Samsung Electro-Mechanics bets big on its chip substrates

Industry

Published: 18 Jul. 2022, 19:41

Samsung Electro-Mechanics bets big on its chip substrates

A Samsung Electro-Mechanics employee explains the manufacturing process of a semiconductor package substrate to journalists on Thursday at the company's production site in Gangseo District of western Busan. [SAMSUNG ELECTRO-MECHANICS]

BUSAN — Amid the deafening sound of machines running, laser drills punched a hole half the width of a strand of hair in a thin plate of copper-clad laminate (CCL).

The plate, which will later become a semiconductor package substrate, is where Samsung Electro-Mechanics is putting its big bucks, announcing a series of investments totaling 1.9 trillion won ($1.4 billion) since last December.

“In terms of the future projected growth rate, the semiconductor package substrate market is estimated to expand even faster than the chip, foundry or chip packaging markets,” said Ahn Jeong-hoon, head of the company's package solution support team.

The surge in demand comes as more big tech companies have started designing their own chips.

The global chip industry is expected to see a compound annual growth rate of 4 percent by 2026, from $676 billion in 2022, according to market tracker Gartner. The chip package substrate market is estimated to grow faster, by 10 percent each year from $11.3 billion in 2022 to $17 billion in 2026.

A substrate package is what connects a semiconductor to the main board and protects the chip from the surrounding environment.

A semiconductor package substrate [SAMSUNG ELECTRO-MECHANICS]

What Samsung Electro-Mechanics is eyeing in particular is a flip-chip ball grid array (FC-BGA) substrate, a sophisticated type of chip substrate designed to bind together high-performing processors used in computers and servers.

Visitors were asked beforehand to remove or not use any cosmetics products, as they may contaminate the production plant. After changing into the provided cleanroom garments, journalists were herded into an air shower room — a cleaning process that had to be repeated several times whenever moving between production lines.

The plant was maintained at a cool temperature. Climbing up the stairs of the factory building, phrases like “We declare war against contaminants” and “Building trust is hard, but losing it is easy” could be seen stuck on the wall and staircases.

Airborne particulates are strictly controlled inside the plant, as high precision is key to manufacturing semiconductor substrates.

A semiconductor substrate is made by building up multiple thin circuit layers on both sides of the core material, CCL.

In order to process a larger number of tasks, circuits are designed to be more complex, with thinner lines and more layers stacked up on the core. Moreover, to enable electric signal transmission between layers, a via — or a small hole of about 50 nanometers — is drilled between each layer.

A high level of precision is required to engrave ultra-thin, complex circuits and drill microscopic holes into thin layers. Samsung Electro-Mechanics is capable of engraving a circuit line with a width of 3 nanometers, which is one-40th the width of a strand of hair, and creating a via with a diameter of 10 nanometers, according to the company.

The larger and more multi-layered a substrate plate is, the more difficult the production process. That is why FC-BGAs for servers, which are broader in size, require a higher level of precision in the manufacturing process than those for PCs.

Samsung Electro-Mechanics plans to begin mass-production of FC-BGAs for servers in the third quarter, a first for a Korean company.

FC-BGAs for servers are about four times wider than FC-BGAs for PCs and have twice the number of layers. Only a handful of companies are capable of manufacturing FC-BGAs for servers, including Japan’s Ibiden and Shinko Electric Industries.

To enter the new segment and meet the growing demand, the company announced it will invest a total of 1.9 trillion won ($1.4 billion) to scale up FC-BGA productions in its three production plants in Busan, Sejong and Vietnam.

A bird's-eye view of a production plant of Samsung Electro-Mechanics in Busan [SAMSUNG ELECTRO-MECHANICS]

The electronic parts manufacturer, 23.7 percent owned by Samsung Electronics, announced in June that it will invest 300 billion won to expand the production of the FC-BGA substrate in its manufacturing plants, after a March announcement of the 300-billion-won investment into the manufacturing of the FC-BGA at the Busan plant.

A separate investment of 1.3 trillion won was announced in December last year to produce FC-BGA substrates in its Vietnamese manufacturing plant as well. The expanded production capacity is expected to translate into revenue starting 2024, according to the company.

The company’s Busan plant will be leading the high-end FC-BGA business as well as research and development projects.

Samsung Electro-Mechanics has been selling FC-BGA since 2002, and produced chip substrates measuring 703,000 square meters (7.567 million square feet) in total last year. The semiconductor substrate business took up about 17.4 percent of the company’s revenue of 9.7 trillion won in 2021, from 16.2 percent in 2019. The electric components sector including multilayer ceramic capacitors claimed the largest share of 49.3 percent, followed by camera modules which took 33.3 percent.

While the IT industry is facing a downturn in demand for electronics, the demand for high-end chip substrates for servers and auto parts will likely continue to increase, according to industry analysts.

“Though the price increase driven by an extreme supply bottleneck is not likely to continue, […] the growth of the FC-BGA market for high-performance computing will be significant, as the chip industry is expected to expand in the server, storage, IT infrastructure and auto parts sectors,” said Go Eui-yong and Park Sang-wook, analysts from Hi Investment & Securities, in a report released in June.

The fact that many big tech companies are designing and developing their own chips is also a plus for the industry, as many of those companies needed to outsource the production, driving up the demand for the market in the long term.

"As a growing number of big tech companies are designing their own chips, there are bigger business opportunities for us," said Hwang Chi-won, head of the circuit board development team of Samsung Electro-Mechanics.

LG Innotek, Samsung Electro-Mechanics’ rival in Korea, also announced in February that it will invest 413 billion won in the FC-BGA business for the first time.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]