Korean OSAT companies suffers from low factory operation rates

South Korean outsourced semiconductor assembly and test (OSAT) companies are seeing the operation rate in their factories drop steeply from the recent downturn of the global chip market.

The downturn has caused customer orders to plummet and these companies have operation rates below 50%, sources said.

OSAT companies handle the packaging and testing of completed chip wafers.

In South Korea, they are Hana Micron, SFA Semiconductor, Nepes, and LB Semicon.

These companies’ customers include Samsung and SK Hynix. High demand from these chipmakers helped the OSAT companies record strong earnings up to the first half of 2022.

But their operation rates of 70% to 90% dropped by 10% on average starting in the third quarter of last year.

The drop became steeper earlier this year, causing their operation rates to plummet below 50%.

Sources said these rates were unprecedented as operation rates maintained certain levels even during past downturns.

They added that the steep decline also probably has to do with South Korean OSAT companies relying heavily on certain customers and product categories.

Taiwanese OSAT company ASE, for example, maintained an 80% operation rate up to late last year thanks to having customers such as Apple, Qualcomm, and Nvidia.