Gartner Dataquest reports semiconductor packaging and assembly market to begin upturn in 2003

JULY 11---The worldwide semiconductor packaging and assembly market is showing signs of a recovery, although the industry will not return to positive revenue growth until 2003, according to Dataquest Inc., a unit of Gartner Inc. (San Jose, CA; www.gartner.com). In 2001, worldwide semiconductor packaging and assembly revenue totaled $2.981 billion, a 56% decline from 2000. In 2002, the market will continue to slide, but not as badly as the previous year. For 2002, revenue is projected to reach $2.715 billion, a 9% decline from 2001. Gartner Dataquest analyst said the industry will rebound in 2003 with revenue of $4.191 billion, a 54% increase from 2002.

"In the second half of 2002, the demand for power and discrete packaging will grow," said Jim Walker, principal analyst for Gartner Dataquest's semiconductor research group. "Portable devices are still growing and power management is a key issue. Packages must be developed and manufactured to meet this ongoing market demand and challenge."

Consolidation of semiconductor assembly and test service (SATS) companies will continue throughout 2002 and into 2003. Excess capacity and lack of available capital will make it difficult for second- and third-tier SATS companies to survive. In addition, Gartner Dataquest analysts said the Japanese will accelerate their adoption of the outsourcing model, which began in 2001

"As 2002 draws to a close, the industry will finally begin to gain momentum. IDMs and OEMs will begin outsourcing again, which may grow the SATS industry more than 10% from the low levels seen in 2001," said Walker.

Gartner Dataquest says that even though the industry slump has not abated, new package-development and assembly technologies continue to be developed. Array packaging (CSP, flip chip, and BGA), system-in-package (SIP), and stacked (3-D) packaging are growing in usage and are receiving the majority of new package development efforts. "The growth of the multichip system-in-a-package concept as a lower-cost approach to the system on a chip continued to outpace the industry growth rate in the first half of 2002," Walker said. "The cost saving and faster time-to-market benefits of a SIP became evident to many customers as cost reductions are squeezed out in 2002."

Gartner Dataquest analysts will provide additional analysis on the semiconductor packaging and assembly market during the Gartner Dataquest breakfast briefing "Will the Back-End Become a Squeeze Play," to be held July 17 at Gartner Dataquest's offices in San Jose. This briefing will explore the issues, risks and opportunities of the semiconductor packaging and assembly industry in 2002. For more information or to register for the briefing, please contact Becky Tonnesen at 408-468-8287 or e-mail: [email protected].

Gartner Dataquest's semiconductor manufacturing research group will also host a briefing during SEMICON/West 2002 titled "Rearranging the Industry's Building Blocks - No Child's Play." This event will be held at the Four Seasons San Francisco on July 24. Gartner Dataquest analysts will provide a cohesive picture of the changes and requirements in the equipment and materials industry that will affect the industry's future. More information on this event is available at www.gartner.com/2_events/local_briefings/2002/july/wsf893.jsp.