Can Japan’s Consortium Reshape the Semiconductor Packaging and Testing Landscape? 

Japan’s semiconductor supply chain has long been plagued by an “imbalanced focus,” with excessive emphasis on front-end processes.

While Kumamoto welcomes TSMC and Hokkaido prepares for Rapidus, making front-end wafer manufacturing the spotlight, back-end packaging and testing remain scattered across small local factories in Kyushu and Shikoku—80% of which are small and medium-sized enterprises (SMEs) with fewer than 100 employees. 

Now, these fragmented forces are beginning to unite. The “J-OSAT” alliance, established in April, brings together around 30 companies, including AOI ELECTRONICS and Amkor Technology Japan, totaling 15,000 employees, under a single platform for the first time to share capacity, customer structures, and cost data. 

According to the plan, starting in the summer of 2025, the alliance will launch substantive collaboration across five working groups: automation, data connectivity, talent development, equipment upgrades, and joint procurement.

It also plans to apply for government subsidies of 10–20 billion yen to fund the introduction of next-generation packaging and testing equipment. 

Makoto Sumida, the alliance’s chairman, offers a straightforward calculation: if the 30 companies share a platform and engage in centralized procurement, overall back-end costs could be reduced by 20%, with the required investment being just 1% of a single front-end wafer fab expansion.

For Japan’s key products like automotive and industrial chips, which still rely on 28nm and above nodes, every cost reduction means more orders staying domestically. 

What Does This Mean for Semiconductor Manufacturing?

The emergence of J-OSAT evokes memories of Japan’s VLSI consortium in the 1980s, but the context is vastly different. Back then, the goal was to catch up with U.S. DRAM; today, it is to avoid being left behind by TSMC, ASE, and JCET. 

Though back-end technology is not as capital-intensive as EUV lithography, it is equally constrained by scale and capital: the top five global OSAT players hold over 80% of the market share, leaving shrinking room for Japan’s “small and scattered” players. Whether the alliance can truly bridge this gap depends not on slogans but on three critical steps. 

First, whether subsidies materialize. If the Japanese government offers only symbolic funding, equipment upgrades will remain an empty promise. Following overseas precedents where subsidies cover up to 70%, at least tens of billions of yen in real investment are needed. 

Second, whether data sharing can overcome commercial secrecy barriers. Back-end factories have long been bound by IDM confidentiality. Without a trusted firewall, joint procurement and capacity sharing will be impossible. 

Third, whether talent mobility can break geographical barriers. SMEs in Kyushu and Shikoku chronically struggle to attract and retain engineers. Without a unified training and rotation system, automation upgrades will still be hindered by the “human factor.” 

From the perspective of China’s packaging and testing industry, the short-term impact of Japan’s J-OSAT alliance is limited. However, attention should be paid to its potential competitiveness gains in specific areas (e.g., automotive-grade chips).

In the long run, the success or failure of J-OSAT will provide China with a case study on “how to consolidate a fragmented industry.” Yet, China’s core competitiveness in packaging and testing still lies in scale, speed, and full supply chain integration.