Is TSMC going to smash IC Packaging Houses?

Two years ago TSMC announced its plans to expand into IC  packaging services.  It is unclear how much these plans succeeded up till now, but it definitely seems that TSMC is now in an excellent position to take a big bite into the advanced IC packaging market, enter into direct competition with ASE, AMKOR, SPIL and STATSChipPac.

Why now?

We are recently hearing from many companies and semiconductor professional that 3D and wafer level package solutions are gaining popularity. The interest in high-end packaging is growing, as they resolve real problems.

The main driver behind 3D packaging technologies is enabling a higher level integration and faster data crunching for the networking market. Wafer level packaging is driven by the need to support the small size requirements of the mobile market. Both markets are growing, and TSMC seems to be have great chances in capturing these high-end segments.

IC package types can be categorized along a continuum with small, low cost package solutions, like QFN package types on one end, and complex, expensive 3D packaging solutions on the other end. TSMC will compete on the expensive type of packages, which may better contribute to its revenue stream.

Since TSMC is handling wafer production, wafer level packaging is a natural extension. The line between wafer production and wafer bumping has become very thin, as can be seen in the screen capture below from TSMC’s site, offering several packaging services already.

Many customers will find it convenient having one company handle their wafer production and assembly services under one roof. Together with their testing services, TSMC will become a one stop shop for many new customers.

Packaging houses are obviously not thrilled with TSMC entry into their zone, as they will have difficulties competing with TSMC on technology and quality. Most assembly houses will probably compete on price and will be forced to lower their gross margin in order to win projects. Packaging houses may have to collaborate more closely with non-competing-foundries such as GLOBALFOUNDRIES, SMIC, SAMSUNG and others, who are not stepping (yet) on their toes.