As global terminal demand continues to be weak, South Korea's integrated device manufacturers (IDMs) have reduced their traditional wafer packaging volume, consequently impacting South Korean outsourced semiconductor assembly and test (OSAT) companies. The AI boom driven by ChatGPT has not yet brought significant benefits to OSAT companies.
According to industry sources cited by Korean media Theelec, in the first half of 2023, the outsourcing volume of IDM wafer packaging to South Korean OSAT companies significantly decreased compared to 2022. It is reported that Samsung Electronics, SK Hynix, due to lower capacity utilization in the backend process, have been handling their own traditional wafer packaging. As a result, OSAT companies such as Nepes, LB Semicon, Hana Micron, and SFA Semiconductor have seen their capacity utilization fall below 50%.
Industry experts point out that the decline in capacity utilization of South Korean wafer foundries and the reduction in memory production are the main reasons affecting OSAT companies' capacity utilization. Besides DB Hitek, which has maintained a utilization rate of 65-75%, the 8-inch wafer foundries such as Samsung, SK Hynix System IC, and Key Foundry have a utilization rate of about 40-50%. The 12-inch wafer foundries' traditional processes also only have a utilization rate of around 70%, which is lower than the level in 2022.
Furthermore, SK Hynix reduced its memory production at the end of 2022, followed by Samsung in April 2023, further impacting the OSAT industry. Due to the global economic downturn, sales of end products such as mobile phones, notebooks, and TVs have decreased, leading to a corresponding decline in production of application processors (AP), display driver ICs (DDI), power management ICs (PMIC), DDR4, and other components.
Despite the AI boom sparked by chatbot ChatGPT, the OSAT industry has not experienced a revival, primarily because the backend process technologies for AI semiconductors and high-bandwidth memory (HBM) are quite challenging and are mainly handled directly by IDMs and wafer foundries.
Initially, the industry expected the market to rebound in the second half of 2023, but electronic product sales have turned out worse than expected, and the overall industry recovery schedule may be further delayed. Representatives from the OSAT industry state that due to increased customer losses, some customers have started handling their own traditional wafer packaging, and although OSAT companies are striving to expand their product portfolios as a coping strategy, the overall unfavorable industry environment presents considerable challenges.
