Semiconductor demand continues to be strong and packaging and testing performance has reached its highest peak in history

As the production of upstream semiconductor chips continues to increase, the downstream packaging and testing production lines are also fully loaded. In addition, the recent capacity expansion has been limited and prices have also risen. Packaging and testing companies expect that fourth-quarter revenue will reach its highest peak this year. Companies including ASE Technology Holding (3711-TW), King Yuan Electronics (2449-TW), Sigurd (6257-TW), and Lingsheng (2369-TW) are all expected to set historical highs.

Despite the recent noise in the semiconductor industry, with the strong demand for chips for 5G mobile phones, network communication devices, servers, and automobiles, wafer foundry capacity continues to be fully loaded, especially with the arrival of Apple's new phones in the second half of the year, and major brands starting to prepare for the year-end sales peak season, all of which have filled the packaging and testing industry with orders, and most of them are looking forward to the first half of next year.

In response to strong customer demand, the packaging and testing industry has also comprehensively increased capital expenditures and expanded new production capacity. Especially now that not only have equipment delivery times been extended and packaging materials are also in short supply, capacity expansion is relatively limited, and overall prices are more likely to rise than to fall. In the second half of the year, industry players will again raise prices for some products.

ASE Technology Holding is optimistic. Not only is the demand for wire bonding packaging strong, but orders for flip chip packaging, wafer-level packaging, etc. are also hot. It is expected that revenue in the second half of the year will hit new highs quarter by quarter. In order to ensure production capacity, customers have signed long-term contracts one after another, and the supply-demand imbalance will continue until 2022.

KYEC and Siliconware Precision Industry have also significantly increased capital expenditures this year, mainly benefiting from chip specification upgrades and increased penetration rates. The testing schedule has been significantly lengthened, and the active chartering of flights by small and medium-sized customers and an increase in outsourcing orders from IDM factories have all exacerbated the increasingly tight testing capacity.

Lingsheng began building new production capacity at the end of last year and also started a new round of expansion plans in September. The overall expansion is about the same as in the first half of the year. The full-year capital expenditure is estimated to grow by multiples compared to last year. With the opening of new production capacity, this year's revenue is estimated to hit new highs quarter by quarter, and full-year profits are expected to make a big leap forward.