Is SATS revenue declining or relocating?

What’s that you say? The SATS sector is set for further declines? Really? Or is that yet another negative perspective being expressed by the trade press? Ok, one publication’s headline reporting Gartner’s latest findings grabbed my attention, while I experienced that “oh no here we go again” feeling in the pit of my stomach. Further reading on other industry sites unearthed a more balanced picture. Yes – numbers are down due to the global economy. Nothing earth shattering there. But the solid numbers reported past revenue from 2008 backwards, and anything going forward is purely speculative.

Let’s talk about what’s really happening. Although the SATS sector reported losses last year, they still outpaced the overall semiconductor industry. In fact, several of the OSATS providers – STATS ChipPAC, Unisem, and Powertech all reported growth over 2007. The expected 40% drop in back-end semiconductor manufacturing capacity is reportedly expected at IDMS not the OSATS providers. That number has more to do with IDMS and OEMS adopting an outsource model and shifting the work to packaging houses. As a result, Gartner predicts a 60% capacity increase for the OSATS in the same time frame. In fact, ASE recently reported being awarded a sizeable contract by Intel. One big enough, in fact, that it is likely to boost ASE’s revenues past the expected level. The contract is reportedly due to Intel’s closing of in-house packaging and test facilities.

According to an article I read in Taiwan Economic News, other IDMS such as NXP Semiconductor, Renesas, and Toshiba are expected to follow suit; and other OSATS will benefit. So rather than an overall loss in revenue wouldn’t this be more appropriately termed a shift in revenue? And don’t all parties ultimately benefit as resources are conserved in one place as they are expanded in others? I think they call this restructuring, and at the end of the day, the industry as a whole might just benefit.

So how does this relate to 3D technologies? Clearly, OSATS play an integral part in market adoption of 3D IC integration technologies. I suggest that volume production of 3D WLP and 3D IC stacking using TSVs could be the missing variable to tip the scales in the favor of OSATS who invest in those production capabilities. When numbers are reported next year, will the companies who took on the challenge be the ones reporting growth? That’s what I want to know. – F.v.T.