OSATs are striving to offload "wafer bank" inventories stored for customers, and are generally pessimistic about their sales prospects for the second and third quarters, according to industry sources.
With TSMC expressing concern about IC design house demand through the third quarter, the impact of order cuts will be felt by OSATs for a longer period of time. As a result, market conditions for OSATs will remain unfavorable in the second and third quarters, and reducing "wafer bank" stocks are now their top focus, the sources said.
Handset chips, notably those for mid- to high-end Android phones with application processors that use flip-chip (FC) packaging, will be the hardest hit by a drop in demand in 2023. According to sources close to ASE Technology and other OSATs, the overall FC packaging demand for handset chips is apparently lower than that for HPC processors.
There are also uncertainties regarding MediaTek's actual wafer starts for mobile processors, as well as demand for Qualcomm's upcoming flagship series, the sources said.
Besides, demand for handset peripheral chips, such as power management ICs, which mostly rely on traditional wirebonding, remains uncertain, the sources indicated.
On the other hand, there has recently been a slight comeback in demand for basic ICs used in notebooks and other PC applications, due to the relatively early inventory adjustment timetable for those chips compared to that for handset ICs, the sources said. Recovery in demand from the PC sector is expected to accelerate in the second half of this year.
In addition, market speculation that ASE Technology has cut its contract quotes by a low- to mid-single-digit percentage have lately surfaced. Lower contract quotations, along with sluggish demand, would put pressure on OSATs' gross margins this year, according to market sources.
