Backend firms see brisk order visibility for automotive chips

Julian Ho, Taipei; Eifeh Strom, DIGITIMES Asia 0


Backend packaging and testing houses continue to see stable growth in orders for automotive chips despite weakness in orders for consumer electronics chips, according to industry sources. Although demand related to consumer electronics ICs is expected to be weak in the third quarter, recovery could begin as early as fourth-quarter 2022 or first-quarter 2023.

Semiconductor prospects in the third quarter remain uncertain, with IC packaging and testing vendors significantly reducing the volume of power MOSFETs, display driver ICs (DDI), entry-level and mid-range microcontroller units (MCU), and power management ICs (PMIC). The peak season in the second half is expected to be weak.

Automotive and network communications ICs remain relatively stable. Additionally, peripheral netcom and power-related chips in Apple's supply chain are expected to enjoy a basic peak season.

Sources said fewer long-term agreements (LTA) have been signed for consumer-type chips, with most for automotive and high-performance computing (HPC). Leading IDMs are more willing to sign contracts with outsourced semiconductor assembly and testing (OSAT) vendors. This also includes burn-in test furnaces for high-end HPC, netcom, and automotive ICs, as well as OLED DDI test machines.

ASE holds a large number of automotive MCU packaging and testing orders released by IDMs. King Yuan Electronics (KYEC), Ardentec, Sigurd Microelectronics, and Powertech Technology (PTI) subsidiary TeraPower Technology all have automotive chip backend orders through the end of the year.

Sigurd recorded a single-month performance high in June. Netcom and automotive chips increased for Sigurd, while memory and consumer chip remained flat, and mobile phones, PC, and graphics cards fell.

The scale of automotive chips is still relatively small compared with consumer electronics chips, accounting for 7-8% of ASE Group's business. Netcom and HPC customers account for a decent portion, which can temporarily help stabilize operations. More pressure is expected to be put on the packaging and testing utilization rates for netcom consumer electronics chips. However, some packaging substrates, such as lead frames, have been transferred from the consumer electronics sector to automotive IC orders. Lead frames are still in short supply in certain fields.

Backend vendors and materials suppliers with a higher proportion of IDM customers will be the ones to witness growth in the third quarter. This includes ASE Group and Ardentec, mainly obtaining outsourced orders from Texas Instruments (TI), Infineon Technologies, Onsemi, NXP Semiconductors, and Renesas Electronics, industry sources said.

The first wave of pull-in orders from Apple's supply chain for seasonal new products remains predictable. Although growth will not be explosive, it is less uncertain than for Androids. ASE Group is expected to benefit from Apple in the third quarter with system-in-package (SiP) for wireless communications chips, PMICs, and wearable device core chips, the sources said.

While there is still a base for consumer electronics and IT products, the destocking of inventory will take time. Supply shortages over the last two years caused foundry prices to rise, resulting in chip makers themselves adopting price increase strategies to deal with increased cost structures. These short-term benefits are likely to end in the second half.