Back-end semiconductor equipment: advanced packaging to propel the market in 2025

The back-end semiconductor equipment market is poised for growth heading into 2025 as significant AI investment offsets slow recovery in traditional sectors.

Revenue in the back-end semiconductor equipment market, which is integral to assembly and packaging, has declined in recent quarters in response to a slow recovery in the consumer electronics market. However, this sector is projected to rebound during the fourth quarter, signaling a recovery in demand along with the increased adoption of advanced packaging.

According to the Back-End Equipment Market Monitor, Q3 2024, the back-end equipment market is positioned for strong growth heading into 2025, although near-term challenges persist. Quarterly revenue declined from $1.4 billion during the first quarter of 2024 to $1.29 billion in the second quarter, an 8.1% decline, and likely dipped further during the third quarter to $1.26 billion. However, Yole Group’s analysts project that revenue will increase by 3.8% to $1.31 billion during the fourth quarter and surge to $1.74 billion – a jump of 32.3% – during the first quarter of 2025…

What is the status of the back-end semiconductor equipment industry? How will the market evolve? Who are the prominent players? Based on the new Back-End Equipment Market Monitor, Q3 2024, Vishal Saroha, Technology & Market Analyst, Semiconductor Equipment, provides you with a snapshot of this industry. He takes a deep dive into the back-end semiconductor industry and to give you a better understanding of the technology challenges, market issues and ecosystem evolution.

Enjoy reading today’s analysis from Yole Group.

The recovery in the semiconductor market in segments such as automotive, industrial and consumer has been slower than expected in the second and third quarters. Excess inventories and muted demand are prolonging the downturn, with utilization rates still below optimal levels, particularly in traditional wire bonding.

For instance, Taiwan’s Advanced Semiconductor Engineering (ASE) has reported utilization rates of just 60% in some of its conventional back-end equipment segments, while ASMPT has confirmed softness in China’s high-end smartphone and industrial markets. However, these sectors are projected to improve in late 2024 or early 2025 and recover during 2025. Outsourced Semiconductor Assembly and Test (OSAT) CapEx shows signs of recovery after an unprecedented 10-quarter downward trend. Packaging equipment utilization rates bottomed out at 60% during the first quarter of 2024 and are now ramping up.

Despite the sluggish mainstream recovery, artificial intelligence (AI) and high-performance computing (HPC) are driving demand for advanced packaging technologies such as 2.5D/3D packaging related to CoWoS and high bandwidth memory (HBM), with hybrid bonding and thermocompression Bonding (TCB) becoming increasingly essential for next-gen AI applications.

As AI accelerators like Nvidia’s Blackwell chip demand enhanced processing capabilities, the integration of SoCs or SoICs with HBM through CoWoS allows for efficient data handling. TCB technology enables the latest versions of HBM3E/HBM4, while hybrid bonding is being developed for future HBM generations.

OSATs like Amkor are expanding their advanced packaging capacity, and back-end equipment vendors like Hanmi, Semes, Hanwha, K&S and ASMPT are expanding their TCB capabilities to meet AI demand.

Foundries like Intel, Samsung and TSMC are similarly expanding their advanced packaging capabilities significantly. Intel has invested in hybrid bonding technologies and is enhancing its facilities for 3D packaging as most of Intel Foundry’s revenue comes from advanced packaging solutions. Samsung is consolidating its advanced packaging R&D closer to manufacturing hubs and increasing its focus on hybrid bonding for HBM production. Meanwhile, TSMC is constructing a major advanced packaging facility in Taiwan as it expands its production capacity.

Yole Group expects this trend to continue, with higher revenue contributions from AI-related products in the coming quarters.

This level of investment is a clear indicator that the major players are preparing for a more dynamic market heading into 2025.

The back-end equipment segment is experiencing growth despite a slowdown in the wafer fab equipment (WFE) sales, as seen with Dutch WFE leader ASML’s recent earnings revision. This indicates a shift in capital allocation towards the more sophisticated packaging solutions essential for AI, which is expected to drive future semiconductor innovation and revenue streams.

US-China trade tensions and policies like the US and EU CHIPS Acts are also driving investment as semiconductor companies look to diversify their supply chains away from China. They are focusing on developing onshore production in regions like the US, Europe, Japan and other countries in Asia such as Malaysia and India. Japan in particular is benefiting from a weaker currency, as the lower value of the Yen makes exports from Japanese equipment manufacturers more attractive owing to lower prices.

The market leaders in the back-end equipment segment will be first in line to capitalize on the rebound in spending.

In 2023, Japanese tool maker Disco led the way with a 20% market share as it excels in wafer thinning, dicing, and grinding technologies, driven by the strong advanced packaging demand.

Netherlands-based Besi held second place with an 11% share, owing to its strong focus on Die Attach Equipment and position as a leader in providing hybrid bonding tools.

Singapore-headquartered ASMPT was positioned in third at 9%, as it provides solutions across back-end equipment technologies, with a strong focus on automation and integration for high-volume production. It is also present in key advanced packaging technologies such as TCB and hybrid bonding.

Both Besi and ASMPT have reported strong order volumes for 2.5D/3D packaging equipment and hybrid bonding systems supported by AI servers and high-bandwidth memory (HBM).

Singapore-headquartered Kulicke & Soffa (K&S) has the fourth largest share at 8%, as a key player in providing wire bonding and die bonding equipment. It maintains a strong market presence in traditional packaging while expanding into advanced interconnect technologies through its TCB solutions.

Samsung-owned Semes rounded out the top five with a 5% market share, as it provides a diverse back-end equipment portfolio and holds a competitive edge in the key South Korean market.

While 2024 presents some near-term challenges from a slow recovery in traditional markets, the mid-term outlook for 2025 and beyond is promising for the top players in the segment. The AI and HPC boom will drive strong demand for advanced packaging solutions, and increasing geopolitical investments in semiconductor infrastructure as well ongoing CapEx in advanced packaging technologies will position the back-end equipment market for sustained growth.

Yole Group will continue to follow the market as these trends develop. Stay tuned on www.yolegroup.com and follow us on LinkedIn!

Vishal Saroha is Technology & Market Analyst, Semiconductor Equipment at Yole Group.

Based in Dresden (Germany), he focuses on developing technology and market products and custom consulting projects in the manufacturing and global supply chain domain.

Prior to Yole Group, Vishal worked at GlobalFoundries, Dresden, first as an Integration & Yield Engineer and then as Sr. Engineer – Integration Engineering, where he was the owner of device and SRAM targeting-related activities on the company’s 22FDX technology. Previously, he also had experience at imec (Belgium), where he worked on issues related to 3DIC packaging and device reliability.

Vishal holds a master’s in nanotechnology from Katholieke Universiteit Leuven (Belgium) and a bachelor’s in physics from the University of Delhi (India).

Source: www.yolegroup.com