfu and Huatian's advanced packaging revenue is on the rise. In 2020, JPC’s advanced packaging sales accounted for 54.72%. Subsidiaries Xingke Jinpeng, JC Advanced, JC Korea and the headquarters of the Jiangyin plant are engaged in advanced packaging and testing business. The total calculation shows that JC’s 1H21 advanced packaging and testing revenue accounted for packaging. The total revenue of the testing business accounted for 91.11%, and advanced packaging and testing was dominant; Tongfu Microelectronics advanced and traditional packaging and testing business income was relatively even, and the advanced packaging and testing business was mainly undertaken by subsidiaries Tongfu Supermicro Suzhou and Tongfu Supermicro Penang. The total revenue in 1H21 accounted for 52.27% of the revenue from the packaging and testing business. Tongfu adopts a major customer-oriented strategy and deeply binds AMD, which is expected to benefit from the continuous increase in its market share in the CPU/GPU field. Huatian Technology's advanced packaging business is mainly undertaken by subsidiaries Huatian Nanjing, Huatian Kunshan and Unisem. In addition, Huatian Xi'an also undertakes part of the advanced packaging business. It is estimated that 1H21 Huatian Technology's advanced packaging business accounted for about 50.65%.

The added value of advanced packaging has increased significantly, and the average product price is approximately 14 times that of traditional packaging. Taking Changjiang Electronics as an example, with its leading position in advanced packaging fields such as wafer-level packaging, SiP packaging, 2.5/3D packaging, the proportion of advanced packaging sales has increased year by year since 2017, and the average sales price of advanced packaging products has also stabilized at The level is about 0.71 yuan/piece, which is about 14 times the average price of traditional package products at 0.05 yuan/piece. According to the YongSi Electronics prospectus, which focuses on advanced packaging and testing, the average sales price of its two high-end advanced packaging products in FC and SiP packages in 2020 is 0.44/0.82 yuan/piece, which is significantly higher than that of traditional packaging.

Mainland packaging and testing companies are basically keeping pace with the international advanced level in terms of advanced packaging technology. Through active mergers and acquisitions to achieve technological synergy and continuous high-intensity independent research and development, domestic packaging and testing companies have completed full coverage of major advanced packaging processes, such as system-in-package (SiP), flip-chip packaging (FC), 2.5D/3D packaging, etc. The packaging process has achieved mass production. Taking into account the macro-catalysis of industrial policy support, domestic substitution acceleration, superimposed on the continuous high-intensity independent research and development, potential mergers and acquisitions brought about technological synergy opportunities and other micro kinetic energy, we believe that the mainland packaging and testing industry as the three major sectors of chip design, manufacturing, packaging and testing Industries with a small gap between China and the international advanced level are expected to take the lead in completing the leap from "synchronization" to "leading", and future development can be expected.

Changjiang Electronics Technology is in a leading position in the industry in wafer-level, 2.5/3D and other packaging technologies. Changjiang Electronics has an innovative and ground-breaking wafer-level FlexLineTM manufacturing method, which achieves supply chain simplification and significant cost reduction that cannot be achieved by traditional manufacturing processes without being constrained by wafer diameter. In 2019, Changdian Advanced, a subsidiary of the company, successfully developed FI ECP01005 technology, realizing the industry's small and thin WLCSP package. In terms of 2.5/3D packaging technology, in the field of silicon-level integration, the company is the first batch of packaging and testing vendors with mature MEOL TSV integration experience in the field of 2.5D packaging.

Tongfu Microelectronics has a leading position in the field of flip-chip packaging and high-end processor packaging and testing. In 2013, the company mass-produced FC packaging technology. In 2015, it was put into construction to realize the first 12-inch 28nm advanced packaging and testing full process (Bumping + CP + FC + FT + SLT) in China and successfully mass-produced. In 2016, it acquired high-end packaging technologies such as FCBGA, FCPGA, FCLGA and large-scale mass production platforms through the acquisition of AMD Suzhou and Penang, Malaysia packaging and testing plants. The company deeply binds AMD to become the world's first packaging and testing plant for 7nm CPUs. It has achieved the process capability and certification of 5nm products.

In addition, we have noticed that unlisted packaging and testing companies such as SMIC (Shenghe Jingwei) and Yongxi Electronics have developed rapidly in subdivision fields such as advanced packaging. According to Yongxi Electronics' prospectus, the company's 2020 operating income will reach 748 million yuan and net profit will be 27.85 million yuan. All the company’s products are in the form of high-end advanced packaging. The packaging products mainly include FC, SiP, QFN/DFN, and MEMS in 4 major categories. They have established stable relationships with well-known IC design manufacturers such as Hengxuan Technology, Jingchen, Fullhan Micro, MediaTek, etc. The overall product yield rate in 2020 will exceed 99.9%. According to SMIC’s 20th Annual Report, SMIC is a joint venture company established by SMIC and Changjiang Technology in November 2014. Its main products are mid-channel bump manufacturing and wafer-level packaging. Leading position in the country.

2 Back-end equipment industry: optimistic about localization investment opportunities

Global packaging and testing equipment industry: taking advantage of advanced packaging, heavy volume can be expected

Packaging and testing equipment can be divided into two categories: packaging equipment and testing equipment. In terms of packaging equipment, it corresponds to the six major processes of backside thinning, wafer cutting, placement, wire bonding, molding and sealing, and rib cutting in the wire bonding process. The traditional packaging equipment is mainly divided into thinning machines according to the process flow. , Dicing machine, placement machine, wire bonding machine, plastic packaging machine and cutting and forming machine. In the advanced packaging process that uses bumping instead of wire bonding, equipment such as flip-chips, ball refills, reflow ovens, etc. are also used, such as through silicon vias (TSV) and other advanced packaging processes. Photolithography machine, etching machine, electroplating machine, PVD, CVD and other semiconductor manufacturing front-end equipment.

The testing process runs through the entire process flow of semiconductor manufacturing, and is mainly divided into design verification testing, process control testing, wafer testing (CP, Circuit Probing), and finished product testing (FT, Final Test), of which CP testing and FT testing occur on the wafer After manufacturing, it belongs to the back-end testing of semiconductor manufacturing. The main testing equipment is testing machine, probe station, and sorting machine. CP test mainly uses test machine and probe machine; FT test mainly uses test machine and sorting machine. Process control testing is the inspection of the entire wafer manufacturing process, mainly using optical microscopes, defect observation equipment, etc.; the design verification test is the entire process inspection of chip samples, so all the above-mentioned semiconductor testing equipment must be used.

SEMI estimates that the global packaging equipment market will reach 6.01 billion US dollars in 21 years, and the test equipment market will reach 7.58 billion US dollars. We are optimistic about the continued growth of the packaging and testing equipment market. Due to the rebound of the semiconductor industry in 20 years, the expansion of downstream packaging and testing plants has accelerated, and the global packaging equipment and testing equipment market has achieved significant year-on-year growth (package equipment +34.1% year-on-year, test equipment year-on-year +19.7%). According to SEMI estimates, the packaging equipment market in 21/22 will reach US$60.1/639 billion, an increase of 56.1%/6.3% year-on-year respectively; the market size of test equipment in 21/22 will reach US$75.8/8.03 billion, an increase of 26.1% year-on-year respectively /5.9%. We believe that the demand for equipment brought about by advanced packaging technology will greatly promote the expansion of the packaging equipment market. With the increase in the complexity of integrated circuits, the market scale of subsequent test equipment will also increase steadily.

The global packaging equipment presents an oligopoly pattern. Companies such as ASM Pacific, K&S, Besi, Disco, Towa, Yamada, etc. occupy most of the packaging equipment market, and the industry is highly concentrated. ASM Pacific has a wide range of products. In 2020, the packaging equipment revenue will reach 868 million US dollars (according to the company's 2020 annual report). According to the SEMI statistics of the packaging market size of 3.85 billion US dollars in 2020, ASM Pacific has a global market share of 22.5%, which is packaging. Equipped with a faucet. Disco's semiconductor packaging field mainly involves thinning machines, dicing machines, and cutting rib forming equipment. It is the subdivision leader in thinning machines and dicing machines in the subsequent process. According to SEMI, in 2020, Disco will have The market share of thin machines reached 81% and 73%, respectively. The main products of Besi are die bonders, placement machines, laminators and other equipment, with a broad product spectrum; K&S's superior equipment is mainly bonding machines.

The global semiconductor back-end test equipment industry is highly concentrated, and the test machine market is in a duopoly situation of Teradyne and Advantest. According to SEMI, in 2020, Teradyne and Advantech will account for approximately 51%/40% of the global test machine market. In terms of breakdown, Teradyne and Advantech will account for approximately 59% of the SoC&Logic test machine market. /37% and about 32%/51% of the storage test machine market size. The probe station market also exhibits a duopoly. According to CSA Research, the market share of Tokyo Seimitsu and Tokyo Electron probe station in 2018 was approximately 46%/27%, respectively. The competitive landscape of sorting machines is relatively scattered. The main companies are Cohu, Advan, Hongjin Precision, and Changchuan Technology. According to the Qianzhan Industry Research Institute, the market share of Kexiu, Advan, Hongjin Precision, and Changchuan Technology in 2018 was approximately 37%/12%/8%/2%.

The quarterly revenue of major global packaging equipment companies has increased for the sixth consecutive quarter since 1Q20, and the quarterly revenue of test equipment companies has increased for the tenth consecutive quarter since 1Q19. Packaging and testing equipment is booming. We use ASM Pacific, Disco, Besi, and K&S as the world’s major packaging equipment company targets, and Advantest, Teradyne, Tokyo Precision, Corseo Semiconductor and A-share listed companies Changchuan Technology and Huafeng Measurement & Control as the world’s major test equipment The company's target, operating income, 1Q16-2Q21, the quarterly revenue of global packaging equipment companies showed strong cyclical characteristics, while the quarterly revenue of test equipment companies showed a long-term steady growth trend. We believe that the periodic differentiation of packaging equipment and test equipment is mainly due to the wide range of downstream applications of test equipment. The main purchasers of packaging equipment are OSAT manufacturers. In addition to OSAT manufacturers, Fabless manufacturers have gradually increased their independence in recent years. Procurement of testing machine strength. On the operating profit side, the demand for high value-added advanced packaging equipment driven by advanced packaging technology increased. Packaging equipment companies' 1Q21-2Q21 operating profit increased by 138.5%/124.8% year-on-year, which was far greater than the corresponding indicators of test equipment companies. We believe that advanced packaging equipment will become a major increase in the performance and profitability of packaging equipment companies.

The difference in gross profit margins of different packaging equipment companies and different test equipment companies is mainly due to the different technical barriers and competition patterns of equipment used in different processes. On the packaging equipment side, Disco is the leader in scribing machines and wafer thinning machines in global packaging equipment. Its gross profit margin has long been a leader among packaging equipment companies, with an average gross profit margin of approximately 58% in a single quarter from 1Q16 to 2Q21. On the test equipment side, Advantest and Teradyne are in a duopoly position among the higher value-added test machines. The average gross profit margin in a single quarter from 1Q16 to 2Q21 is about 55%. The gross profit margin of Hugh Semiconductor is slightly lower. According to our statistics, the gross profit margin of the single quarter from 1Q16 to 2Q21 fell at about 39%.

From 1Q16 to 2Q21, the test equipment company's gross profit margin was stable higher than that of the packaging equipment company, but starting from 1Q21, the difference in gross profit margin showed a trend of convergence. From the data of 1Q16-2Q21, on average, back-end test equipment has higher added value than packaged equipment. In 2Q21, the weighted average gross profit margin of major global test equipment companies was 52.7%, while the weighted average gross profit margin of packaging equipment companies was 49.8%. We believe that the difference in gross profit margin between packaging equipment and test equipment is gradually converging, mainly due to the increase in the proportion of advanced packaging technology and advanced packaging. The added value of the equipment is high. We expect that with the increase in the proportion of advanced packaging equipment in packaging equipment, the gross profit margin of packaging equipment companies is expected to further increase.

1H21 packaging and testing equipment review: strong performance, rising valuation fluctuations

Benefiting from the high-intensity capital expenditures of downstream packaging and testing foundries, 1H21 global packaging equipment and test equipment sectors have ushered in strong performance, and 2Q21 global packaging equipment and testing equipment sector revenue and operating profits have reached record highs. We selected 4 companies including ASM Pacific and K&S as the target companies of the global packaging equipment sector, and selected 6 companies including Advantech and Teradyne as the target companies of the global test equipment sector. The global packaging equipment segment’s 2Q21 operating income totaled US$1.72 billion (QoQ: +42.2%, YoY: +46.2%), 1H21 total operating revenue reached US$3.24 billion (YoY: +46.4%), and 2Q21 operating profit totaled US$473 million. (QoQ: +32.7%, YoY: +124.8%), 1H21 operating profit totaled 830 million US dollars (YoY: +130.5%). The global test equipment segment’s 2Q21 operating income totaled US$2.57 billion (QoQ: +39.7%, YoY: +46.2%), 1H21 total operating revenue reached US$4.78 billion (YoY: +34.5%), and 2Q21 operating profit totaled US$756 million. (QoQ: +34.1%, YoY: +79.8%), 1H21 operating profit totaled 1.320 billion US dollars (YoY: +75.2%). The 2Q21 package equipment segment has a net profit margin of 21.8% (QoQ: +2.84pct) and a gross profit margin of 49.8% (QoQ:+1.18pct); the test equipment segment has a net profit margin of 24.9% (QoQ: -2.10pct) and a gross profit margin of 2Q21 52.7% (QoQ:+1.41pct).

We believe that the strong performance of global packaging and testing equipment companies in 1H21 is mainly due to the shortage of global packaging and testing production capacity, and the demand for downstream packaging and testing foundries to increase the demand for equipment. We have observed that the scale of new orders from major equipment manufacturers continues to rise, and the backlog of orders has further increased. Despite the continued tight supply chain, with the support of the scale of downstream orders, the 2Q performance of major equipment manufacturers is still outstanding.

The global packaging equipment sector and test equipment sector 1H21 showed a fluctuating upward trend. We selected four companies, ASM Pacific, Disco, K&S, and Besi, as the targets of the global packaging equipment sector and weighted by market value. The global packaging equipment sector rose by 13.4% in 1H21, and a total increase of 2.9% from the beginning of 21st to September 30; Advantech was selected , Teradyne, Tokyo Precision, Kexiu, Changchuan Technology, and Huafeng Measurement & Control are the targets of the global test equipment sector and are weighted by market value. The global test equipment sector rose by 20.5% in 1H21, and a total of Increased 13.6%. The global packaging and testing equipment sector rose 18.0% in 1H21, and rose 9.8% from the beginning of the year to the close of September 30.

Grasp the opportunity of localization of packaging and testing equipment

With a CAGR of 25% in the 21-25 years of China's semiconductor equipment market and a 20% localization rate of packaging and testing equipment in mainland China, we estimate that the domestic market for packaging and testing equipment in China will be US$1.582 billion in 2025. According to SEMI data, the size of the semiconductor equipment market in mainland China in 2020 will reach 18.72 billion U.S. dollars, with a CAGR of 30.7% in 2016-20 and a CAGR of 17.7% in 11-20. In the context of high capital expenditures of downstream foundries, we assume that China's mainland semiconductor equipment market has a CAGR of 25% in 21-25. According to the data of China International Admissions Network, the localization rate of packaging and testing equipment in my country in 2019 is about 5%. With the accumulation of technology and the gradual fulfillment of market cultivation results from packaging and testing equipment manufacturers such as Changchuan Technology and Huafeng Measurement and Control, we assume that my country will be in 2025. The localization rate of packaging and testing equipment will reach 20%. Under the above assumptions, we estimate that the domestic market for packaging and testing equipment in Mainland China will be approximately US$1.582 billion in 25 years. If the global packaging equipment market size (3.85 billion U.S. dollars, according to SEMI) and the test equipment market size (6.01 billion U.S. dollars, according to SEMI) are split in 2020, the domestic packaging equipment market will be split in 2025. The market space for chemical products is 618 million U.S. dollars, and the localization market for test equipment is 965 million U.S. dollars.

A single spark can start a prairie fire, and China's packaging equipment continues to make breakthroughs. We are optimistic about the opportunity for the localization of packaging equipment. After years of technology accumulation and market training, some mainland Chinese semiconductor packaging equipment manufacturers have gradually matured their design and manufacturing capabilities. According to People's Daily Online, the fan-out packaging equipment developed by Suzhou Akris in 2019 has reached or exceeded the international advanced level. According to Jiwei, in 2021, the 8-inch fully automatic wafer thinner industrialized model independently developed by CEC Electronic Equipment Co., Ltd. has successfully entered an 8-inch integrated circuit production line in Mainland China, and the company expects to deliver it by the end of this year The first 12-inch fully automatic wafer thinning machine to solve the problem of "jamming" in the field of ultra-thin wafer processing. The technologies of companies such as Fu Shi Sanjia in the field of plastic packaging machines, Sanjia Yamada in the field of cutting and forming equipment, and Plessing Intelligence in the field of die-bonding machines are also becoming more mature. We believe that with continuous technology accumulation and market cultivation, some packaging equipment companies in mainland China will benefit from the return of orders from China's mainland packaging and testing industry and usher in rapid growth in performance. The localization of packaging equipment market can be expected in the future.

Semiconductor back-end test equipment has achieved partial domestic substitution, and back-end test equipment is expected to benefit from opportunities such as memory localization. In terms of testing machines, according to the 20th annual report of Huafeng Measurement & Control, the company has realized the import substitution of analog & hybrid testing machines, and some SoC testing machines have also been developed and delivered for verification. In addition, we have noticed that a group of companies such as Yuexin Technology, Yudu Technology, Jiangsu Hongtai, Wuhan Jinghong and other fields are growing rapidly in the fields of SoC testers and storage testers. We are optimistic that new forces in the back-end equipment will seize opportunities such as memory localization. develop. In terms of probe stations, the major companies in mainland China are Changchuan Technology, Sammy Sieer, Shenzhen Silicon Power, etc., which are in the second echelon as a whole and are narrowing the technological gap with international advanced manufacturers. According to Techweb, Senmeier Technology launched the first wafer-level A12 fully automatic probe station in mainland China in March 21. Some of the probe station products in my country have entered the international advanced ranks. In terms of sorting machines, according to the 20th annual report of Changchuan Technology, the company has reached the international first-class level in subdivision equipment such as translational sorting machines. We believe that with continuous technology accumulation and market cultivation, under the background of the impact of overseas epidemics on overseas supply chains and the large-scale circulation in mainland China, the process of localization of test equipment is expected to be further accelerated, and the localization market has a broad space.

3 Advanced Packaging: Technical Route and Introduction to Downstream Market

Market size: In 2019, the world's 29 billion US dollars, 20-25 CAGR 6.6%, 25 years accounted for 49.7%

Moore's Law refers to the fact that the number of transistors contained in an integrated circuit will double every 18 months. However, as the feature size of transistors shrinks to below 10nm, the quantum tunneling effect leads to more serious leakage. Chip development and manufacturing based on Moore's Law Costs will also increase exponentially, and Moore's Law continues to encounter bottlenecks. The industry proposes More Moore, More than Moore, and New Devices (Beyond CMOS). The Beyond CMOS refers to not only further reducing the size of transistors to achieve Moore's Law, but also through circuit design optimization or advanced packaging technology. .

The growth rate of the advanced packaging market is significantly higher than that of traditional packaging. We expect the CAGR of the advanced packaging market in Mainland China to reach 18.0% in 21-26. Globally, according to Yole's estimates, the global advanced packaging market will climb from approximately US$29 billion in 2019 to approximately US$42 billion in 2025, with a CAGR of approximately 6.6% in 20-25, and advanced packaging in 2025 accounting for 49.7%. According to data from China Industry Information Network, the proportion of the advanced packaging market in China in the mainland packaging and testing market has increased from 11.3% in 2017 to 13.1% in 2020. Compared with the global average, my country's advanced packaging market share is still low, and there is ample room for industrial upgrading.

According to statistics of major packaging and testing companies such as Changjiang Electronics, Tongfu, Huatian and other major packaging and testing companies in 20-21 years, we have observed that the advanced packaging industrialization layout of major packaging and testing companies in mainland China may have ushered in an acceleration. Than will accelerate the promotion. In 17-20, the proportion of advanced packaging will increase by 1.8pct. We expect that the proportion of advanced packaging will increase at a rate of approximately +3.5pct every three years in 21-26. It is expected that the proportion of the advanced packaging market in mainland China will reach 20%, combined with the forecast of my country’s packaging market in 2026 by the Foresight Industry Research Institute (442.9 billion yuan), we predict that China’s advanced packaging market will reach 88.58 billion yuan in 2026, and the CAGR of the advanced packaging market in 21-26 is expected to reach 18.0%. We believe that advanced packaging technology will become the core driving force leading the growth of the packaging and testing industry in mainland China.

Advanced packaging is the interleaving and aggregation of advanced connection technologies, operating units, and packaging ideas. We take 1) flip-chip packaging (Flip-Chip), 2) wafer-level chip scale packaging (WLCSP) and 3) system-in-package (SiP) three representative advanced packaging processes as examples to introduce the development trend.

Technical Route 1: Flip-chip

Flip-chip is not a specific packaging process, but a connection technology between the chip and the substrate. The flip-chip packaging process was developed by IBM in the 1960s and has been widely used in recent years with the rapid development of consumer electronics products and the rapid increase in product performance requirements. In the traditional wire bonding method, the chip is connected to the substrate through metal wire bonding. The chip area encapsulated by this packaging process is relatively large, which gradually cannot meet the miniaturization requirements of smart devices. The flip-chip process refers to direct deposition on the I/O pads of the chip, or deposition of bumps after RDL wiring, and then the chip is turned over and heated, so that the molten solder is combined with the substrate or frame. Face down.

The flip chip packaging process can be subdivided into FCBGA (flip chip ball grid array packaging) and flip chip size packaging (FCCSP). Flip chip ball grid array packaging (FCBGA) is used in flip chip packaging (FC). Have a high market share. Due to the use of small balls instead of pin soldering, this process solves the electromagnetic compatibility and electromagnetic interference problems, and can withstand higher frequencies; the high I/O density can effectively reduce the packaging area; the flip-chip packaging allows the back of the chip to be directly Exposure to air improves the heat dissipation capacity of the chip. Due to the above advantages, flip-chip ball grid array packaging is widely used in notebook computers, high-performance computing (HPC), AI and other fields. According to Yole data, the market size of Flip Chip Ball Grid Array (FCBGA) in 2020 is about 10 billion U.S. dollars, and the market size is expected to grow to 12 billion U.S. dollars by 2025, and the 21-25 CAGR of the market size is about 3.7%.

Application scenarios of advanced packaging: 5G RF chips, consumer electronics, HPC

On the FCCSP revenue side, ASE ranks first, and the future of mainland manufacturers can be expected. According to Yole data, in the field of flip chip-level packaging in 2020, Taiwanese manufacturer ASE will rank first with a market share of 23% on the revenue side, followed by Samsung and Amkor with a market share of 14 % And 10%. Mainland manufacturers Changjiang Electronics Technology, Huatian Technology, and Tongfu Microelectronics ranked fourth, fifth, and sixth respectively, with market share of 8%, 4%, and 3% respectively. If IDM manufacturer Samsung is excluded and only OSAT manufacturers are counted, the market share of the above three mainland manufacturers ranks third, fourth, and fifth respectively. In the tide of localized substitution in the semiconductor industry chain, mainland manufacturers are expected to further increase the market share of flip chip scale packaging (FCCSP).

Technology Route 3: System-in-Package (SiP)

Wafer-level chip-scale packaging (WLCSP) is a new packaging technology that integrates chip-scale packaging (CSP) and wafer-level packaging (WLP). Compared with traditional packaging, the wafer is cut into individual chips before packaging. Wafer-level packaging has obvious cost advantages. Chip size packaging (CSP) refers to a technology in which the ratio of the package area to the chip area is less than 1.2:1, which can effectively promote the miniaturization of circuits. Therefore, wafer-level chip scale packaging (WLCSP) can significantly reduce IC size, greatly increase information transmission speed, and effectively reduce the probability of noise interference. According to the prospectus of Jingfang Technology, wafer-level chip size package products are 75% smaller and 85% lighter than quad flat package (QFP) products, and 50% smaller and 40% lighter than ball grid array package (BGA) products. %.

Divided by technology type, wafer-level chip size packaging can be divided into fan-in wafer-level packaging (FIWLP) and fan-out wafer-level packaging (FOWLP). Traditional wafer-level packaging mostly uses a fan-in structure (FI), which is mainly applied to integrated circuit chips with a small number of I/O pins. With the continuous improvement of consumer terminal performance requirements for electronic products, as well as the continuous advancement of lithography machines and chip manufacturing technologies, the process of 28nm and below has gradually become the mainstream, and fan-in packaging can no longer complete the multi-layer in its chip area. Rewiring and bump array layout, fan-out wafer level packaging (FOWLP) came into being. Fan-out packaging breaks through the limitation of the number of I/O terminals. When the required number of I/O ports cannot be arranged in the original size, the package size of the chip is artificially enlarged through special filling materials, and the entire package range is expanded. Wire and arrange I/O.

Fan-out wafer-level packaging (FOWLP) is a growth process under wafer-level packaging. Since it can provide more I/Os than FIWLP, FOWLP performs in more complex integrated circuits such as computing chips. Strong. Since most of the current chip manufacturing process nodes are still 28nm and above, the number of I/Os is relatively small, which can be solved by fan-in wafer level packaging (FIWLP) and flip-chip packaging (FC). With the improvement and reduction of the manufacturing process, fan-out wafer-level packaging is the general trend. Currently, fan-out wafer-level packaging is widely used in terminals such as smartphones and PC-side microprocessors. According to Yole data, the fan-out wafer-level packaging market is expected to grow from US$1.256 billion in 2019 to US$3.046 billion in 2025, with a CAGR of 15.9% in 2020-2025. Considering that the demand for highly integrated consumer electronics is overwhelming, and the FOWLP process is expected to be applied on a large scale in potential fields such as automotive electronics, military electronics, and high computing power after its further maturity, we believe that FOWLP is a growth process under wafer-level packaging.

TSMC's integrated fan-out packaging (InFO) process is leading the world, and the market share of mainland manufacturers is expected to further increase. According to Yole data, the global market for fan-out wafer-level packaging (FOWLP) in 2020 will reach 1.475 billion US dollars, an increase of 17.44% year-on-year. Among them, TSMC has a high market share of 66.9%, followed by ASE, Changjiang Electronics Technology, and Anhui Relying on (Amkor), the market share reached 20%, 5.1%, and 3% respectively. Currently, Changjiang Electronics Technology, Huatian Technology, Tongfu Microelectronics, Jingfang

Technology Route 3: System-in-Package (SiP)

System-in-package (SiP) is not a specific process, but a solution to package a variety of chips with different functions together in a parallel or stacked manner. According to the definition of the International Semiconductor Route Organization (ITRS): SiP is a single unit that combines multiple active electronic components with different functions and optional passive components, as well as other components such as MEMS or optical devices, to achieve certain functions. Standard packages form a system or subsystem. Since system-level subassembly can significantly reduce the package volume and achieve more complex functions, it is regarded as an important path to achieve beyond Moore's Law. The realization of three-dimensional integration and signal interconnection in the Z-axis direction through stacking is an important technology direction of system-in-package. Typical technologies include 3D-stacking, through-silicon via technology (TSV), chiplet packaging technology (Chiplet), and so on. Stacking can further increase packaging density, improve signal transmission speed, and reduce power consumption, but it is technically difficult. The maturity and richness of key technologies such as stacking and perforation still need to be improved.

It is the development trend of SiP and even advanced packaging technology to package chips in 3D space. 3D packaging and Chiplet packaging are the representative processes of system-in-package. 3D stacking technology refers to the technology of three-dimensional integration, signal communication and packaging of chips or structures with different functions in the Z-axis direction through processes such as stacking or via interconnection. Chiplet mode is a mode in which multiple module chips and underlying basic chips are packaged together through die-to-die internal interconnection technology to form a multi-functional heterogeneous SiPs chip. TSMC stated at the Hot Chips Conference on August 23, 21 that its advanced packaging technology will follow the 3D packaging thinking, from InFO (integrated fan-out packaging) and CoWoS (Chip-on-Wafer-onSubstrate) to SoIC ( The combination of small outline integrated circuit package) and InFO and CoWoS is expected to realize SoIC interconnection within 1μm by 2035.

Due to the advantages of SiP in heterogeneous integration, consumer electronics that emphasize the combination of portability and functionality are its major application areas. According to Yole data, the global system-level packaging market will be approximately US$14 billion in 2020. According to downstream application areas, consumer electronics will occupy approximately US$11.9 billion in market size and approximately 85% of the market, occupying system-level packaging downstream applications. High market share in the field. Followed by the communications infrastructure field and the automotive electronics field, the market size is approximately US$1.2 billion and US$800 million, respectively. It is estimated that the system-level packaging market will exceed 19 billion U.S. dollars in 2026, and the CAGR of the market size will be greater than 5% in 2021-2026. In terms of market segments, the market size of consumer electronics, communication infrastructure, and automotive electronics system-level sub-assembly will reach approximately US$15.7 billion, US$1.9 billion, and US$1.3 billion, respectively.

2.5D/3D packaging can greatly increase packaging density and reduce packaging size, and it is widely used in HPC and other application terminals. According to Yole data quoted by Memes Consulting, the 2.5D/3D packaging market will grow from US$1.758 billion in 2018 to US$5.749 billion in 2023. The CAGR for 19-23 is 26.7%, much higher than other advanced packaging technology markets. Scale growth. Split by downstream application areas, the main application areas are consumer electronics, HPC and automotive electronics. The market share in 19 years was 11.76, 3.50, and 81 million US dollars, respectively, and the CAGR in 19-23 was about 18%, 46%, and 25%, respectively. , Consumer electronics occupy the main application market for 2.5D/3D packaging, and HPC will have a high market growth rate, which will be the real driving force for 2.5D/3D technology. We believe that 2.5D/3D packaging is a packaging process with potential and growth in the future, or it will reshape the competitive landscape in the packaging field.

Application scenarios of advanced packaging: 5G RF chips, consumer electronics, HPC

From a technical point of view, flip-chip packaging is expected to still occupy most of the advanced packaging market share, and 3D packaging has growth potential. According to Yole statistics, using wafer consumption as the statistical caliber, advanced packaging used about 29 million wafers in 2019, of which flip-chip packaging accounted for 74%, followed by fan-in packaging from highest to lowest. , 3D stacked packaging, fan-out packaging, accounting for 12%, 7%, and 6% respectively. It is estimated that about 43 million wafers will be used in advanced packaging by 2025. Flip-chip packaging is still a large-scale advanced packaging process, but its proportion has fallen to 71%; 3D stacked packaging is expected to usher in rapid growth, with a proportion from 2019 7% will increase to 12% in 2025; the market share of fan-out packaging will also rise further, rising to 8% in 2025.

At the application level, telecommunications infrastructure is a fast-growing application area for advanced packaging, and mobile phones & consumer electronics are the main application areas for advanced packaging. According to statistics from Yole, the advanced packaging market in 2018 totaled approximately US$27.6 billion, of which mobile phones & consumer electronics accounted for 84%, which are the main application areas of advanced packaging. Automobiles & vehicles and communication infrastructure accounted for 9% and 6% respectively. The above three application areas are the main application areas of advanced packaging. It is expected that mobile & consumer electronics will still be the largest application market for advanced packaging in 2024, but its share will drop to 73%. Communication infrastructure will become a part of the advanced packaging application field with a high compound growth rate, and the proportion of value is expected to increase to 15%; the proportion of value of automobiles & vehicles is expected to increase from 9% to 11%.

The 5G technology represented by 5G mobile phones is opening up a new blue ocean in the packaging market, and packaging and testing manufacturers in mainland China may benefit significantly. According to Yole data, the global 5G smart phone packaging and testing market will reach 510 million U.S. dollars in 2020. It is estimated that the global 5G smart phone packaging and testing market will reach 2.6 billion U.S. dollars in 2026, and the CAGR will reach 31% in 21-26. In addition to the application scenarios of 5G smart phones, 5G technology also has great potential in application scenarios such as the Internet of Things and smart driving. We believe that 5G technology represented by smartphones will become the main booster for the packaging market, especially the advanced packaging market. Under the background of the penetration of 5G mobile phones in mainland China and the leading global application and promotion of 5G technology, packaging and testing manufacturers in mainland China will A historic opportunity is ushered in the 5G tide.

Automotive electronic packaging is gaining momentum, and the incremental market is relatively large. As smart cars need to realize functions such as autonomous driving and intelligent networking, the number of electronic components they need has increased significantly, and the demand for automotive chip packaging is expected to increase significantly. Due to the harsh conditions of automotive-grade chips, the requirements for safety and reliability are much higher than those of consumer-grade chips. Therefore, automotive chips still mainly use relatively mature traditional packaging processes. With the continuous maturity of advanced packaging technology, its integration, high computing power and other advantages make advanced packaging still the future trend of automotive chip packaging. According to Yole data, the automotive electronic packaging market will grow from US$5.114 billion in 2018 to US$8.988 billion in 2024. The CAGR will reach 10% in 19-24, and the proportion of advanced packaging will increase from 3% in 2018 to 2024. 6% of the year. We are optimistic about the empowerment of automotive electronics to the packaging industry. In the context of the continuous increase in the penetration rate of smart cars in mainland China, automotive electronics will become an important booster for the packaging industry in mainland China.

Smart wearable devices and HPC are coming soon, helping the advanced packaging market grow. For smart wearable devices, according to IDC, global apparel smart wearable device shipments are expected to increase from 2.8 million units in 2018 to 9.1 million units in 2022, corresponding to a CAGR of approximately 34.3% in the corresponding time period; ear-worn devices are expected From 2.1 million units to 12.8 million units, the CAGR is approximately 56.4%; the watch category is expected to increase from 72.8 million units to 120 million units, and the CAGR is approximately 13.30%. Due to the strong demand for miniaturization and integration of smart wearable devices, system-in-package (SiP) is often used, so the increased volume of smart wearable devices will boost the development of the advanced packaging market. According to Gartner, the global public cloud service market will increase from USD 242.7 billion in 2019 to USD 364 billion in 2022, with a CAGR of approximately 14.5% in 20-22. The increased demand for HPC driven by public cloud services will also further drive the development of advanced packaging markets such as 3D stacking and flip-chip packaging.