By Li Panpan
Lead frame products for semiconductor packaging are in severe shortage because of the lack of raw materials like copper, resulting in an unbalanced equipment supply. Chinese lead frame manufacturers are actively expanding production to seize market opportunities.
Huang Jianeng, Chairman of CWTC Global, a leading lead frame manufacturer in the Taiwan region, said the shortage will continue to 2023.
The semiconductor packaging and testing industry is growing, driven by digital transformation, automotive electronics, Industry 4.0, and the Internet of Things in recent years, leading to a supply shortage of upstream materials such as packaging substrates and lead frames. Although with increased investment, there is still a capacity gap because of the limited supply of equipment and more upstream materials.
The supply shortage of lead frame products started in 2021, driven by the vast market demand, Huang Jianeng said its largest client offered to pay six times the price, hoping to get the lead frame order initially scheduled for the end of the second quarter to be available in the early of the second quarter. “The shortage of lead frames will not only last this year, but even extends to the first half of 2023”, he added.
There are three kinds of packaging products. Lead frame products are traditional with mainstream technologies including SOT, SOP, QFN/DFN, and others, which are the most mature in the industry. Substrate products and wafer-level products generally belong to advanced packaging, with gross profit margin not as good as to lead frame products because of small production and limited sales volume.
Moreover, chips in severe shortages with price increases, including power devices, analog chips, MCUs, automotive chips, need traditional packaging with lead frame products instead of advanced packaging.
Wu Tianyu, Chief Operating Officer of ASE Group, a global leader in the packaging and testing industry, said in February that the company increased capital in the lead frame. Still, equipment delivery needs time, and supply and demand will not balance in 2023.
Industry insiders said the lead frame equipment needs to rely on Japanese suppliers, and the delivery time is not ideal.
In terms of materials, copper, as the primary raw material of lead frames, has seen its price continue to rise since 2020, bringing tremendous pressure to many lead frame suppliers.
The shortage of production capacity of special alloys also limits the production capacity of lead frames.
Huang said that today’s most significant difficulty is in obtaining raw materials, especially the copper alloy C7025.
Lead framed package QFN/DFN using etching processes has excellent heat dissipation and electrical conductivity. But its market demand has not increased because of its complicated processing technology and small production capacity.
“With the pandemic and transportation issues, the production capacity gap of etching processes is still as high as 25%, judging from the orders in the first half of the year,” Huang added.
Chinese supplier PW Alloy(博威合金) can independently produce C7025 high-conductivity copper alloy materials without relying on imports since 2015. It said it could mass produce the current mainstream lead frame high-end materials for its leading clients.
Although prices of lead frame products are increasing, downstream manufacturers will not be significantly affected, for there are many suppliers.
