What is OSAT? A Simple Guide to Outsourced Semiconductor Assembly and Test

In this blog, we’ll break down what OSAT is, explore how it fits into the semiconductor supply chain, highlight the top OSAT companies, and discuss how it compares to alternatives like ATMP (Assembly, Test, Mark, and Pack). We’ll also take a look at market trends and answer frequently asked questions.

What is the Outsourced Semiconductor Assembly and Test (OSAT Meaning)?

Outsourced Semiconductor Assembly and Test (OSAT) refers to the process where semiconductor companies contract third-party service providers to handle the assembly, packaging, and testing of their integrated circuits (ICs). These OSAT providers are a crucial link in the semiconductor supply chain, sitting between foundries that manufacture wafers and the final product integration by device manufacturers.

The primary reason for outsourcing is that chip packaging and testing require highly specialized equipment and environments that are capital-intensive. OSAT providers offer economies of scale and technical expertise that help fabless semiconductor companies bring products to market faster and more efficiently.

OSAT companies are typically not involved in the design or wafer fabrication stages but focus solely on post-fabrication processes. Their services often include:

• Wafer bumping

• Die preparation

• IC packaging

• Electrical testing

• Final quality assurance

What Do Outsourced Semiconductor Assembly and Test Companies Do?

In the global semiconductor value chain, OSAT companies occupy a critical post-fabrication role. OSAT companies provide a comprehensive suite of services that transform raw semiconductor wafers into finished ICs that are ready for integration into electronic products. Here's a breakdown of their key functions:

1. Wafer Backgrinding and Dicing

Once wafers are manufactured, they need to be thinned and diced into individual dies. OSAT providers handle this delicate step with precision equipment.

2. Die Attach and Wire Bonding

Each die is attached to a substrate or package using conductive adhesives. Wire bonding or flip-chip technology is used to connect the die to external pins or solder balls.

3. Encapsulation and Packaging

The IC is enclosed in a protective casing to shield it from environmental factors. Packaging types include QFN, BGA, CSP, and more.

4. Testing and Burn-in

ICs are subjected to various electrical tests to ensure functionality and reliability. Burn-in testing simulates operational stress to screen for early failures.

5. Final Inspection and Delivery

OSAT firms conduct final inspections for physical and electrical integrity before shipping the ICs to customers or OEMs.

These steps ensure the chips are protected, functional, and ready for integration into electronics ranging from smartphones to data center servers.

Why Use OSAT?

OSAT providers function as specialized partners that enable the mass production of reliable semiconductor products. Without them, many chip design firms—especially fabless startups—would struggle to bring innovations to market at scale. By bridging the gap between wafer fabrication and final product integration, OSATs enhance efficiency, drive innovation, and ensure the seamless operation of the global semiconductor supply chain.

OSAT helps to meet overflow capacity when upside demand could not be met through internal manufacturing, OSAT enables the supply chain to better meet diverse requirements and deliver robust and reliable solutions to common customers. Semiconductor companies cut their packaging prices by 2% to 5% every year by outsourcing to OSATs. 

• Cost Efficiency

OSAT providers bring economies of scale. By serving multiple clients, they reduce the cost of specialized packaging and testing equipment.

• Technical Expertise

Packaging technologies are constantly evolving (e.g., 2.5D/3D IC, fan-out, chiplet integration). OSAT vendors invest heavily in R&D to offer advanced capabilities.

• Speed to Market

By outsourcing the backend process, semiconductor firms can focus on design and front-end fabrication, accelerating time-to-market.

• Global Flexibility

With facilities around the world, OSAT providers can support customers with regional logistics, compliance, and quick delivery.

What are the Top 10 OSAT Companies in the World?

OSAT refers to a third-party semiconductor package, assembly, and test outsourcing for IDMs (Integrated Device Manufacturers) and fabless companies. OSATs carry out important post-fabrication processes to guarantee chips of desired performance, reliability, and quality. With the growing need for advanced packaging (e.g., 2.5D/3D IC, fan-out), OSATs facilitate cost-saving scaling for AI, 5G, and automotive electronics markets. 

Here is a list of the top 10 OSAT providers globally, based on revenue, technology capability, and market influence (as of 2025):

Global OSAT (Outsourced Semiconductor Assembly and Test) market is largely dominated by ASE Technology Holding Co. Ltd., Amkor Technology, JCET (STATS ChipPAC), SPIL, Powertech Technology Inc, and others. These companies are known for their global scale, advanced packaging technologies (like fan-out and 2.5D/3D IC packaging), and strong partnerships with leading fabless and IDM players.

As new technologies such as three-dimensional (3D) stacking of integrated circuits and others are introduced, the complexity of chip-package interaction is going up significantly and it is increasingly difficult for foundries to deliver end-to-end solutions that meet the requirements of the broad range of leading-edge designs. 

What is the Difference Between OSAT and ATMP in Semiconductor Fabs?

With the convergence of voice, video and data functions into a single platform, semiconductor manufacturers are relying on OSAT companies to boost their ability to achieve these new levels of functionality by pushing integration technology to new levels. 

While OSAT and ATMP (Assembly, Test, Mark, and Pack) are closely related in function, they differ in terms of scope and organizational structure:

In essence, OSAT is a form of ATMP provided as an outsourced service. Many semiconductor giants maintain internal ATMP units but still partner with OSAT vendors to manage capacity and reduce CapEx.

The Positives And Negatives Of A New Semiconductor FAB And OSAT

To deal with this situation a ‘subcontract’ assembly method is employed known as OSAT. OSAT provides third-party IC-packaging and test services. The OSATs are merchant vendors of IDMs and foundries who have internal packaging operations which can be outsourced to a certain percentage of their IC-packaging production to the OSATs. The fabless companies also taking the same route and outsource their packaging to the OSATs and/or foundries.

OSAT Advantages:

• Lower Capital Requirements: No need for heavy investments in packaging and test facilities.

• Faster Time to Market: OSATs accelerate production timelines through established infrastructure.

• Advanced Technologies: Access to cutting-edge packaging options.

• Scalability: Easily adjust to market demand.

OSAT Disadvantages:

• IP Risks: Sharing designs with third parties increases risk.

• Quality Control: Less direct oversight can pose challenges.

• Dependency: Heavy reliance on external partners may affect supply chain resilience.

New FAB Advantages:

• Control: Full authority over processes and IP.

• Customization: Tailored facilities for proprietary technologies.

New FAB Disadvantages:

• Cost: Billions in investment with long ROI periods.

• Time: Years required to build and qualify a fab.

• Operational Complexity: Requires expertise in diverse manufacturing domains.

The Outsourced Semiconductor Assembly and Test (OSAT) Market Trends 2025

The OSAT market, currently valued at $40-45 billion, is poised for significant growth, driven by increasing demand for advanced semiconductor technologies. Service providers that align their capabilities with semiconductor clients’ needs—through advanced packaging, talent management, or ER&D—can capitalize on this expanding market by positioning themselves as strategic partners in the global semiconductor value chain.  

Outsourced semiconductor assembly and test services (OSAT) are the industry term for providing specialist manufacturing and testing services to semiconductor businesses. To assemble, package, and test integrated circuits (ICs) and other devices, semiconductor manufacturers employ OSAT companies. The rising demand for cutting-edge electronic gadgets across various sectors is driving the OSAT market. OSAT suppliers conduct assembly and testing for semiconductor businesses to save money and expedite delivery. Furthermore, the need for these specialized services is driven by complex semiconductor components such as SoC designs and improved packaging methods.

According to Gartner, the combined IC-packaging and test service market, which includes OSATs, foundries, and IDMs, is projected to reach $53.3 billion in 2017. Yole Development forecasts, in 2019, the IC packaging market, which includes all technologies, is projected to reach $68 billion in terms of revenues, up 3.5% over 2018. The OSAT industry is undergoing rapid transformation due to several market and technology drivers:

1. Advanced Packaging Demand

AI, 5G, and HPC applications require compact, high-performance packaging solutions like 2.5D, 3D, and fan-out WLP.

2. Fabless Growth

The rise of fabless companies continues to fuel demand for outsourced services.

3. Globalization and Regional Expansion

To reduce geopolitical risks, OSAT firms are expanding facilities across Southeast Asia, India, and North America.

4. Sustainability

Eco-friendly packaging and energy-efficient testing are emerging priorities.

5. Automation and Smart Manufacturing

OSAT providers are investing in Industry 4.0 technologies for better yield, traceability, and cost efficiency.

The Outsourced Semiconductor Assembly and Test (OSAT) market is experiencing significant growth, primarily driven by the increasing demand for semiconductors in various industries, such as consumer electronics, automotive, and telecommunications. The Global Outsourced Semiconductor Assembly and Test (OSAT) Market is projected to grow at a CAGR of 8.11% from 2024 to 2030, according to a new report published by Verified Market Reports. The report reveals that the market was valued at USD 43.37 Billion in 2023 and is expected to reach USD 74.78 Billion by the end of the forecast period.

Frequently Asked Questions (FAQs)

Q1: Is OSAT only for large semiconductor companies?

A: No, OSAT services are widely used by startups, SMEs, and fabless firms to access advanced manufacturing without heavy investment.

Q2: How do OSAT providers ensure chip quality?

A: They use rigorous electrical testing, visual inspection, and burn-in testing to meet industry standards.

Q3: Can OSAT companies handle advanced nodes like 5nm or 3nm?

A: While OSATs don’t fabricate chips, they do handle packaging and testing for such advanced nodes, often in partnership with foundries.

Q4: What are the risks of relying on OSAT vendors?

A: Risks include IP theft, quality inconsistency, and supply chain disruption, though these are mitigated through strict contracts and audits.

Q5: Are OSAT providers adopting AI and automation?

A: Yes, many are integrating AI-driven inspection, predictive maintenance, and smart packaging lines to enhance productivity.

Conclusion

Outsourced Semiconductor Assembly and Test (OSAT) providers are a vital part of the global semiconductor ecosystem, enabling innovation and cost-efficiency for companies of all sizes. As technology advances and demand for specialized packaging increases, OSAT firms will continue to play a critical role in shaping the future of electronics. OSAT providers are the unsung heroes of the semiconductor supply chain, ensuring that raw silicon becomes a finished, functional component ready for integration. As semiconductors become more complex and the demand for AI, automotive, and IoT applications rises, OSAT companies will play an even bigger role in shaping the future of tech.

In today’s fabless semiconductor landscape, OSAT providers are indispensable. Even tech giants like Apple rely on OSAT partners, such as ASE in Taiwan, to package their processors. By outsourcing these back-end processes, chip designers and wafer fabs can optimize efficiency, creating a highly specialized global supply chain—where chips are designed in one country, fabricated in another, and assembled elsewhere. As semiconductor technology advances, the demand for smaller, more powerful, and energy-efficient chips has skyrocketed, making OSAT firms more crucial.

For engineers, hardware designers, and students, understanding OSAT services is key to grasping the full lifecycle of semiconductor production. Early collaboration with OSAT partners can optimize manufacturability and yield, while career opportunities in this field offer exciting prospects at the intersection of materials science, electronics, and advanced manufacturing. As the industry pushes the boundaries of what’s possible, OSATs will continue to play a pivotal role in shaping the future of technology—one chip at a time.

Read More:

• Key Factors for Purchasing Semiconductor Components
• Semiconductor | Definition, Examples, Types, Uses, Materials, Devices, & Facts
• What is the appropriate level of CapEx relative to the semiconductor market?

Written by Jack Zhang from AIChipLink.

AIChipLink, one of the fastest-growing global independent electronic component distributors in the world, offers millions of products from thousands of manufacturers, and many of our in-stock parts is available to ship same day.

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