Yole: Mainland China's memory chip manufacturers have greatly promoted the prosperity of local packaging and testing plants

Yole's recent research report pointed out that the rise of memory chips in the Chinese mainland market, the development of flip-chip DRAM and 3D stacking technology will bring significant benefits to local packaging manufacturers.

Data shows that in terms of market share, the overall storage packaging market will grow at a compound annual growth rate of 7% from 2020 to 2026, reaching US$19.8 billion in 2026.

DRAM packaging will be the most important memory packaging area in 2026, accounting for 70% of the market share.

In the long term, NAND and DRAM packaging revenues will grow at significant CAGRs between 2020 and 2026, at 4% and 9%, respectively.

From a technical perspective, after wirebond, flip chip will occupy the largest share of the storage packaging market in 2026, at 34%, mainly used for DRAM packaging.

Revenue from standard wafer-level chip-scale packaging (WLCSP) is expected to grow at a CAGR of 14% during 2020-2026, but its market share in value terms will only be around 1% by 2026.

Wirebond discrete and multi-chip will dominate the memory packaging market in 2026, followed by flip chip. Wirebond is the most common packaging technology for NAND and mobile DRAM.

As Moore's Law continues to slow and new advanced packaging technologies emerge, back-end processing becomes increasingly important.

From the supply chain perspective, approximately 68% of storage packaging revenue came from IDM players in 2020. The remaining 32% was generated by OSAT.

Memory packaging in mainland China is a key business opportunity for OSAT manufacturers.

Yangtze Memory Technologies (NAND) and Changxin Memory Technologies (DRAM), two emerging memory manufacturers in mainland China, outsource all packaging to OSAT manufacturers.

Storage Packaging Market Revenue Classification 2020-2026: IDM vs OSAT

Orange represents IDM, yellow represents OSAT manufacturers that provide packaging for non-mainland China IDM manufacturers, and green represents OSAT manufacturers that provide packaging for mainland China IDM manufacturers.

"Storage is a key market in the data-centric modern world, driven by important megatrends such as mobile, cloud computing, artificial intelligence and the Internet of Things," asserts Simone Bertolazzi, an analyst at Yole. "All of these are driving the so-called 'data generation explosion' and are shaping a strong growth in storage demand in the coming years."

NAND and DRAM are the main storage technologies, accounting for about 96% of the overall independent storage market revenue.

Walt Coon, vice president of NAND and memory research at Yole’s Semiconductor and Software division, explained, “Between 2020 and 2026, NAND and DRAM revenues are expected to grow at a CAGR of 9% and 15%, respectively, reaching $93 billion and $155 billion in 2026.”

The memory packaging market follows the same trends as the standalone memory market and will therefore benefit from strong long-term growth in memory demand as well as continued fab capacity expansion.

Simone Bertolazzi commented: “We expect the total number of wafers used for memory chips to grow from 35.5 million in 2020 to 50 million in 2026, a CAGR of 6% between 2020 and 2026, while the number of memory packages will grow at a CAGR of 5% over the same period.”

In 2020, the overall storage packaging market size was US$13.1 billion, equivalent to about 10% of the independent storage market.

Mike Howard, VP DRAM and Memory research at Yole’s Semiconductor and Software division, added: “DRAM was the leading memory technology in 2020 in terms of packaging revenue, with a 63% share, while wire bonding was the dominant packaging method, mainly used in mobile applications.”

Storage packaging market revenue changes from 2020 to 2026

Unlike the independent memory market, which is characterized by large price fluctuations, the memory packaging market is relatively stable because most of the business is conducted within IDM manufacturers. Yole estimates that in 2020, approximately 68% of memory packaging revenue will come from IDM manufacturers, and the remaining 32% will come from OSAT manufacturers.

Mainland China's OSAT manufacturers usher in new opportunities

China's emerging storage IDMs, Yangtze Memory Technologies and Changxin Memory Technologies, are rapidly increasing their NAND and DRAM wafer production, respectively. These two companies do not have complete internal packaging capabilities and must outsource all packaging to OSATs. This is a unique business opportunity for OSATs, especially those in China.

According to Yole's report on memory packaging, the revenue contribution of memory suppliers from mainland China to OSAT manufacturers can grow from less than $100 million in 2020 to about $1.1 billion in 2026. This is equivalent to a compound annual growth rate of 55% from 2020 to 2026.

OSAT manufacturers in mainland China will benefit from this opportunity first. Three major players in the OSAT field in mainland China, Changdian Technology, Tongfu Microelectronics and Huatian Technology, are preparing to join the competition.

Memory packaging methods evolve from leadframes to advanced packaging based on TSV and hybrid bonding

It is also important to note that there are currently two opposing trends affecting the memory packaging business: on the one hand, increased memory production in mainland China is driving the growth of OSAT revenues; on the other hand, IDMs are increasing their internal back-end capabilities, especially for advanced packaging processes, to reduce outsourcing to OSATs.