[DigitalToday reporter Hyunwoo Choo] China’s three biggest semiconductor packaging and testing (OSAT) companies have entered a trillion-won-scale expansion race, driven by a surge in demand for AI semiconductors and triple-digit profit growth.

A report by the South China Morning Post (SCMP) on the 26th said Jiangsu Changjiang Electronics Technology (JCET), Tongfu Microelectronics and Huatian Technology together announced more than 15 billion yuan ($2.2 billion) in capacity expansion investment in the first half of this year. Packaging and testing is the final stage of semiconductor manufacturing. The investment focused on expanding advanced packaging capacity for AI accelerators.

JCET posted first-half net profit of 845 million yuan, up 79.4 percent from a year earlier. Revenue hit a record high of 19.5 billion yuan. It said in June it would build a 7.8 billion yuan advanced packaging plant in Shanghai’s Lingang. Tongfu expects net profit to jump by as much as 337 percent. A partnership with AMD on next-generation processors drove growth, and it will use 888 million yuan of a 4.2 billion yuan paid-in capital increase for memory capacity expansion. Huatian also posted net profit of 813 million yuan, up 259 percent, and will build a memory plant in Nanjing with annual capacity of 430 million units for 3 billion yuan.

The expansion race is seen as the result of advanced packaging emerging as a core semiconductor technology as Moore’s Law-driven process miniaturisation hits limits, compounded by China’s push for technological self-reliance. China Securities said the value of advanced packaging is dozens to hundreds of times higher than before. It pointed to Nvidia’s B200, saying its CoWoS cost is comparable to the cost of advanced wafer manufacturing. With TSMC’s CoWoS capacity tight, outsourcing providers have also gained greater pricing power in negotiations.

SJ Semiconductor and Fourehope Electronics also embarked on expansion plans of 5 billion yuan and 10.3 billion yuan, respectively. Taiwan’s ASE raised capital spending to $10.5 billion from $8.5 billion.