Analysts are projecting strong growth in advanced packaging, with a compound annual growth rate (CAGR) through 2026 approaching 7% across the segment; much higher for certain high-end technologies, including 3D stacking, embedded die, and fan-out. Outsourced assembly and test (OSAT) firms, which package finished die manufactured by independent device manufacturers (IDM) and foundries, will be challenged by the complexity of the advanced packaging processes and will face stiff competition, in many cases from their own customers. If OSATS are to thrive, or perhaps just survive, they will need to embrace smarter manufacturing approaches.
Gathering process data is key
The historical division between front-end device manufacturing and back-end packaging/testing is the result of their vastly different cost structures and process complexity. The relative simplicity of the back-end process led OSATs to compete primarily on price, seeking always to minimize costs and maximize volume. Simple processes were simple to control. The acquisition, storage, and analysis of process data were costs to be avoided wherever possible. Advanced packaging processes have introduced a host of new variables that must be controlled to ensure process yield and product reliability. Process data is no longer a cost to be avoided but should be considered an essential asset to be leveraged to maximize profitability.
Meanwhile, as they accommodate increasingly complex processes, OSATs confront encroachment in their markets by sophisticated competitors who may also be their customers — IDMs and foundries who have outsourced a significant portion of their production to OSATs but have also maintained their own internal back-end capabilities. Advanced packaging processes have been described as the migration of front-end-like processes to traditional back-end applications. With this evolution, the advantage device manufacturers once had by outsourcing assembly and test to avoid diluting their expertise with low-value processes has greatly diminished. More importantly, these customers-turned-competitors are already comfortable with managing complex processes — they wrote the book. In addition to IDMs and foundries, substrate and printed circuit board (PCB) suppliers, electronic manufacturing services (EMS), original design manufacturers (ODM), and others see the opportunity presented by the significant growth forecasted for advanced packaging.
Smart manufacturing needs broad, deep data
Data is the life blood of smarter manufacturing — acquiring it, storing it, organizing it, analyzing it, sharing it. Without leveraging it you are not just blind in the competitive environment of semiconductor manufacturing, you will probably not survive. OSATs are not new to data collection and management. After all, testing is part of their name. But test data is product/function focused. In its simplest form, it is go/no go. Functional testing may go beyond that, to measure how well it works, if for no other reason than to identify the best devices and sell them for premium prices. Smarter manufacturing requires data on a whole new scale — data that is both deep and broad.
Deep data measures all aspects of the manufacturing process. It measures feature sizes and shapes, but it also measures equipment performance, tracks maintenance operations and consumables, and much more. It provides the basis for correlating differences in product performance with events and variables in the manufacturing process. As processes become more complex, the number of variables quickly exceeds any human’s ability to monitor and extract actionable information. Smart manufacturing includes sophisticated analytical techniques, like data mining and artificial intelligence, that can quickly find correlations that would otherwise be invisible. What batch of chemicals was that device exposed to? On what tool? When? Was there a tool failure or error condition? Combining product data with tool data yields true process data.
Broad data provides visibility of the lifecycle, from end-to-end throughout the entire supply chain, from wafer manufacturing to device fabrication, packaging and testing, warehousing and distribution, and even into final disposition and use. Clearly, OSATs are only one link in this chain, but they are a critical link. They should ensure their data is captured and structured so that it can be leveraged in a variety of ways in the future. Whether that be sharing subsets of data to optimize efficiency across the entire value chain or to take advantage of cloud-enabled services, OSATs who do this will be more competitive than their conservative counterparts.
The OSATs model needs smart manufacturing
Will history repeat itself? Probably. If you look at the complexity and dimensions of the structures being created by cutting edge advanced packaging processes today, they are remarkably similar to what device manufacturers were doing 30 years ago. Device manufacturers have been through this process evolution and have learned the value of process data. They know that the cost of data pales in comparison to the costs of slower yield ramps, yield-robbing process excursions, and the redirection of human resources to solve problems. They are the competition.
The degree to which OSATs continue as a separate segment is open to question. 30 years ago, there were dozens of major device manufacturers. Today the market has consolidated. There are three or four in the first tier, another half dozen or so in the second tier, and numerous small niche providers. A similar consolidation is likely among OSATs. The question is, will they remain independent or be subsumed by IDMs and foundries. The answer will be determined in large part by the choices OSATs make as they confront the inevitable digital transformation being spurred by Industry 4.0, big data plays, and market consolidation.
Editor’s note: this post first appeared in the 2021 Yearbook.
