TSMC will enter the FanOut business – Yole Développement’s point of view

The fact that TSMC is interested in advanced packaging  isn’t “new news” – In fact, over the last few years TSMC has significantly invested in flip-chip copper pillar capacities (for more details, Yole Développement’s report on “2015 Flip Chip Business Update” will be available end of September, stay tuned!) and 3DIC stacking for CMOS image sensors and logic devices.

What is new is TSMC’s interest in supporting the FanOut packaging platform for volume production, using its own proprietary InFO technology. Yole Développement (Yole) has confirmed that TSMC will begin volume production in 2016, and it’s likely that the Apple A10 will be its first customer – one of what will be a wave of new customers, with Qualcomm, Mediatek, and other big companies eyeing this field.

Our estimation is that TSMC’s 2016 business will be at least a few hundred million dollars, giving a significant boost to FanOut sales. Linked to this estimate, Yole’s advanced packaging team has updated its FanOut market forecast (see graph below) in order to account for the potential sales increase starting in 2016. A complete analysis of the FanOut packaging platform’s evolution is available in the Fan-Out and Embedded Die: Technologies & Market Trends report published by Yole several months ago.


It’s clear that TSMC is making these technological investments in order to have a complete offer for Application processor (AP), MCU, and GPU manufacturers, from front-end manufacturing to full back-end processing. TSMC will gain a significant advantage over Samsung and GLOBALFOUNDRIES if it’s able to capture and retain Apple, Qualcomm, and Mediatek’s business in-house.
The sales forecast for FanOut at TSMC will not hugely impact the company, but the effect of TSMC’s involvement in FanOut, and its ability to attract big customers, will dramatically impact another part of the industry:  OSAT and substrate makers. Substrate makers will be most impacted, and the reason is simple:  inFO means no substrate, and TSMC providing a complete service to Apple means that OSATs will lose business. High-end packaging and advanced substrate activities are moving away from their existing providers: Shinko, Ibiden, Unimicron, etc. – and advanced substrates will be heavily affected in 2016 – 2017 when one of their largest profit centers disappears. The impact on OSATs is clear, but TSMC customers will likely continue requesting second and third sources, meaning OSATs will be able to partially limit their sales losses.

This TSMC development is another example of the importance of middle-end foundry services that are assembled step by step in order to use semiconductor front-end processes to provide back-end services. TSMC’s investment, and that of several other foundries (i.e. CWLCSP), along with the recent M&A activities occurring in advanced packaging (the acquisition of STATS ChipPAC by JCET; of FCI by TianShui Huatian Technology Co.; and several others on the way), are a great sign of advanced packaging’s growing importance (and not just cost-related) as an added value to the chip . More information on FanOut and other advanced packaging activities and strategic moves can be found here or in Yole’s forthcoming “2015 Status of the Advanced Packaging Industry” analysis.  Stay tuned!

If you’re an advanced substrate maker, OSAT, or equipment/materials manufacturer and you’d like   to understand the impact that TSMC’s involvement in FanOut manufacturing will have on your business and strategy, we can provide valuable insight.   Please contact Rozalia Beica, Advanced Packaging Business Unit Manager —