The Week In Review: Manufacturing

Fan-out consortium; Broadcom-Qualcomm analysis; wafer sales.


Packaging and test
A*STAR’s Institute of Microelectronics (IME) has formed a fan-out wafer-level packaging consortium comprising of OSATs, materials vendors, equipment suppliers and others.

The group is called the FOWLP Development Line Consortium. As part of the announcement, Singapore’s IME has established a development line to accelerate the development of fan-out. Located in IME’s facilities in Singapore, the group is developing fan-out based on the “mold-first” and “re-distribution layer (RDL)-first” method.

The members of the group include Applied Materials, Asahi Kasei, Dipsol Chemicals, ERS Electronic, Fujifilm, JSR, Kingyoup Optronics, Kulicke & Soffa, Nordson, Open-Silicon, Orbotech, STATS ChipPAC, Toho Kasei, and Towa.


Astronics, a supplier of products to the global aerospace, defense, and semiconductor industries, reported its financial results for the quarter. Aerospace segment sales of $128.7 million were up.

Broadcom’s move to make an unsolicited bid to acquire Qualcomm for $130 billion is clearly the topic of conversation in the IC industry.

At present, troubled Qualcomm is in the midst of acquiring NXP. Broadcom’s move to buy Qualcomm “will stand whether or not (Qualcomm’s) pending acquisition of NXP is consummated,” according to KeyBanc Capital Markets in a research note. “The combined company, including NXP, is expected to have pro forma FY17 revenue of $51 billion and pro forma FY17 EBITDA of approximately $23 billion.”

On the surface, the deal doesn’t make sense. On the other hand, Broadcom’s move makes sense. The company hopes to get a foothold in 5G, basebands and other markets. “Broadcom’s opportunistic offer looks like it is acquiring a distressed company. Qualcomm’s well-publicized legal battles with Apple and regulatory bodies in various geographies and its slow-moving NXP acquisition process have created a perfect storm and made Qualcomm look vulnerable,” according to analysts Sravan Kundojjala and Stuart Robinson from Strategy Analytics in a blog.

What does Broadcom want from Qualcomm? “One word. Modems! For a company like Broadcom, Qualcomm’s modem leadership completes the wireless picture. Please note that Avago acquired Broadcom one year after Broadcom’s exit from the baseband market and the company did not inherit modem products,” according to Kundojjala and Robinson. “At this point, only Qualcomm’s modems make sense as Intel, MediaTek and Spreadtrum are behind in terms of product strength. HiSilicon and Samsung LSI are vertically integrated and Broadcom cannot acquire them. Qualcomm’s success in 5G is all but assured at this point, thanks to its first-mover advantage. Can Broadcom develop a 5G baseband on its own? Yes, of course. But, it will take a huge R&D budget and multiple years to get customer acceptance and Broadcom’s lack of experience in 4G basebands further complicates the process as backward compatibility is a key requirement for network operators. So, the only option is to look for an acquisition to fill this gap and Qualcomm fits the bill perfectly.”

Others agreed. “We are positive on the proposed acquisition and believe the deal would make sense,” according to analysts John Vinh, Michael McConnell and James Wang from KeyBanc Capital Markets. “The acquisition of Qualcomm will provide Broadcom with a strong presence in the baseband business and will strengthen Broadcom’s mobile and wired infrastructure segments, creating a leading diversified communication semiconductor company. We anticipate the diversification can provide leverage when negotiating with customers and can strengthen the risk profile of the combined company. We also expect Broadcom to be able to reconcile the tension between Qualcomm and Apple if the deal goes through.”

Canaccord Genuity technology analyst Michael Walkley said: “We believe the combination could create shareholder value through potential accretion, synergies, increased share with Apple and Samsung; in addition, Broadcom could potentially settle the licensing dispute with Apple in a more-timely manner than could Qualcomm, given Broadom’s strong relationship with Apple. Further, we believe Qualcomm and Broadcom are uniquely positioned for reaccelerating revenue and earnings growth as the market transitions to 5G.”

So will the Broadcom-Qualcomm deal happen? And what about Qualcomm’s move to buy NXP?

“This brings into question Broadcom’s commitment to Qualcomm’s ongoing NXP acquisition. If Broadcom wanted NXP, it would have directly acquired NXP by counter-bidding Qualcomm. But, that’s not the case. Broadcom only wants Qualcomm’s chip assets, to be more specific. This casts doubt on Broadcom’s commitment to Qualcomm’s licensing unit too,” according to analysts Kundojjala and Robinson from Strategy Analytics.

“Finally, a deal of this size will no doubt face intense scrutiny from regulators around the world, especially as Qualcomm is involved,” they added. “The combined company will have an enviable share in smartphone chips including modem, processor, connectivity and RF. This could easily attract anti-trust organizations to demand concessions, which may include product divestitures, conditions on pricing and competive-friendly measures. Avago closed Broadcom’s acquisition in 8 months and is expecting any Qualcomm deal will close in 12 months.”

Market research
Automotive electronic system sales are forecast to rise by 5.4% from 2016 through 2021, which is the highest among six major end-user system categories as compiled by IC Insights.

Worldwide silicon wafer area shipments increased during the third quarter 2017 when compared to second quarter 2017 area shipments, according to the SEMI Silicon Manufacturers Group (SMG) in its quarterly analysis of the silicon wafer industry.

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