Ups and Downs in the World Market

Estimated reading time: 9 minutes

The keynote session for the EIPC 2024 Winter Conference addressed several topics, ranging from applications for superconductivity to the fluctuating European financial market and the importance of IC substrates. The conference took place in late January at the IHK Academie in the city of Villingen-Schwenningen, on the eastern edge of the Black Forest in southwest Germany. 

The theme for EIPC President Alun Morgan’s theme was superconductivity, a phenomenon discovered in 1911 but of great relevance today in applications like MRI scanners and the Large Hadron Collider.

Although all current superconducting materials require temperatures close to absolute zero for effective operation, South Korean scientists recently claimed to have developed materials that work as superconductors at room temperature. Such materials would have exciting applications in nuclear fusion, energy generation, energy storage, transport, healthcare, and data systems. artificial intelligence tools, Morgan said, now have the potential to accelerate the discovery and development of innumerable new materials and future transformational technologies.

Dr. Nicolas Schweizer, CEO and chairman at Schweizer Electronic, hosted the tour of the Schramberg factory later in the day. He gave a brief overview of the history and capability of the company and the diversity of its market in the automotive, aviation, industrial, medical, and communication, and computing sectors.

With input from Custer Consulting, NT Information, and NanYa Plastics in the keynote session on business outlook, this session brought valuable and authoritative market intelligence and industry knowledge to the conference, moderated by EIPC Technical Director Tarja Rapala-Virtanen. 

Custer’s business outlook for the global electronics industry, with emphasis on Europe, was delivered on behalf of Jon Custer by Alun Morgan. 

Looking back, 2023 saw the rapid expansion of generative AI technology in an age of economic uncertainty and accelerating climate crisis. There were changes and challenges—supply chains were disrupted, and geopolitical tensions resulted in increasing sanctions and trade controls. But there were opportunities and the emergence of new innovations and opportunities: Artificial intelligence, electric vehicles, automation and robotics, new energy outlooks, and aggressive data collection all made major gains in 2023, although the future holds risks in economic, environmental, geopolitical, societal, and technological categories. 

World GDP growth was forecast to reach 2.9% in 2024, from 3.5% in 2022, and 4.0% in 2023, but the Euro area forecast was only 1.0%, from 3.3% in 2022 and 0.7% in 2023.

World PCB output for 2023 was estimated at $90,090 million, from $91,375 million in 2021 and $97,505 million in 2022. By comparison, the 2023 estimate for Europe was $1,980 million, from $2,025 million in 2021, and $2,160 million in 2022, and the downward trend in European PCB output appeared to have flattened off. Nakahara predicted that 2025 will be a good year for the world industry, but commented that this will be heavily influenced by recovery in IC substrates, since they now represent 20% of bare-board output.

Michael Gasch commented that the German-speaking countries combine 62% of European production, with the Latin countries combining 22%, UK 9%, and the rest of Europe about 7%. Austria, Switzerland, and Germany are strong in industrial electronics, with Switzerland also in medical electronics. France, Italy, and the UK are heavily engaged in defense, aeronautics, and space, and all have a fair share in supplying the EMS industry. Gasch remarked that there remains much uncertainty as to what might happen in China, North Korea, and Russia, and the fact that more than half of the global population will have elections this year.  

There was some good news. Lithuanian high-tech group Teltonika is building a new PCB factory in Vilnius, Lithuania. The company recently announced plans to construct a new electronics assembly plant in Vilnius to address the growing interest in the company's EMS services. This new printed circuit board (PCB) plant is just one of 10 projects to be established in the Teltonika High-Tech Hill technology park. Covering an area of more than 33,000 square metres, the PCB factory will house manufacturing facilities and administrative premises. The budget for the project is estimated to be EUR 143 million. 

In Custer’s global outlook, worldwide GDP is forecast to expand 2.6% next year on an annual average basis, compared with the 2.1% consensus forecast of economists surveyed by Bloomberg. Solid GDP growth has translated into more-than-solid labor market performance. The unemployment rate across all the economies covered by Custer’s sources now stands about 0.5 percentage points below its pre-pandemic level. Importantly, this improvement is visible even in some key economies that have seen very low real GDP growth, such as the Euro area. GDP growth and employment have been surprisingly buoyant among economies that experienced a large and unwanted inflation surge in 2021-2022. Inflation is now cooling across G10 and emerging market economies

By contrast, Custer’s outlook for Europe expects real GDP growth in the euro area to be around 1% in 2024. Countries with a high proportion of industrial production—above all, Germany—must expect somewhat lower growth due to the interrelationships.

Economic growth in the U.S. is somewhat stronger, partly because the U.S. itself produces large quantities of energy and is therefore less affected by high energy prices than European economies.

The predicted economic growth will only occur in 2024 if there are no additional growth-dampening effects. If, for example, new global supply bottlenecks occur, this will lead to interruptions in production.

Geopolitical uncertainties pose an additional economic risk. An escalation of existing conflicts, above all the war in Ukraine and the conflict in the Gaza Strip, could lead to significant supply chain problems and rising commodity prices. If political parties that focus on economic isolation prevail in the upcoming elections in Europe—namely the elections to the European Parliament—but also in individual countries and the U.S., this would have a negative impact on global trade, with negative consequences for all export-oriented economies.

While the biggest economic risk in 2023 was energy security, in 2024 it will be political and geopolitical uncertainties, he said. Uncertainty is poison for investment, and declining investment not only weakens growth and employment in the short term but also the long term, because low investment weakens overall economic production capacities permanently.

In Custer’s view, this means that 2024 will be another year of considerable economic uncertainty. In summary, he referred to three key macroeconomic relationships to keep an eye on: geopolitical tension, inflationary pressure, and growing protectionism. These have an impact on investment activities and manufacturing production that will ultimately lead to economic growth.

The next speaker was Dr. Hayao Nakahara with a video presentation on the IC substrates industry. 

He began by observing that 2023 was a disappointing year for semiconductors but that recovery is expected, which is good news for IC substrate makers. The long-term perspective is bright, particularly in automotive and industrial applications. 

The statistics indicate that personal computers and smartphones consume more than 60% of semiconductor devices so that “when PC and smartphone sneeze, semiconductor catches cold,” which is what happened in later 2022 and early 2023. He believes that for PCs, the longer term is not so bright but because more powerful AI-based processors are coming, the prospects for IC substrates are more positive. Indeed, the capacity for manufacturing Ajinomoto build-up film (ABF) is increasing. He commented that tablet shipments show a similar trend to PCs but smartphone shipments have finally started to rise. 

In China, iPhone sales have been overtaken by Huawei, whose Mate 60 Pro is powered by a chip that uses 7-nanometre technology developed and fabricated in China, and an indication of China’s rise in IC capability, which has prompted huge investment in high-end IC substrate manufacture in China.

Although total car shipments have remained fairly static at around 83-84 million units over the past several years, electric vehicle shipments have risen sharply, with China leading the world. The number of semiconductor devices per car is estimated to be between 150 and 200. Multiply by 1.5 for hybrid cars and by 2 for electric, taking the total to a possible 400 of which between 30 and 40  will be main processor chips needing advanced packaging. Advanced driver assistance systems and autonomous vehicles will require many more.

Against this background, Nakahara focused his presentation on IC substrates. He listed the world's top 25 PCB makers and highlighted 15 that make IC substrates, some of whom make only IC substrates. He estimated that in 2022, IC substrates accounted for 18.6% of worldwide PCB production, valued at about $97 billion. His forecast for IC substrates was $18,500 million for 2024 and $22,200 million for 2025. 

He commented that IC substrate makers and hopefuls sensed the future growth of semiconductor chips, with $200 billion investment being made by Intel, AMD, NVIDIA, TSMC, Samsung, Micron, and others, and have started to invest about $30 billion in the expansion of existing IC substrate manufacturing plants and building new plants. He listed IC substrate investments being made by Japanese, South Korean, Taiwanese, and Chinese manufacturers, together with the package types they were preparing to make. For flip-chip BGA, LGA, and PGA, the build-up conductor layers are fabricated by semi-additive processing using mainly Ajinomoto ABF dielectric film. Flip-chip CSP is fabricated using mainly BT dielectric. There are still a considerable amount of wire-bonding substrate made for analog and power devices. 

The importance of IC substrates for our modern world was the subject of the next keynote, presented by Andreas Folge from Nan Ya Plastics in Germany. He defined IC substrates as “the bridge between the nano-world of Chip and the micro-world of PCB”—the necessary core material in IC packaging technology and the critical interface between the semiconductor chip and the PCB, with a significant impact on circuit performance.

With some microsection examples, he put a perspective on the scale and density of typical substrates, commenting that only a few companies worldwide have the capability to manufacture them. He gave examples of where IC substrates were needed and used in the modern world—effectively wherever data is processed: memory chip packaging, MEMS chip packaging, RFID packages, and processor chip packaging. With the rapidly increasing amount of data to be handled and processed, the demand for IC substrates will also increase and follow the trend of the semiconductor industry.

Folge listed the essential characteristics of IC substrates: low electrical resistance and good signal integrity, excellent mechanical strength, high thermal conductivity, high chemical resistance, high dielectric constant, and good adhesion properties.

As semiconductor complexity increases, illustrated by the transition from the single-chip processors of 1971 to the 50-billion-transistor processors available today, the demands on the material properties of the IC substrate, particularly thermal expansion and thermal resistance, become increasingly critical. 

The value of the world semiconductor market is forecast to increase to $702 billion by 2027, with the computing/server and mobile phone/tablet sectors consuming more than 60% of devices, and the future market drivers will be artificial intelligence and virtual reality, high performance computing, e-mobility and industrial applications. 

Folge commented that the leading IC substrate manufacturers are almost exclusively based in Asia and that Nan Ya is among the top three.

During the session, Alun Morgan welcomed the newly elected board members Stuart Down, Stan Heltzel, Thomas Michels, Antti Ojala, and Rico Schlüter.