Samsung's big bet on substrates: aiming to be among the top three in the world

Amid the deafening sound of machinery in Busan, South Korea, a laser drills a hole half the width of a human hair into a thin sheet of copper-clad laminate (CCL). The sheet will later become a semiconductor package substrate, and this is where Samsung Electro-Mechanics is investing heavily—a series of investments totaling 1.9 trillion won ($1.4 billion) announced since December.

"In terms of projected future growth rates, the semiconductor package substrate market is expected to expand faster than the chip, foundry or chip packaging markets," said Ahn Jeong-hoon, head of the company's packaging solution support team. This is because as more and more large technology companies begin to design their own chips, this is bound to bring a surge in demand.

According to market tracker Gartner, the global chip industry will grow at a compound annual growth rate of 4% from 2022 to 2026. The chip packaging substrate market is expected to grow at a rate of 10% per year, from $11.3 billion in 2022 to $17 billion in 2026. The substrate package is the material that connects the semiconductor to the motherboard and protects the chip from the surrounding environment.

Samsung Electro-Mechanics is particularly interested in flip chip ball grid array (FC-BGA) substrates, a complex type of chip substrate designed to incorporate high-performance processors used in computers and servers.

Semiconductor substrates are made by building multiple thin circuit layers on both sides of the core material CCL. In order to handle more tasks, circuits are designed to be more complex, with thinner lines and more layers stacked on the core. In addition, in order to achieve electrical signal transmission between layers, a through hole or a small hole of about 50 nanometers is drilled between each layer.

Carving ultra-thin, complex circuits and drilling tiny holes in thin layers requires high precision. According to the company, Samsung Electro-Mechanics is able to carve circuit lines with a width of 3 nanometers, which is one-40th the width of a hair, and create vias with a diameter of 10 nanometers.

The larger the substrate and the more layers it has, the more difficult the production process becomes. That is why FC-BGA for servers is wider in size and requires higher precision in the manufacturing process than PCs. Samsung Electro-Mechanics plans to start mass production of FC-BGA for servers in the third quarter, a first for a Korean company.

FC-BGA for servers is about four times wider and has twice the number of layers than FC-BGA for PCs. Only a few companies are able to manufacture FC-BGA for servers, including Japan's Ibiden and Shinko Electric Industries. To enter new market segments and meet growing demand, the company announced that it will invest 1.9 trillion won (US$1.4 billion) to expand FC-BGA production at its three production plants in Busan, Sejong and Vietnam.

The electronic parts maker, which is 23.7 percent owned by Samsung Electronics, announced in June that it would invest 300 billion won to expand production of FC-BGA substrates at its manufacturing plants, after announcing in March that it would produce FC-BGAs at its Busan plant.

A separate investment of 1.3 trillion won was announced in December last year to produce FC-BGA substrates at its Vietnam manufacturing plant. The expanded capacity is expected to translate into revenue starting in 2024, according to the company.

The company's Busan plant will lead high-end FC-BGA business and R&D projects.

Samsung Electro-Mechanics, which began selling FC-BGA in 2002, produced a total of 703,000 square meters (7.567 million square feet) of chip substrates last year. The semiconductor substrate business accounted for about 17.4% of the company's 9.7 trillion won in revenue in 2021, up from 16.2% in 2019. The electronic components division, including multilayer ceramic capacitors, accounted for the largest share at 49.3%, followed by camera modules at 33.3%.

While the IT industry faces sluggish demand for electronics, demand for high-end chip substrates for servers and auto parts is likely to continue to increase, industry analysts said.

"While price increases driven by extreme supply bottlenecks are unlikely to last, growth in the FC-BGA market for high-performance computing will be significant as the chip industry is expected to expand in the server, storage, IT infrastructure and automotive parts sectors," Hi Investment & Securities analysts Go Eui-yong and Park Sang-wook said in a report published in June.

The fact that many large tech companies are designing and developing their own chips is also a positive for the industry as many of them need to outsource production, driving up market demand in the long run.

"As more and more large tech companies are designing their own chips, there are bigger business opportunities for us," said Hwang Chi-won, head of Samsung Electro-Mechanics' circuit board development team.

Samsung Electro-Mechanics' Korean competitor LG Innotek also announced in February that it would invest 413 billion won in the FC-BGA business for the first time.

★ Click [Read original text] at the end of the article to view the original link of this article!