Before semiconductors can be used for any practical purpose, they need to be packaged and eventually mounted to a printed circuit board. Many more advanced chips are being packaged on substrates rather than packaged with lead frames, even if they are low pin count devices. IC substrates then provide connections to the PCB through a bottom side ball out and the device can communicate with other chips in the system.
The growth in IC substrates, both in terms of usage and production capacity, was already growing over the past couple decades as more components opted for BGA packages, which would require a substrate. Now there are many design drivers that motivate the use of substrates, most notably heterogeneous integration. New application areas and investment by Western governments are also driving new production capacity for IC substrates. We will examine each of these areas and cost drivers in this article.
IC substrate market size
The size of the semiconductor market is massive, but I see substrates as a subcomponent are small by comparison. Still, the size of the IC substrate market is projected to grow to $14.2 billion by year 2030. For perspective, the size of the IC substrate market was only $8.26 billion in 2021, according to Straits Research. This represents a compound annual growth rate (CAGR) of 6.98%.
Two of the biggest leaders in this growth are projected to be Taiwan and North America, with North America projected to slightly outpace Taiwan with 7.37% CAGR over the forecast time period. It should not be surprising that this is driven by some of the biggest names in tech, such as Apple and Intel, the former designing their own products requiring substrates and the latter providing foundry services for OEM products.
The growth drivers in this portion of the semiconductor industry boil down to two factors: geopolitics and advanced devices. The geopolitical aspect starts from supply chain problems originating in 2020, but that has been exacerbated given the ongoing conflict in Ukraine and a potential conflict between China and Taiwan. No company wants to get caught unprepared, so many companies are implementing a China +1 strategy, or they are leaving China altogether.
The other side of the geopolitical coin relates to new investments in domestic production, most notably the CHIPS Act in the United States. The European Chips Act was approved in July 2023 and we can expect more investment to begin flowing into this area as well as chip fabrication and wafer fabrication.
Companies like Huawei are adding to demand for advanced chips that require IC substrates. Source: Tamer/Adobe Stock
Markets driving IC substrate growth
At the end of the day, there has to be demand for the products produced on IC substrates, so we have to look to the markets to see where demand is driving growth. governments can only address the supply side through investment, but not necessarily the demand side.
On the demand side, the growth of IC substrates is expanding to touch on many products that previously would not require IC substrates as a subcomponent. for example, this includes the following areas:
- Advanced processors for AI and edge computing
- Heavily integrated ASICs for high volume consumer and commercial markets
- A new generation of power products
- Many small ASICs appearing in a plurality of consumer products (audio, power, wireless, etc.)
Rewind a couple decades, and it would be very uncommon to see chips within organic substrates used in some of these applications. The reason is that there were already so many ASICs in standard JEDEC packaging, and it was not until miniaturization became such a huge driver of consumer product development that more advanced substrates were needed.
Substrates aid both miniaturization and heterogeneous integration of multiple functions into a single package. The former is a big driver of consumer product designs, as was mentioned above, and some of the most popular consumer products use multiple micro BGAs for the main components. The latter is what has allowed many companies to mix and match IP to create totally unique components that are the main value creators in the end product.
Growth of a custom market?
Just because the IC substrate market is growing does not mean that the conventional lead-frame packages will go away. Instead, the growth in IC substrate market size and access to expanded foundry capacity will allow companies to build customized heterogeneously integrated components and small-footprint chips that combine multiple functions into small packages. Between access to open-source architectures like RISC-V, expanding access to chiplets, and IP obtained via licenses, companies can mix and match the features they need and build custom chips much easier than at any time in the past.
Due to the economics of semiconductor fabrication and packaging, currently only large companies with high expected production volumes can take advantage of expanding IC substrate capacity. Once a more open market for chiplets and bare dice develops, more companies will be able to take advantage of advanced packaging solutions on IC substrates.
