Frost: Asia Is Outsourcing Destination for Power Semiconductor Packaging
April 26, 2008 // Published as a news service by IHS
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According to Frost & Sullivan, the trend to outsource packaging requirements to Asia is growing among power semiconductor manufacturers, due to declining profit margins and escalating competition.
The new business models of these manufacturers speed consumer adoption of their products by reducing time to market and production costs.
Recent analysis from Frost & Sullivan of the outsourced power semiconductor packaging markets found earned revenues of $887.6 million in 2007, with estimates to reach $1.4 billion by 2011.
Outsourcing packaging to Asia will help power semiconductor companies lower their manufacturing costs, analysts said. Asia's economical raw materials, labor, installation and maintenance costs will help it generate more revenues from packaging than any other region.
One factor in the growth of outsourcing to Asia is the shift toward integrated circuit (IC), lead-free packages that boost demand for power quad flat no-leads (QFN) packages primarily manufactured in Asia. Analysts said directives such as Restriction of Hazardous Substances (RoHS), Waste Electrical and Electronic Equipment (WEEE) put a ceiling on the use of lead in electrical and electronic products.
To comply with the regulations, power semiconductor manufacturers are turning to power with lead-free QFN packages.
"Since power QFN is a new packaging technique, most power semiconductor manufacturers do not possess the requisite in-house manufacturing capabilities," said Frost & Sullivan senior research analyst Bonnie Varghese K. "Therefore, there is extensive outsourcing of QFN packaging to Asia."
Analysts said IC packaging companies in the power semiconductor market must stay abreast of developments in the semiconductor industry to meet the constant demand for improved packages. They will introduce differentiated packaging by identifying the right technology and integrating it immediately.
"Market participants will be particularly responsive to customer preference for increased functionality in mobile phones, since it triggers the need for higher levels of integration," said Varghese. "This could be a huge challenge for power semiconductor packaging companies, since several power semiconductor devices are used in portable products."
To fulfill the need for high efficiency, power semiconductor manufacturers demand packages that offer high performance. Analysts said IC packaging companies will also have to take stock of the form factor, since constantly reduced die sizes provide small form factors.
Analysts said end-user demand for greater integration, higher performance, smaller form factors and shorter product life cycle has forced IC packaging companies to improve the production process and change their assembly lines by increasingly relying on outsourcing.
Source: Frost & Sullivan.