As Wafer Fab Capacity Grows, Where is the New Packaging Capacity?

The semiconductor industry is going through a major change. With the growing demand for faster and more efficient electronics, companies are increasing their wafer production to keep up. However, a big question is emerging: where will the new packaging capacity come from to support this growth? Advanced packaging technologies are essential for connecting wafer production to the final semiconductor products. The industry's future depends on these developments. This article looks at the current state of advanced packaging, focusing on major players like Intel, TSMC, and Samsung, and discusses the challenges and opportunities ahead.

The Expanding Frontier of Wafer Fabrication & Advance Packaging

The semiconductor industry is on a trajectory of rapid growth, driven by the relentless pursuit of smaller, faster, and more powerful chips. Wafer fabrication is expanding to keep pace with these demands. Companies are investing billions into new fabs, advancing manufacturing processes, and pushing the boundaries of technology.

In recent years, major players like TSMC (Taiwan Semiconductor Manufacturing Company) and Samsung have made significant strides in advancing their fabrication capabilities. TSMC has consistently led the charge with its cutting-edge 5nm and 3nm process nodes, while Samsung has been at the forefront with its 3nm GAA (Gate-All-Around) technology. These innovations are crucial in enabling the next generation of high-performance computing, AI, and mobile devices.

However, while wafer fabrication is scaling up rapidly, a critical aspect of semiconductor manufacturing often remains under the spotlight: advanced packaging.

Intel, a major player in the semiconductor industry, is heavily investing in advanced packaging technologies to match its expanding wafer production. One of its key projects is building a cutting-edge packaging facility in Penang, Malaysia.

Robin Martin, Intel's Vice President, recently shared that this new facility will become Intel's main center for advanced 3D packaging. The Penang plant is part of Intel's larger plan to boost its 2.5D/3D packaging capabilities, with a focus on 3D Foveros technology.

Intel plans to significantly increase its 3D Foveros production capacity, aiming to quadruple it by 2025. This boost in capacity will support Intel's growing range of advanced semiconductor products, meeting the rising demand for high-performance computing and AI applications.

Two years ago, Intel announced a $3.5 billion investment to expand its advanced packaging capacity in New Mexico, which is still in progress. The Penang facility will complement this expansion, along with other key sites in Oregon, USA, and New Mexico.

Understanding Wafer Fabrication and Advanced Packaging

What Is Wafer Fabrication?

Wafer fabrication, or wafer fab, is a key stage in making semiconductors. It starts with a pure silicon crystal sliced into thin wafers. The process includes growing a silicon dioxide layer for insulation, applying and exposing the photoresist to define circuit patterns, etching the silicon, doping to alter electrical properties, depositing thin films for components, and adding metal layers for connections. After fabrication, wafers are tested and prepared for packaging.

What Is Advanced Packaging?

Advanced packaging is the process of enclosing and connecting semiconductor chips after they've been made. It ensures that chips work properly in their final products. 2.5D Packaging places multiple chips side-by-side on a base layer with high-density links, enhancing communication. 3D Packaging stacks chips vertically, allowing for more compact and efficient designs. Fan-Out Packaging extends the chip's connection points beyond its edges, simplifying signal management. Chip-on-Wafer-on-Substrate (CoWoS) mounts chips on a wafer and then onto a base layer, enabling high-speed connections. Embedded Multi-Die Interconnect Bridge (EMIB) uses a small bridge to connect chips within a single package, improving performance and reducing delays. System-in-Package (SiP) combines multiple functions and chips into one package, making complex systems more compact and efficient.

The Role of Advanced Packaging

Advanced packaging technologies are vital in the semiconductor supply chain. They serve as the bridge between the raw silicon wafers produced during fabrication and the final, functional semiconductor devices that end up in consumer electronics. These technologies not only enhance the performance and functionality of chips but also contribute to their miniaturization and cost-effectiveness. 

Despite its importance, advanced packaging often doesn't receive the same level of attention as wafer fabrication. As the demand for more advanced chips grows, so does the need for cutting-edge packaging solutions that can support this growth.

The Competitive Landscape of Advanced Packaging

As wafer fabrication capacities increase, the competition in advanced packaging is intensifying. Key players in the semiconductor industry have to develop and refine their packaging technologies to gain a competitive edge.

TSMC, a leader in semiconductor manufacturing, offers a range of advanced packaging solutions, including its InFo (Integrated Fan-Out), CoWoS (Chip-on-Wafer-on-Substrate), and SoC (System-on-Chips) technologies. These solutions are designed to address different needs, from high-density interconnects to improved thermal management and signal integrity.

Samsung, another major player, is advancing its own packaging technologies with innovations such as I-cube and X-Cube. Samsung's I-cube technology focuses on stacking memory and logic chips to enhance performance and efficiency, while X-Cube aims to improve interconnect density and reduce form factor.

Global Foundries, a prominent semiconductor foundry, is advancing its packaging solutions with its Embedded Die Packaging technology. This approach integrates smaller chips into larger substrates to improve performance and reduce form factors, supporting a variety of applications from consumer electronics to high-performance computing.

India Semiconductor Mission is a government-led initiative to develop a semiconductor manufacturing ecosystem in India. This mission includes investments in advanced packaging technologies and aims to attract global players while bolstering domestic production capabilities. The goal is to position India as a major player in the global semiconductor supply chain.

Procurement Challenges in Advanced Packaging

Even with progress in advanced packaging technologies, some challenges remain. One major issue is scaling up production to match the growing demands of the semiconductor industry. As wafer fabrication capacities increase, there's a critical need for advancements in packaging technologies to prevent supply chain bottlenecks.

Component Shortages and Lead Times: The semiconductor industry has been grappling with significant component shortages over the past few years, driven by the rapid increase in demand for chips and the limited supply of critical components. Buyers face the challenge of securing the necessary materials for Foveros packaging, such as TSVs and micro-bumps, which are in high demand and short supply. Long lead times for these components can delay production and impact customer demands.

For instance, sourcing TSVs, which are used to create vertical electrical connections between stacked dies in Intel's Foveros packaging, is a complex process. The global supply of fabrication capacity to produce TSVs is limited, and only a few suppliers are capable of producing them to the quality standards required. As a result, procurement teams must develop long-term relationships with suppliers, negotiate favorable contracts, and ensure that they have access to sufficient quantities of these critical components.

Quality Control and Compliance: Advanced packaging technologies require the use of highly specialized materials and components, which must meet strict quality standards. Procurement teams must ensure that suppliers adhere to these standards and comply with requirements for sustainability, environmental regulations, and ethical sourcing. Any failure to meet quality standards can result in costly production delays and rework.

Supplier Collaboration and Risk Mitigation: Given the complexity of advanced packaging, procurement professionals must work closely with suppliers to manage risks and ensure a steady supply of materials. For example, buyers can collaborate with suppliers to develop joint risk mitigation strategies, such as dual sourcing, inventory buffering, and supplier diversification. These strategies help to reduce the impact of supply chain disruptions and ensure that a company can meet its production targets.

Buyer's Role in Ensuring Supply Chain Continuity

Consider a buyer working within Intel's procurement team who is responsible for sourcing materials for the new Penang facility. This buyer must navigate the complexities of securing TSVs and micro-bumps from global suppliers, each of whom operates within different regional constraints and market dynamics. The buyer might encounter a supplier in Japan that is producing TSVs but is facing export restrictions or delays due to trade tensions. To mitigate this, the buyer would need to engage alternative suppliers, perhaps in South Korea or Europe, while negotiating long-term contracts to ensure consistent pricing and availability.

Additionally, the buyer must manage logistics, particularly in a region like Southeast Asia, where natural disasters such as typhoons can disrupt transportation routes. They would also need to maintain a delicate balance of maintaining inventory levels without overstocking and driving up holding costs.

Conclusion

The semiconductor industry is undergoing a period of rapid transformation, with wafer fabrication capacities expanding to meet the demands of increasingly advanced electronic devices. However, as wafer fab capacity grows, the importance of advanced packaging technologies becomes more pronounced. Advanced packaging serves as a crucial link between wafer fabrication and the final semiconductor product, and its role in the industry cannot be overstated.

Leading companies like Intel, TSMC, and Samsung are making substantial investments in advanced packaging to support this growth.

While challenges remain, the opportunities in advanced packaging are substantial. The industry's continued investment in research and development, coupled with innovations in materials and manufacturing processes, will play a crucial role in shaping the future of semiconductor technology.

As we look ahead, it is clear that the success of the semiconductor industry will depend not only on advancements in wafer fabrication but also on the ability to scale and innovate in advanced packaging. The integration of these technologies will drive the development of more powerful, efficient, and versatile semiconductor devices, ultimately shaping the future of electronics and technology.