SUSS MicroTec (SMHN GR) -- A Hidden Advanced Packaging Play

This article is the third in our series on advanced packaging. In the previous article, we detailed the hybrid bonding technology and its main equipment supplier, BESI, a company listed in Europe (BESI (BESI NA) -- Where is Hybrid Bonding Used?). Today, I would like to introduce another advanced packaging equipment manufacturer that is also listed in Europe but is not yet well-known to investors – SUSS MicroTec, based in Germany.

SUSS MicroTec arguably has the highest proportion of its revenue from advanced packaging among global semiconductor equipment companies. The second-ranked Camtek claims that ~60% of its revenue comes from advanced packaging, while SUSS MicroTec has ~70% of its revenue deriving from this segment. Looking at order levels (income recognition lags behind orders), over 85% of the company's orders in 2H23 came from advanced packaging equipment, arguably making it the purest advanced packaging play globally. Unfortunately, as a smaller company listed in Germany with no major broker coverage, it remains under the radar for many investors. I will now delve into more specifics about the company.

SUSS MicroTec's business is divided into two main segments: Advanced Backend Solutions and Photomask Solutions. In its Photomask Solutions segment, SUSS MicroTec primarily manufactures photomask cleaning equipment. Due to its close cooperation with TSMC, the company holds a global monopoly in the high-end logic (N14 and below node) photomask cleaning equipment market, with about a 90% market share compared to AMAT's ~10%.

The Advanced Backend Solutions segment includes two product lines: lithography equipment and bonder/debonder. The company's lithography equipment primarily comprises photoresist spin/spray coaters and mask aligners/projection scanners for advanced packaging processes. In the spin/spray coater market, SUSS MicroTec and Tokyo Electron (TEL) share the market equally; in the mask aligner/projection scanner market, SUSS MicroTec has ~50% of the market share, with other competitors including Europe's EV Group and Japan's Ushio. In backend lithography processes, mask aligners are the simplest devices (directly imprinting the mask pattern, no exposure needed), higher resolution requires projection scanners (a simple exposure device), and the highest resolutions require actual steppers. In TSMC's CoWoS process, SUSS MicroTec's scanners and Canon's steppers from Japan share the market.

Now, let’s focus on the company's bonder/debonder business. As mentioned in our previous articles on TSMC's CoWoS, we discussed the temporary bonding & debonding process; SUSS MicroTec specializes in these temporary bonders and debonders. The company’s TBDB equipment primarily serves three major customers: TSMC, Samsung, and Micron. SUSS MicroTec supplies TSMC's CoWoS-L with temporary bonders (100% market share) and provides over 70% of the market share for Samsung and Micron’s HBM temporary bonders and debonders.

We have explained previously that TSMC's CoWoS-S silicon interposers, being large and thin, risk cracking, while the RDL interposers used in CoWoS-R/L do not have this issue. However, large-sized RDL interposers made from organic materials also face a different problem – warpage. To address this, SUSS MicroTec developed a temporary bonder tool with a pressure annealing function specifically for TSMC, which helps mitigate warpage issues with large RDL interposers (see below image).

In the HBM process, each individual DRAM wafer undergoes TSV processing before dicing and stacking. In the HBM TBDB field, Japan's Tokyo Electron had a first-mover advantage with SK Hynix choosing their temporary bonders and debonders for all their HBM production. However, latecomers like Samsung and Micron opted for SUSS MicroTec as their primary supplier.

In the following paragraphs I will provide a detailed estimate on SUSS MicroTec’s TBDB orders in the following years.