Taiwan’s chip packaging and testing sector is among the biggest in the world, and including operations in China, performs back-end chip production for more companies than any other.
One of the keys to its future is advanced packaging, which is seen as vital to continuing the steady march of computing power, key to the era of high performance computing (HPC).
Revenue among Taiwan's Top 20 chip packaging and testing companies rose 18.8% to NT$874.2 billion (US$31.30 billion) in 2021, one of the strongest years ever in the semiconductor industry, as shortages and supply chain troubles forced companies around the world to pay more for the chips needed for products ranging from automobiles to PCs to graphics cards and game machines.
The higher payments sent profits rocketing. Total net profits for Taiwan’s Top 20 chip packaging and testing firms rose 91.10% to NT$116.44 billion (US$4.17 billion) from NT$60.93 billion a year earlier.
People familiar with the biggest chip maker in Taiwan, TSMC, understand the company’s main business is to manufacture semiconductors, to fabricate them in massive factories. Its business is known as front-end manufacturing. The back-end is chip testing and packaging.
When the chips are finished being etched on the silicon wafer, the next step is to test them to make sure they work (chip testing), and then to seal the good ones in protective packaging (chip packaging) so they can enjoy a long life. Semiconductors are so sensitive that even microscopic bits of dust can cause one to malfunction.
Each small square on this wafer is a semiconductor die, the heart of the chip, and must be packaged to keep it healthy, like the photo below.
The star of the industry is the world’s biggest chip packaging and testing company, ASE Technology Holding Inc., which reported revenue rose 19.5% last year to NT$569.997 billion (US$20.41 billion).
ASE is so big, its revenue dwarfs the rest of the chip packaging and testing industry in Taiwan, combined.
The next two biggest firms, in order, are Powertech Technology Inc. (PTI), with revenue of NT$83.79 billion (US$3.0 billion) last year, and King Yuan Electronics Corp. (KYEC) at NT$33.76 billion (US$1.21 billion).
Powertech is slightly different than ASE in that it specializes in memory chips, DRAM, NAND Flash, and more, while ASE works mainly on logic chips.
KYEC is also a specialist, in testing. Nearly all of the company’s revenue is for testing chips to make sure they work properly.
The fastest growing company in the sector in 2021, by revenue, was Lingsen Precision Industries, Ltd., up 41.7% to NT$7.73 billion.
The Top 20 list is limited to Taiwan Stock Exchange-listed companies. One of the firms, ShunSin Technology Holdings Ltd., is domiciled in Samoa and operates in China and Vietnam. Yet it listed in Taiwan because it’s part of the Foxconn Group, one of Taiwan’s largest conglomerates.
The Foxconn Group made it a mission to build its semiconductor expertise over the past year. Last year, it announced XSemi Corp., a partnership with Yageo Corp. to design analog and power semiconductors for the automotive and industrial sectors. It also purchased Belgium’s ArQana Technologies to combine it with its own AchernarTek Inc. and develop RF semiconductor components for autos and 5G. It also partnered with automaker Stellantis N.V. to design purpose-built semiconductors for Stellantis and 3rd party customers.
Yet ShunSin is the only company on this list to see revenue decline in 2021. It fell 11.94% to NT$4.27 billion.
Profitability was the highlight of 2021 for Taiwan’s chip packaging and testing industry. A number of companies saw net profits rise far higher than in the past several years.
ASE’s net profit rose 125.48% last year to NT$66.01 billion, leading the industry. Rival JMC Electronics Co. Ltd.’s net profit rose 118.71% to NT$324.4 million, while ChipMOS Technologies Inc.’s rose 113.69% to NT$5.06 billion.
In terms of gross profit margin (GM), companies that specialize in IC (integrated circuit) testing boards (load boards, probe cards) topped all others. Keystone Microtech Corp. topped rival Chunghwa Precision Test Tech Co. Ltd. (CHPT) by a smidge, with a GM of 54.36%, versus CHPT’s 54.03%.
Ardentec Corp. topped all pure packaging/test rivals with a GM of 37.15%, followed by Xintec Technology Corp. Ltd. at 33.74% and Tong Hsing Electronic Industries Ltd. at 33.30%
There are a number of other noteworthy statistics from Taiwan’s 2021 chip packaging and testing data. Hopefully what’s provided here, the revenue ranking, top growers, top net profit makers, and top gross margins, present a good overview of the sector.
Disclaimer: Blog posts and other information on TriOrient Investments' web site (3-orient.com) do not constitute investment advice. TriOrient Investments is a private company and does not accept outside funds for investment, nor does it divulge trading activity, nor provide recommendations of any kind to buy or sell any kind of investment product. This material is provided for informational purposes only. The views expressed regarding market, economic, industry or corporate trends are those of the authors and are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets, sectors or firms will perform as expected.
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