Continuing from the previous discussion, we previously conducted an in-depth analysis of the upstream materials and chip design industry in China, recommending companies with potential for the future. In this issue, we will discuss the current state of China’s chip packaging industry.
The Chinese chip packaging industry is currently at a bottleneck in development. Some leading enterprises have mastered core technologies such as flip-chip and wafer-level packaging, achieving mass production of TSV and Fan-Out technologies. However, the overall localization rate of packaging materials is relatively low, with high-end substrates and bonding wires relying on imports. Compared to foreign countries, China has a gap in technological research and development, as foreign companies are more mature and widely applied in areas such as 3D packaging and system-level packaging. In terms of equipment and materials, high-end products are monopolized by foreign companies. In terms of production capacity and scale, international giants have a clear advantage, able to meet large-scale orders. In terms of product quality and stability, foreign companies outperform domestic ones in long-term stability and consistency due to their experience and processes, while the reliability of some domestic companies’ products in high-end application scenarios needs improvement.
Moreover, with the United States imposing restrictions on China’s chip industry, the packaging industry is facing unprecedented difficulties. The chip packaging industry is a high-investment sector with a long return on investment cycle. Unlike the chip design industry, it is difficult for small enterprises to enter the market. However, there are still many high-quality companies in China that are continuously breaking through and striving to narrow the gap with the world. As the saying goes, domestic substitution is an inevitable trend; perhaps this day will come late, but it will eventually arrive.
Currently, the cutting-edge packaging technologies include the following categories: 1. Innovations in Wafer-Level Fan-Out Packaging (Fan-Out) and System-Level Packaging (SiP). In the field of wafer-level fan-out packaging, Hangzhou Jingtong Technology’s “MST Fobic” technology is remarkable. It abandons traditional paths, replacing substrates with silicon bridges, reducing packaging thickness by 40%, while the yield rate leaps to 92%, and costs are cut by 30%, making significant contributions to the lightweight and high-performance of chips. On the other hand, system-level packaging (SiP) is gaining momentum. Huawei holds new patents and makes significant improvements in packaging structure, optimizing heat dissipation and signal transmission pathways, significantly enhancing the performance of terminal devices, successfully integrating multiple functionally diverse chips, such as computing, storage, and communication modules, precisely addressing the needs of AI and high-performance computing. 2. Advancements in 3D Stacking and Chiplet Technology. In the 3D packaging race, TSMC’s CoWoS technology is leading the way, with vertically stacked chips resembling a “skyscraper” of chips, achieving exponential increases in integration. Domestic Changdian Technology is not to be outdone, leading the way in heterogeneous integration of automotive chips; Tongfu Microelectronics has also achieved mass production of high-density fan-out packaging, establishing a foothold in the market and opening new avenues for domestic chip packaging. 3. Panel-Level Packaging (PLP) and Silicon Photonics Cross-Industry Innovations. Panel-level packaging cleverly utilizes square substrates, breaking the “circular curse” of wafers, with giants like Samsung and NVIDIA entering the fray. Samsung empowers wearable devices with a new lightweight design, while NVIDIA prepares AI chips for deployment, achieving dual advantages in cost and area utilization. Silicon photonics takes a different approach, using optical interconnects to cut high-frequency transmission losses. TSMC’s compact general-purpose photonic engine (COUPE) has already shown promise, expected to shine on the commercial stage in 2026, ushering in a new era of chip communication with the dance of electronics and photonics. 4. Exploration of Glass Substrates and New Materials. Glass substrates, with their high thermal stability and light transmission capabilities, are entering the realm of high-frequency circuits and testing. Although there are significant processing challenges, Wuyuan Semiconductor is leveraging AI to optimize material ratios, achieving a “triple win” in packaging strength, heat dissipation, and cost control, injecting new momentum into the industry.
So, which companies in China are breaking through with new packaging technologies? 1. Jingtong Technology: As a pioneer in fan-out technology, it has built a moat with its self-developed “MST Fobic” technology, attacking with both high-density interconnection and cost control, leading the international yield rate, with orders pouring in from AI chip manufacturers; in the market, it precisely targets fan-out and chiplet technologies, competing with industry giants TSMC and Samsung, making inroads in mobile, medical, and edge computing fields. 2. Changdian Technology: As a leader in domestic packaging and testing, it invested 1.4 billion in R&D in 2023, achieving significant results in heterogeneous integration of automotive chips, with meticulous layouts in 3D packaging and chiplet technologies. Production capacity is expanding rapidly, aiming to compete in the international arena for HBM and AI chips. 3. Huawei: Empowering the ecosystem with its “chip packaging structure” patent, optimizing heat dissipation and performance in one step, injecting intelligence into terminal and data center chips with AI wisdom, relying on the design foundation of Hisilicon, integrating vertically from design to packaging. 4. Wuyuan Semiconductor: Introducing AI to optimize packaging processes, using machine learning to “see through” material performance, reducing both R&D cycles and costs, receiving high praise after trials in high-end communication equipment, opening new paths for material innovation. 5. Tongfu Microelectronics and Huatian Technology: Differentiated advances with Tongfu Microelectronics achieving fruitful mass production of fan-out packaging, deeply binding with international client AMD, and increasing R&D investment in Q1 2024, laying heavy plans in the high-end market; Huatian Technology is deeply engaged in wafer-level packaging, collaborating with Jingtong Technology to break through process bottlenecks, eager to explore new battlefields in automotive electronics and AI chips.
Future Challenges and Outlook 1. Dual Challenges of Technical Costs. Advanced packaging relies on precision techniques such as lithography and etching, but unfortunately, the localization rate of key domestic equipment is less than 30%, with “bottleneck” issues like etching machines urgently needing to be addressed. R&D costs are soaring, with Changdian Technology investing 1.4 billion annually, while small and medium-sized enterprises lament their funding struggles, facing pressure on their financial chains. 2. International Market Turbulence. TSMC and Samsung dominate half of the global high-end packaging market, suppressing domestic companies with both technology and pricing. The global semiconductor market is changing rapidly, with a projected 25% growth in sales in 2024, making the path for domestic substitution inevitably bumpy. 3. Green Collaboration as a New Industry Challenge. The ABF substrate for packaging materials faces overseas constraints, making the development of alternatives like glass substrates urgent. The environmental “tightening” calls for innovations in green packaging, with sustainable development becoming a must-answer question. Currently, China’s chip packaging industry stands at a crossroads of technological breakthroughs and domestic substitution, with pioneers like Jingtong Technology and Changdian Technology measuring the gap with international giants through differentiated innovation. Looking ahead, with the waves of AI and automotive electronics surging, advanced packaging will crown the semiconductor industry as the “pearl of the crown,” and the three swords of technological independence, diversified integration, and ecological collaboration will be needed to cut through the thorns and safeguard China’s “chip” journey.