Recently, the entire technology sector has undergone significant changes. The semiconductor industry chain, which has been continuously adjusted before, has recently received a series of positive signals. The subdivision of semiconductor packaging has officially ushered in an important turning point in the development of the industry.
As a supporting material track that is seriously underestimated by the market, semiconductor ceramic materials are expected to take advantage of the trend.
First, let’s look at the situation of the semiconductor packaging industry.
In terms of capacity utilization, global and domestic semiconductor packaging companies have previously faced problems such as weak demand for terminal consumer electronics and high industry inventories. Many packaging factories have proactively lowered their operating rates.
But in the second quarter of this year, the situation has completely changed. The overall capacity utilization rate of domestic mainstream packaging and testing companies has rebounded from less than 65% at the beginning of the year to more than 82% at the current stage. Leading companies are approaching 90% of full production, and this number has been rising steadily for many consecutive months.
The increase in capacity utilization means that downstream customer orders continue to pour in, terminal market demand is picking up, and the packaging industry bids farewell to the downward cycle and ushered in an upward turning point.
The order structure has also changed.
In the past, orders from domestic packaging and testing companies were mostly concentrated in the domestic market, but this year the proportion of orders from overseas customers has increased significantly, and the overseas business revenue of many leading packaging and testing manufacturers has increased by more than 20% month-on-month.
On the one hand, the global semiconductor industry chain is being restructured, with overseas chip design companies transferring packaging and testing orders to China; on the other hand, global demand for new energy vehicles, artificial intelligence hardware, and server chips has picked up, bringing a large number of incremental orders for high-end packaging business.
Low-end packaging orders have steadily recovered, and high-end advanced packaging orders have continued to increase in volume. Domestic and overseas markets have made simultaneous efforts, and the growth foundation of the packaging and testing industry has become more solid.
Advanced packaging technology is also accelerating.
As physical bottlenecks in the chip manufacturing process gradually emerge, advanced packaging technology has become the mainstream direction for major technology companies to break through the upper limit of performance. Advanced processes such as chiplets, 2.5D/3D packaging, and fan-out have been commercialized on a large scale.
Domestic leading packaging and testing companies have increased investment in research and development, and the revenue share of advanced packaging business has increased year by year.
Advanced packaging technology has high thresholds, high product added value, and gross profit margins much higher than ordinary packaging business. Its popularity has brought the packaging and testing track into a high-tech track with high added value.
After the inflection point of the semiconductor packaging industry is established, ceramic materials, which are the core supporting track, are about to explode.
Semiconductor packaging is to “wear a protective shell” for the chip to achieve circuit connectivity, and ceramic materials are irreplaceable core substrates in high-end packaging, power semiconductor packaging, and radio frequency chip packaging.
Compared with traditional plastic packaging substrates, ceramic materials have the advantages of high temperature resistance, strong insulation, excellent thermal conductivity, and stable chemical properties. They are indispensable in high-end fields such as automotive chips, power semiconductors, high-frequency radio frequency chips, and optical communication chips.
As the demand for terminal electronic products picks up, chip purchases increase, orders for semiconductor packaging companies surge, production capacity is full, and demand for various substrates and consumables required for packaging increases simultaneously. Ceramic materials are a necessity for high-end packaging, and market demand is rising sharply.
Moreover, the current industry trend is not only the resurgence of traditional packaging, but also the rapid rise of advanced packaging, power semiconductor packaging, and automotive electronic packaging. These high-end packaging fields are market segments with the largest consumption of ceramic materials and the highest technical thresholds. The upgrading of the industry structure has promoted the increase in the proportion of high-end ceramic products, opening up profit margins.
There are two main categories of ceramic materials used in the semiconductor field.
The first type is ceramic substrate, which is one of the most widely used ceramic products in the packaging process and undertakes the three major functions of thermal conduction, electrical conduction and insulation.
The increased volume of products such as new energy vehicles, photovoltaic inverters, energy storage equipment, and industrial inverters has led to an explosion in demand for power chips, which in turn has promoted a surge in demand for ceramic substrates. In addition, traditional consumer electronics and communication chip packaging have recovered, causing market demand to show a trend of “both volume and price rising”.
The other type is ceramic package shells, which are mainly used in high-end radio frequency chips, military semiconductors, optical module chips, sensor chips and other fields.
The boom in artificial intelligence, computing servers, and optical communications industries has led to an expansion in demand for radio frequency chips and optical chips, and a simultaneous increase in orders for ceramic casings.
The technical barriers to this type of high-end ceramic products are high. There are only a few domestic companies capable of producing them and entering the supply chain of leading packaging and testing companies. The leading companies have obvious advantages.
For a long time, the high-end semiconductor ceramic material market has been dominated by overseas companies, and domestic companies are highly dependent on imported products.
However, in recent years, with the guidance of industrial policies, support from downstream customers, and continuous investment in R&D by enterprises, domestic ceramic material companies have gradually achieved technological breakthroughs, and their product performance has moved closer to the international first-line level. Relying on localized services, cost advantages, and supply response speed advantages, they have entered the supply chain system of domestic mainstream packaging and testing companies and chip companies.
The track is in a double dividend period of accelerating domestic substitution and the explosion of downstream demand. The short-term inflection point of the packaging industry has brought phased market conditions. The long-term import substitution trend remains unchanged. Domestic related companies still have room for growth several times.
From the perspective of industrial chain rotation, after the valuations of popular tracks in the early stage of the semiconductor sector increased, funds began to migrate to lower segmented tracks.
Semiconductor packaging has been fully adjusted in the early stage and its valuation is low. Now that the industry has reached an inflection point, it has become the first choice for capital allocation. As an upstream consumable for packaging, ceramic materials have lower attention and stock price positions, and are a “low-level supplementary growth track.”
In terms of cyclical attributes, this recovery in semiconductor packaging and supporting ceramic materials is different from the past. In the past, it mainly relied on traditional consumer electronics inventory replenishment. However, this round of automotive electronics, computing hardware, and new energy-related semiconductors are the core increments. The demand is long-term incremental demand, and the industry’s growth attributes are enhanced.
Starting from the real industry, this market is supported by real industry data such as capacity utilization, overseas orders, and advanced packaging revenue share. The real industry chain is operating well and the market is confident.
In terms of related companies, Changdian Technology in the field of semiconductor packaging is a leading domestic packaging and testing company and a leading packaging and testing company in the world. Its business covers traditional and high-end advanced packaging, with rich overseas customer resources; Tongfu Microelectronics has a deep layout in the fields of high-end chip packaging and computing power chip packaging, and cooperates closely with global leading chip companies; Huatian Technology is the main local packaging and testing company, with a multi-field packaging business and a solid foundation in the domestic market.
In the semiconductor ceramic materials track, China Ceramics Materials is deployed in multiple subdivisions, with continued investment in research and development, and its products entering the supply chain of many domestic companies; China Ceramics Electronics is mainly engaged in electronic ceramic casings and semiconductor ceramic packaging shells, and is the core supplier of high-end ceramic packaging components in China; Sanhuan Group is a veteran enterprise in the ceramic field, with a rich category layout, large-scale production capacity, and constantly expanding its business in the semiconductor field.
For the future development of the industry, opportunities and challenges coexist.
In terms of opportunities, the demand side continues to recover. The stocking cycle of new consumer electronics products overlaps with the demand for semiconductors related to automotive electronics, new energy, and AI computing power, providing order support; advanced packaging continues to penetrate, and the demand for high-end ceramic materials grows simultaneously, opening up long-term growth space; domestic substitution is steadily advancing, releasing dividends.
In terms of challenges, industry competition is intensifying, and competition in the mid- to low-end fields may be fierce in the future; uncertainty exists in the global economy and overseas demand, which affects industry orders; technology research and development pressure is high, and high-end semiconductor ceramics and advanced packaging require long-term investment in research and development, and there is a risk of research and development failure and technology iterations that are less than expected.
In short, the semiconductor packaging and ceramic material tracks have short-term market opportunities, and long-term growth logic and domestic substitution support, but the journey forward will not be smooth.
