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Limited capacity is driving longer delivery times and higher prices.

This past year saw unprecedented growth in shipments of flip chips. With stronger-than-expected sales of PCs, shipments of CPUs and chipsets with flip chip increased dramatically. The long-awaited shift of graphics chips from wire bond to flip chip began in the last two quarters of 2005. A larger number of ASIC designs moved to flip chip. All in all, the growth rate for solder-bumped flip-chip devices reached an unprecedented 48% in 2005. The strong demand outstripped substrate supply and caught some by surprise. As flip-chip-in-package shipments continue to grow this year, many remain concerned about the supply of substrates. Just look at recent headlines: "Xilinix Hit by Substrate Shortages"¹ and "TSMC May Build Flip Chip Substrate Plant in the Future."² Will the substrate shortage limit growth of flip chip this year?

Laminated substrates. Laminate substrates are the largest segment of the semiconductor packaging materials market, with a value of more than $4.2 billion in 2005 as reported in the Global Semiconductor Packaging Materials Outlook. The growth in laminate substrates has been driven by flip chip, which accounted for more than half of the revenue. Strong growth in demand for flip-chip substrates from chipsets and graphics applications coupled with the ASE fire that destroyed flip-chip capacity in Taiwan resulted in price increases and longer delivery times, pushing up the value of the market. This situation is expected to continue for much of this year, even though companies such as ASE are making laminate materials a major strategic focus.

The shortage quantified. Flip-chip substrate capacity in 2005 was calculated to be 1.16 million sq. meters with demand estimated to be 1.10 million sq. meters. Capacity calculations were based on direct input from such major suppliers as ASE, CMK, Dai Nippon Printing, Fujitsu, Hitachi Chemical, Ibiden, JCI, Kinsus, Kyocera, Mitsui Chemicals, Nanya PCB, NEC Toppan Circuit Solutions, NTK, Phoenix Precision Technology (PPT), Samsung Electro-Mechanics, Shinko Electric Industries, SMIED Globetronics Technology Industries (SGTI) (a subsidiary of Sumitomo Metals Industries Electronic Devices) and UniMicron. Operating capacity may actually be lower for some manufacturers and some capacity is allocated to key large customers, making it unavailable to the general market.

Design cycle times for laminate substrates are typically quoted as four to six weeks. With the current shortages, actual delivery times can be 15 weeks or longer. One company recently reported a quoted delivery time of more than 20 weeks. The situation is not expected to improve significantly this year.

While ASE, Ibiden, Kinsus, Kyocera, NTK, PPT and UniMicron are increasing capacity for flip-chip substrates, the market is expected to be tight through the end of 2006. Some new joint ventures, such as the one planned by Endicott Interconnect Technologies with Meadville Technologies Group to establish a production line in Shanghai, promise additional capacity in the future. However, it takes time to install and qualify a flip-chip line and for a new supplier the qualification process for a new substrate vendor takes 12 months or more.

In addition, some basic materials used to fabricated substrates are also in short supply. Bismaleimide triazine (BT) resin remains the dominant material for PBGA substrates and Mitsubishi Gas Chemical retains a monopoly position, even though substitute materials from Hitachi Chemical, Mitsui Chemicals (BN300) and others have been introduced. Sumitomo Bakelite is promoting a new epoxy resin multiplayer material and Nanya has capacity for a BT resin formulation in Taiwan. Companies in Japan report that the shortage of BT resin is driven by demand outpacing capacity. There are also concerns about other materials such as the Ajinomoto Build-up Film (ABF) material used in build-up substrates, but Ajinomoto is expanding its capacity in Japan.

Continuing growth. Drivers for flip chip continue to be performance, on-chip power distribution, pad-limited designs and form factor requirements. These trends are expected to continue and flip chip is expected to show a 31% CAGR through the end of the decade.

Continued shipments of CPU processors, DSPs, chipsets, graphics and field programmable gate arrays (FPGAs) will drive future growth. The expanding wireless communications market is expected to drive growth for a variety of flip-chip devices during 2006. Flip-chip substrates for wireless devices are not expected to be in short supply as there is plenty of capacity for less complex substrate structures. With sufficient added capacity in the future, there is hope for an improved situation in 2007.

References

1. EE Times, March 3, 2006

2. DigiTimes, Feb. 21, 2006

E. Jan Vardaman is president of TechSearch International, Austin, TX; jan@techsearchinc.com. Her column appears semimonthly.