Psst! Here's a Secret: New EMS Profits Are Behind You

While most EMS companies are busy gazing downstream for new sources of revenue with higher margins in design, fulfillment, maintenance, service and the like, a potential high-margin center has materialized, not in front of their noses, but behind them.

We're talking about SiP, PiP and PoP. For those who haven't mastered the alphabet soup: system in package; package in package and package on package, or collectively 3D packaging. At TFI, our initial research suggests it has the potential to become a sweet spot for EMS providers bold enough to look upstream. Here's why:

In the age of nano-miniaturization, converged 3D chip packaging is a value-added activity to which both the EMS and Semiconductor Assembly and Test Service (SATS) nodes along the supply chain contribute. But which of them will ultimately capture this exploding market is still unclear.

Like many other aspects of electronics manufacturing, the cell phone is driving this, especially PoP, where multiple functions can be best accomplished in minimal space, creating more efficient connections and lower power usage. A couple of the larger EMS providers tell us they're doing PoP work for cell phone OEMs and that demand is strong.

The cell phone may be first, but it will not be the last to benefit from 3D packaging. Laptops, PDAs, digital cameras and other consumer devices will drive new growth. So will myriad other segments, from medical to military, as engineers adopt the PoP for performance benefits of these products. PoP is expected to grow from 100 million units in 2005 to nearly 700 million in 2010.

Most EMS companies already have at least some of the capital equipment they need for this work, especially PoP, which does not require the clean room necessary for SiP and PiP. From our initial research we estimate that an EMS provider could launch PoP stacking capability for $200,000 to $400,000 investment, plus the cost of technology expertise.

For more about this opportunity, be sure to read the presentation based on my research, "New Chip Packaging Solutions: An EMS Opportunity, Competitive Threat or Both?"

Savvy companies will snatch this opportunity. EMS companies could - if they turn around and look upstream. What do you think?  Please post a comment on our blog.