The global semiconductor packaging and testing industry is likely to see less than 5% growth sequentially in the third quarter of 2011, affected by the transition from gold to copper wire bonding, falling contract prices and less-optimistic market conditions, according to industry sources.
The surging gold price has spurred the adoption of copper wire bonding. However, as the cost of copper wire packaging is 15-20% cheaper than gold wire, contract quotes have become unfavorable for dedicated packaging and testing houses including major players Advanced Semiconductor Engineering (ASE), Siliconware Precision Industries (SPIL) and STATS ChipPAC, the sources observed.
But amid brisk demand for copper wire bonding, which was originally used to package low pin number products mainly but has been applied to mid- to high-level packaging, backend service providers have stepped up the expansion of their capacity. The ramp-up is inevitably putting downward pressure on the prices offered by suppliers, the sources said.
Average contract prices for overall IC packaging and testing services will likely be dragged down by 8-10% in 2011 as a result of the migration from gold wire bonding to "cheaper" copper, the sources added.
The weakening end-market demand amid the present uncertain macroeconomic environment is another factor contributing to the anticipated slow growth of the global packaging and testing industry in the third quarter of 2011, the sources indicated.
Industry leader ASE has forecast revenues will grow 3-6% sequentially in the third quarter, while Amkor projects a 5-12% increase. SPIL expects a 2-6% sequential rise in third-quarter revenues, and STATS ChipPAC predicts up to 6% sales growth on quarter.