Traditionally, packaging has been considered a low-end non-critical part of a semiconductor’s design. In the past, it wasn’t overly complicated and keeping it low-cost was key. This led to the growth of back-end packaging plants across Asia. Most large packaging companies are either Mainland Chinese, Taiwanese, or American, and have operations throughout Asia.
But moving towards ever smaller process nodes is increasingly expensive and difficult, so new ways are being developed to continue performance increases year-on-year. Since China has faced certain restrictions on the tools and equipment it can import it has even more reason to place extra focus on methods to improve chip performance without moving to ever smaller process nodes.
What is packaging?
Put simply, a package is a container that holds a semiconductor die. It protects the die, can help dissipate heat, and connects the chip to a printed circuit board (PCB) or other chips. Packaging work is often done through a separate vendor known as an outsourced semiconductor assembly and test (OSAT), although many leading foundries like TSMC are now expanding their packaging capabilities.
Advanced packaging comes in many flavours. It is a general term used to describe many new techniques: 2.5D/3D, fan-out wafer-level packaging, chip scale package, antenna-in-package, and system-in-package, among others. Often the goal is to be able to stack, for example, two 7nm chips to reach the performance of a 3nm chip.
How does China stack up?
When looking at the industry as a whole, Mainland China has around 38% of the global packaging market, the only part of the semiconductor value chain that it leads in, and three of the top ten companies globally. Taiwan has six companies, and the US has one. Mainland China’s leading company JCET has an 11.3% market share and locations in China, Singapore, and Korea. Other Chinese players include TFME and Huatian.
The world’s largest and second largest OSATs, Taiwan’s ASE and the US’s Amkor, are heavily involved in advanced packaging, but as mentioned previously, it isn’t just OSATs involved in packaging, foundries like Intel, TSMC, and Samsung are also more and more involved.
As mentioned, JCET is China’s largest packaging firm. Its HQ is in Wuxi, which has the most packaging plants out of any city in China, and is in Jiangsu Province, which has more than any other province. TFME’s HQ is also in this province, as are plants from major international players such as ASE and Amkor.
JCET’s focus for the past few years and into the future is on nothing but advanced packaging. It often emphasizes that China’s green energy development in areas like electric vehicles and solar power creates opportunities for advanced packaging, as it can be used to ensure the reliable performance of the wide-bandgap semiconductors used in these applications. As well as help improve signal transmission in wireless technologies such as 5G and WiFi.
On the government funding front, in the summer of 2023, the National Natural Science Foundation announced a plan to fund 10-20 small scale research projects focused on chiplets and advanced packaging; committing RMB 800,000 per project, about $110,000, and 7-10 larger projects, committing RMB 3,000,000 each. Resulting in a funding package of around $4m-$6.4m over the next four years. Perhaps this isn’t a lot of money compared to what we hear the Chinese government investing elsewhere. But this isn’t research that requires buying billions of dollars worth of semiconductor manufacturing equipment. These are focused research projects on key aspects of advanced packaging like 2.5D/3D technology, interconnect architecture and optical technologies, and bonding. The final goal of this research is to help improve chip performance by one to two times and create internationally recognized research teams. It is likely breakthroughs from such research can be moved into firms like JCET with relative ease given the strong connections between government, universities, and industry.
Such research is also important to China from a patent perspective. As of 2021, Korea, Taiwan, and the US all led Mainland China when it came to advanced packaging patent applications globally, but China is not standing still, and is now ahead of Japan by quite some margin. It does still have work to do though as even within Mainland China, Taiwanese firms hold more patents than Mainland Chinese, 34% to 23%, and even US firms have 16%.
Despite this industry facing no US restrictions yet, Chinese design firms are still concerned. It has been reported that Chinese design firms are looking to use packaging plants in Southeast Asia, such as ASE’s plant in Malaysia out of concern for future restrictions Chinese packaging suppliers may face. Chinese packaging companies should do more to set up and invest in plants in Southeast Asia as part of their strategy. There will be little use in having the latest advanced packaging lines if even Chinese design firms fear using them.
Conclusions
While I find it unlikely Chinese OSATs and foundries will be cut off from imported equipment as it is much easier to replace locally than front-end lithography equipment. It is still telling that the very thought of this as a possibility has led to Chinese design firms choosing factories based in Malaysia rather than back home in China. As SEA nations fight for semiconductor investment from foreign firms this could be something they can play on. They are attracting not just investment from the likes of Samsung, Intel, and Amkor, but also Chinese packaging firms.
With regard to advanced packaging itself, I see no reason why China cannot be on a par with the rest of the world, however, does being on a par really help? Advanced packaging can, in some cases, get more performance from a chip without having to go to a lower process node, but if your competitors have access to both the latest process nodes and advanced packaging, then one is still playing catch up. Advanced packaging helps Mainland China stay within touching distance, and does provide it with part of the semiconductor value chain where it can say it is at the forefront with peers in Taiwan and the US, but it is not going to provide China with a way out of the lithography bind it finds itself in. Maybe that isn’t the goal though. Sure, as AI applications get ever more taxing it helps to have ever more powerful chips, but if one can achieve the same as your competitors albeit by taking up more physical area and more power, does that matter from a national security perspective as long as the result is the same?