As we enter the second quarter, AI remains a focal point in the market. Nvidia, AMD, and Intel have successively released high-end chips, and with the gradual recovery of consumer electronics each quarter, the semiconductor supply chain's momentum is being propelled. Though downstream semiconductor packaging and testing (OSAT) companies have stated that the industry reached its low point in the first quarter, anticipating a gradual recovery in market conditions starting from the second quarter.
Starting from April, Taiwan's fabs are facing electricity price hikes, with an average increase of about 11%. The semiconductor industry is high-energy-consuming, mainly due to the high power consumption of its equipment, which needs to operate continuously. The market believes that the memory and testing sectors of the semiconductor industry will be more affected by the electricity price hikes. Taiwan's CMOS image sensor (CIS) packaging and testing company, King Yuan Electronics (KYEC), stated during its February investor conference that it will continue to monitor variables such as electricity price hikes or water price adjustments, and adjustments to the cost structure may be made.
In the second quarter, OSAT players have the opportunity to see continuous quarterly growth. KYEC is capitalizing on the industry trend of larger chip sizes and chiplet designs, coupled with the increasing demand for AI and HPC chip testing in the market, which has brought positive impacts on its recent operations. KYEC indicated that the second quarter will be better than the first quarter, and expects testing volumes to increase in the second half of the year, making the third and fourth quarters even better than the first half.
Looking ahead, the demand for AI products remains a topic worth noting in the OSAT supply chain. In 2023, the lack of advanced packaging capacity, especially in CoWoS packaging, was a major factor behind the shortage of HPC chips. Industry insiders revealed that TSMC's CoWoS capacity for the first half of 2025 has been fully booked, and it is estimated that the revenue proportion from TSMC's 3-nanometer process will further increase in 2025. Market analysts also point out that TSMC's outsourcing orders for Intel CPUs, which will begin production in 2024, are also worth paying attention to.
In addition, the two backend packaging and testing facilities previously acquired by ASE Technology Holding Co., Ltd. (ASE) from Infineon are located in the Philippines and South Korea, respectively. The transactions are expected to be completed in the second quarter. This acquisition will not only increase ASE's semiconductor production capacity but also meet Infineon's subsequent order demands.
In fact, Taiwanese OSAT giants including ASE, KYEC, and ChipMOS, among others, generally believe that the semiconductor outlook for the second half of 2024 remains positive. However, they emphasize the need for careful observation of the demand situation in the consumer electronics chip market, given the ongoing uncertainties in the macroeconomic environment.
