The global outsourced semiconductor assembly and test services (OSAT) market size was valued at USD 37.95 billion in 2021, presumed to reach USD 72.90 billion, expanding at a CAGR of 8.5% during the forecast period. The term "outsourced semiconductor assembly and test" refers to services provided by third-party suppliers. Wafer processing capability, package redesign, characterization including thermal analysis and certification, burn-in and life-testing, and several other techniques are among the primary market offerings of the companies. Focusing on shrinking and efficiency, the semiconductor industry has been expanding, with semiconductors emerging as the fundamental components of modern technology. All downstream technologies have been directly affected by the developments and breakthroughs in this area. OSAT suppliers are third-party providers of semiconductor assembly, packaging, and testing services for semiconductor integrated circuits. OSAT has played an essential part in the semiconductor industry by filling the gap between IC design and availability.
The OSAT businesses provide packaging and testing for silicon devices manufactured by foundries before their shipment to the market. It focuses primarily on delivering novel packaging and test solutions for semiconductor businesses in well-established areas like communications, consumer electronics, and computers, as well as developing markets like automotive electronics, the Internet of Things (IoT), and wearable devices. It provides.
Suppliers of wafer substrates, bonding materials, and packaging binders, among others, are crucial to the success of OSAT manufacturers. Rising costs of essential metals, such as copper, gold, silver, and palladium, are reflected directly in rising raw material costs.
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The Growing Implementation of Semiconductors in the Automotive Sector
Even though the global automobile industry has been experiencing a downturn and fluctuating demand in recent years, it remains one of the most important drivers and prospects for semiconductor and OSAT vendors. The increasing number of semiconductor goods per car and developments like autonomous and electric vehicles are now critical drivers for semiconductor manufacturers and OSAT providers. As more and more semiconductor components, like microcontrollers, sensors, and radar chips, are utilized in the automotive industry, the potential for OSAT and semiconductor foundries is also expanding. For the production of electric, hybrid, autonomous, and alternative-fuel vehicles, semiconductor devices constitute the basis of the hardware necessary to operate the software. Additionally, due to trends like driverless vehicles and V2X, numerous advanced-level semiconductor packaging is required, boosting the outsourced semiconductor assembly and test services industry even further.
For example, a centralized automotive-specific SoC is required to enable level 5 autonomy or increase hybrid efficiency. The centralized semiconductor-based automobile system continues to rely on single semiconductor components. It results in innovative work from existing automotive companies and emerging semiconductor fabless and OSAT enterprises targeting the automotive sector. In addition, emerging infotainment systems are increasing the demand for large displays and touch screens in the car industry, driving the market among OSAT and semiconductor suppliers. Advanced touch screen displays instead of traditional dials are deemed to provide futuristic looks, improved reaction, and the ability to accommodate several functionalities in a compact area, generating a minimalistic design. In addition, the automobile industry requires a high level of customization and dependability for these applications; hence, this is anticipated to create a substantial demand for outsourced semiconductor assembly and test services from the automotive industry over the projection period.
The Integration of Semiconductor Vendors into Packaging Operation
Multiple issues, including the US-China trade war, have generated a supply chain gap in the semiconductor sector. The problem contributes to longer wait times. Such a market dynamic motivates numerous wafer foundries and semiconductor companies to vertically integrate their packaging and testing operations to provide end-users with single-point solutions. One of the critical reasons OSATs consider the entry of foundries like Intel, Samsung, and TSMC into the IC packaging market as a potential threat to their profits is the occurrence of such instances. In addition, increased competition and shifting requirements for application-specific packaging are anticipated to force OSATs to improve their products.
The Advent of Flexible Wearable Devices
The technologies of the foldable display and the flexible wearable gadget are gaining prominence. For example, Huawei and Samsung displayed their flexible flagship products in February 2019. The trend for an increasing number of devices to become loose and to be utilized in testing circumstances may contribute to the expansion of the OSAT industry. The infiltration rate of high-end and advanced packaging systems like WLCSP (Fan-in and Fan-out), which is driven by high I/Os and high integration, is anticipated to continue to rise over the forecast period, thereby compelling OSAT vendors to develop new products and technologies to meet the growing demand. Businesses in the Asian region intend to grow their capacity to increase their capabilities and serve a more extensive consumer base. China is anticipated to lead the global expansion of the OSAT market. OSAT market leaders include Jiangsu Changjiang Electronics Technology (JCET), Tianshui Huatian Technology, and Tongfu Microelectronics. Given the significant investments in research and development and capacity expansion by the industry's major suppliers, the future of the OSAT business appears positive.
The outsourced semiconductor assembly and test services or OSAT market is classified based on service, type of packaging, application, and region.
Based on service, the categories include Packaging and Testing.
The packaging section is envisioned to grow at a CAGR of 8.3% and hold the largest market share. The third-party companies offer packaging and testing services for silicon devices manufactured by foundries and shipped to the market. They focus on providing novel packaging and testing solutions for semiconductor firms in well-established areas such as communications, consumer electronics, and computers, as well as in developing markets such as automotive electronics, the Internet of Things (IoT), and wearable devices. Most suppliers provide a vast array of packaging technologies, such as laminate, leadframe, power discrete, wafer level, etc.
The testing section will hold the second-largest share. Testing applications rely heavily on the semiconductor industry's research and development efforts. In recent years, there has been a substantial demand from OSAT participants for developing new testing procedures to combat the intensifying competitiveness. OSAT offers testing facilities for analog, digital, mixed-signal, LCD driver semiconductors, and RF components, ranging from wafer testing to qualification testing to the final production test of packaged devices. In addition to providing contract testing services, several market vendors build strategic partnerships with customers to create testing solutions.
Based on the type of packaging, the categories include Ball Grid Array (BGA) Packaging, Chip Scale Packaging (CSP), Stacked Die Packaging, Multi-Chip Packaging, Quad Flat, and Dual-inline Packaging.
The BGA or Ball Grid Array is envisioned to hold a significant share during the forecast period. Ball grid array packaging is surface-mount packaging used for integrated circuits. BGA packages permanently attach components like microprocessors because they offer more connecting pins than dual in-line or flat packages. BGA packaging has grown in popularity for high-density connection-required surface-mount IC devices. These are utilized for high-performance applications with high thermal and electrical requirements since they fit ICs into a smaller footprint, shortening the electrical path and reducing inductance. They're ideal for microprocessors, ASICs, and PC chipsets.
The Multi-Chip Packaging section will advance at a prominent rate. Electric equipment producers are aiming toward cheaper, lighter, and faster goods by integrating multiple processors in a single package, which is gaining popularity. Multi-chip packing has various advantages, including board sizes that are decreased by ten or more, signal propagation that is enhanced by a factor of three, and a small number of soldered connections. This permits using multi-chip packaging in situations where achieving the system's requirements at a lower cost is of the utmost importance.
Based on application, the categories include Communication, Consumer Electronics, Automotive, Computing and Networking, Industrial, and Other Applications.
The communication section is envisioned to grow at a CAGR of 8.8% and hold the largest share. Most communication applications comprise communication chips employed in the telecommunications industry. Significant sources of demand for OSATs and OEMs include power amplifiers (PAs), front-end modules (FEMs), and other RF and connection components. The Semiconductor Industry Association stated that around 33% of all manufactured semiconductors, such as networking equipment and smartphone radios, are utilized for communications. Communication applications are frequently deployed in extreme climatic conditions and demand reliable packaging solutions.
The consumer electronics section will hold the second-largest share. Semiconductors are essential to the consumer electronics sector. They are used in various consumer electronics items, including smartphones, smartwatches, smart speakers, portable and wireless smart devices, adaptors, audio and image applications, and home appliances. The introduction of intelligent consumer devices, connected devices, and multipurpose devices that rely less on human operations is increasing demand for advanced semiconductor technology, like communication chips, memory devices, and many others.
The region-wise segmentation of the global outsourced semiconductor assembly and test services market includes North America, Europe, Asia Pacific, and LAMEA.
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The Asia Pacific will dominate the regional market
The Asia Pacific will command the market with the largest share during the forecast period. It is anticipated that the surge in trend in the global automotive industry for advanced semiconductor chip package solutions will accelerate the expansion of the outsourced semiconductor assembly and testing in the Asia Pacific during the forecast period. This is mainly attributable to rising purchasing power levels, robust economic growth, the presence of big electronic manufacturing enterprises, and an expanding number of people using smartphones. China, Taiwan, South Korea, and Japan are some of the essential contributors to the OSAT market in the region, which contains a strong consumer electronic client base, therefore propagating the region's expansion.
Asia-Pacific is predicted to grow in the IC testing and packaging market throughout the forecast period. Increasing demand for IC components in mobile devices has been the critical driver of revenue growth. Proactive demand for IC components has also spurred the deployment of innovative packaging methods that allow higher levels of integration and I/O connectivity. In addition, there has been a rising emphasis on improved packaging among foundry companies in the region. In 2021, for instance, the Semiconductor Manufacturing International Corporation (SMIC) prompted the Chinese chipmakers to prioritize adopting advanced packaging as Moore's law approaches its physical limits and the United States Department of Commerce (DoC) imposes sanctions for manufacturing chips with different process nodes. The expansion of the OSAT market is a result of the increasing emphasis on improved packaging.