Taiwanese Outsourced Semiconductor Assembly and Testing (OSAT) Faces Largest Expansion Boom Ever

Demand for AI chips is propelling Taiwanese outsourced semiconductor assembly and test (OSAT) players into a new round of capacity expansion. Citing industry sources, Digitimes reports that Taiwanese OSAT companies are successively increasing their high-end manufacturing capacities, with total capital expenditures projected to reach a historic high of NT$400 billion by 2026.

The increase in AI and high-performance computing chip orders has made the packaging and testing processes more complex, and the required space for production lines, machinery, and cleanrooms has expanded accordingly. The factories themselves have also become part of the capacity competition. TSMC Group's ASE Technology Holding Co., Ltd. and SPIL together account for over half of the investment ratio, while Powertech Technology Inc. and Kyocera Corporation enter the second tier with investments of NT$5 billion each, and SilTech has increased its capital expenditure from NT$5.9 billion to NT$8.8 billion.

The scramble for factory space is the first pressure to emerge. Reports mention that ASE Technology Holding Co., Ltd. and SPIL have secured over 10 new sites in Taiwan over the past few months, and Kyocera Corporation has finalized multiple factory leases since the end of 2025, aiming to increase total production capacity by 30% to 50% by the end of 2026.

Having funds in place does not equate to immediate production capacity. Industry insiders point out that the demand for advanced packaging and testing equipment has exceeded expectations, with a queue already forming upstream in the supply chain, and some machinery delivery times have been extended to over a year, resulting in the postponement of OSAT's new capacity schedule. Powertech Technology Inc. is a typical case— the company originally planned to add 6,000 pieces of FOPLP capacity by 2026, but due to extended equipment delivery times, it changed to first opening 3,000 pieces, with the remaining 3,000 pieces postponed to 2027.

Xintec also faces similar constraints. The company previously mentioned that its new factory in Longtan will take on AI ASIC test orders, but the delivery time for wafer testing equipment has been extended to 6 to 8 months, thus postponing the production start time from the second quarter of 2025 to the third quarter of 2026.