OSAKA -- Kyocera will set up a new chip substrate plant in Kyoto Prefecture, in expectation of growing demand for the product used in smartphones.
Even though market growth for such phones is losing momentum, demand for space-saving substrates is expected to keep rising to accommodate increasingly advanced handset specifications.
Kyocera will spend about 15 billion yen ($132 million) to double production capacity for flip-chip chip scale package -- or FCCSP -- substrates. These items carry the central processing unit, communication modules and sensors, and connect to the printed circuit board which holds other components such as resistors.
The company built its first FCCSP substrate plant in the Kyoto Prefecture city of Ayabe in 2014, and this facility is expected to reach full capacity by the end of this year. So Kyocera will build another plant next to the first one, with plans to start operation by summer 2017.
An FCCSP substrate is about 0.2mm thick, half that of conventional substrates, which need to be connected via metal wiring. It enables stacking of more semiconductor chips. As new smartphones grow increasingly thin and use batteries with bigger capacity, while also including new features, such space-saving technologies are essential to fit all components.
Global shipments of smartphones are expected to come to about 1.52 billion units in 2016, up just 5.7% from 2015, according to U.S. company IDC. Growth will fall below 10% for the first time, as the Chinese market, the world's biggest, matures.
On the other hand, the global market for FCCSP substrates is expected to grow more than 30% annually. Their applications are seen expanding to wearable devices and on-board automotive equipment, among other uses.
Kyocera, bracing for a net profit decline in the current year ending March 31, hopes to revive earnings growth by beefing up this field.
Japanese rival Ibiden and South Korea's Samsung Electro-Mechanics and Taiwanese companies are ahead of the game. By aggressively investing, Kyocera aims to increase sales of FCCSP substrates to 30 billion yen in a few years.