Semiconductor Materials: Restructuring in the Supplier Base
By Dan Tracy, senior director, Industry Research & Statistics, SEMI
Last week, the Nikkei Asian Review (and other sources) reported the exit of Sumitomo Metal Mining (SMM) from the leadframe business. Leadframe makers headquartered in Japan have long had a prominent share of the global leadframe market, and SMM has been a top supplier for decades. And just several years ago, SMM and Hitachi Cable integrated their leadframe operations. According to the Nikkei Asian Review article, Chang Wah of Electronic Materials (Taiwan) is acquiring some of the SMM leadframe operations, while the article reports that SMM is negotiating the sale of its power semiconductor leadframe business to Jih Lin Technology (Taiwan).
SMM previously exited the bonding wire market in 2012, so this latest announcement reflects the company’s move away from commoditized material segments. According to SEMI’s own analysis, the leadframe market that has seen very little revenue growth over the past 12 years and it is an industry segment with a large supplier base, with over 30 suppliers globally. The basis for competition in the leadframe business has long been, generally speaking, lowest price and shortest turn-around time. Leadframes are a commodity, though plating and etching capabilities can be a differentiator among the suppliers.
Over the past decade while production facilities in Japan and Southeast Asia closed, many leadframe suppliers shifted production to and increased capabilities in China. Also, China headquartered leadframe suppliers are numerous. These suppliers in China have typically focused on low-lead count and discrete leadframe products for domestic assembly plants, though some companies have expanded capabilities to produce higher value leadframe products. The market share of the China headquartered suppliers has gradually been growing.
Given the pricing pressures in the industry, the trend towards smaller, lower cost leadframes, and the transition to non-leadframe technologies, the long-term outlook for the leadframe market from a business perspective remains very challenging as overall revenue growth is unlikely. Expect further consolidation and the continued emergence of China suppliers in this longstanding packaging material segment.
The SEMI Strategic Material Conference 2017 will be held September 19-20 in San Jose, Calif.