According to Yole's forecast, the Advanced Packaging (AP) market will be worth $44.3 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 10.6% to $78.6 billion from 2022 to 2028. In contrast, the traditional packaging market is expected to slow to a compound annual growth rate of 3.2% from 2022 to 2028, reaching $57.5 billion. Overall, the packaging market is expected to grow at a CAGR of 6.9% to reach $136 billion.
The AP market will account for approximately 48% of the total integrated circuit (IC) packaging market by 2022, and its share is steadily increasing due to various megatends. In the AP market, flip chip platforms including FCBGA and FCCSP accounted for 51 percent of the market share in 2022. The segments with the highest projected revenue CAGR from 2022 to 2028 are ED, 2.5D/3D, and flip chips, with growth rates of 30%, 19%, and 8.5%, respectively.
Mobile and consumer will account for 70% of the total AP market by 2022, with a projected CAGR of 7% from 2022 to 2028 and 61% of AP revenue by 2028. The telecommunications and infrastructure segment is growing the fastest, with an estimated revenue growth rate of approximately 17%, and is expected to account for 27% of the AP market by 2028. Automotive and transportation will account for 9% of the market, while other segments such as medical, industrial, and aerospace/defense will account for 3%.
While traditional packaging currently dominates wafer production and will account for nearly 73 percent of total production by 2022, AP market share is gradually increasing. The market share of AP wafers is expected to grow from approximately 27% in 2022 to 32% in 2028. On a unit basis, traditional packaging accounts for more than 94 percent of the market, but AP shipments are expected to grow at a CAGR of about 6 percent from 2022 to 2028, implying 101 billion unit shipments by 2028.
Innovation beyond Moore's Law: Small chips and hybrid bonding break new ground
Advanced packaging has become the key to semiconductor innovation, enhanced functionality, performance and cost effectiveness. Large companies such as TSMC, Intel and Samsung are adopting small chip and heterogeneous integration strategies, leveraging AP technology as well as front-end scaling work.
The chiplet method divides the SoC chip into multiple chips, scales only the chips with advanced technology nodes, and integrates them using 2.5D or 3D packages. This increases production and reduces costs. Hybrid Bonding (HB: Hybrid Bonding) is another important trend, enabling metal-metal and oxide-oxide stacking face to face with convex spacing of less than 10 µm. It is used for wafer-to-wafer hybrid bonding for applications such as CIS and 3D NAND stacking, as well as the ongoing development of 3D SOCs in logically memory-stacked 3D ics for PCS, HPCS, and data centers.
TSMC is a leader in high-end advanced packaging with its CoWoS production and diversified product portfolio, including 3D SoIC, InFO_SoW and CoWoS variants. Intel invested heavily in advanced packaging in 2022, but macroeconomic factors affected its core business in 2023. As a result, we expect TSMC to outinvest Intel in advanced packaging this year. Samsung offers advanced packaging solutions for HBM and 3DS products, fan-out panel level packages and silicon intermediate layers for high-end performance products.
Advanced packaging requires different equipment, materials and processes than traditional packaging, such as new substrate materials, lithography processes, laser drilling, CMP and KGD testing. AP participants have made significant investments to develop and introduce these advancements. Heterogeneous integration with advanced packaging drives semiconductor innovation and improves overall system performance while reducing costs.
Semiconductor supply chain: The new Geopolitical Battleground
The semiconductor value chain, including advanced packaging, is in focus due to chip shortages and geopolitical tensions. Governments are investing in understanding and strengthening domestic ecosystems. The conflict between the United States and China has disrupted supply chains and affected semiconductor companies' access to chips and equipment. Advanced Packaging (AP) is seen as key in the post-Moore's Law era, and the AP market is expected to reach $78 billion by 2028. However, trade tensions have led to new value chains and production relocations, diversifying supply chains but risking Chinese capacity displacement. Seven major vendors dominated AP, with OSAT contributing 65.1% of AP wafers. OSAT expands testing expertise, while traditional test participants invest in packaging. The industry saw a paradigm shift as players from different models moved into packaging, cannibalizing OSAT. Substrate supply has been tight, affecting material availability and leading to longer delivery times and higher prices. Reduced demand and capacity expansion could help ease the shortage. Substrate suppliers invested in capacity expansion but faced time constraints, resulting in continued supply issues for the next two to three years.