Taiwan continues to dominate the global outsourced semiconductor assembly and test (OSAT) market, but China is catching up quickly. Driven by state-backed chip self-reliance efforts, China's OSAT industry has expanded at pace, steadily closing the market share gap across the Taiwan Strait. A recent industry-led initiative gaining traction in China is also pushing back against cutthroat pricing that has undermined profitability.
China rises as OSAT market sees global rebound
DIGITIMES Research estimates global OSAT revenue will climb 5% year-over-year to US$41.2 billion in 2024, fueled by the end of inventory correction and renewed customer demand.
Chinese OSAT firms have become the second-largest force globally, supported by robust local demand and pro-industry government policies. The gap with Taiwan's market share continues to narrow.
In 2024, five Taiwanese firms — ASE Technology Holding, PTI, KYEC, ChipMOS Technologies, and Chipbond Technology — rank among the world's top 10 OSAT providers, collectively holding over 35% market share. Their Chinese counterparts — JCET Group, TongFu Microelectronics, and Tianshui Huatian Technology — have seen revenue growth outpace the industry average, pushing their combined share to 25%.
On a national level, Taiwan retains the top spot with more than 40% of global OSAT output in 2024, despite a slight year-over-year decline. China's share has climbed to 34%, maintaining its upward momentum for a second straight year. The US and South Korea follow at 15% and 4%, respectively.
Overcapacity and price wars drive industry pushback
Following US chip sanctions, Chinese OSAT companies expanded aggressively with state subsidies to localize production. This surge in capacity led to oversupply and a wave of price-cutting that impacted both domestic players and Taiwanese suppliers with operations in China.
In response, major Taiwanese OSAT firms, including ASE and its subsidiary SPIL, PTI, KYEC, ChipMOS, and LPI, have gradually withdrawn from China over the past four years.
US and South Korean OSAT companies that once saw growth potential in China have also pulled back, especially after Donald Trump's return to the White House in January 2025 reignited scrutiny of China-based operations.
Amid mounting competition, a grassroots proposal dubbed the "Anti-Involution Initiative for the Semiconductor Packaging and Testing Industry" has stirred discussion across China's OSAT sector. The document outlines three critical issues — price undercutting, overcapacity, and product homogenization — and urges companies to adopt five self-regulatory principles:
1. Maintain cost discipline and avoid below-cost pricing
2. Prioritize quality and develop strong brand identities
3. Increase R&D spending to drive innovation
4. Enhance supply chain collaboration for mutual gains
5. Uphold industry self-governance and stabilize market order
Despite broad support, analysts caution that the initiative has limited teeth without official backing. Price pressures, especially in the low- and mid-end segments, remain severe.
Taiwanese industry sources report signs of easing price competition in early 2025, with some Chinese firms pivoting toward advanced packaging technologies.
One supplier remarked that the US chip restrictions may have unintentionally sped up China's localization drive, particularly in OSAT equipment and test interface development, "faster than anyone expected."
Article translated by Levi Li and edited by Jerry Chen
