AI Demand Drives Billions in Investments Toward Advanced Chip Packaging

Advanced chip packaging is emerging as a critical part of AI semiconductor manufacturing, attracting billions of dollars in investments from chipmakers and suppliers globally. As demand for artificial intelligence chips outstrips available packaging capacity, companies are racing to expand production and develop new tools.

Historically, packaging served mainly to protect chips and provide electrical connections to circuit boards. However, as it has become harder and costlier to win performance gains by shrinking and adding transistors, more chip designers are using advanced packaging to integrate multiple processors and memory into a single package. This allows the system to work together faster, which is especially important for AI chips that need to shuffle vast amounts of data.

Former Intel chief executive Pat Gelsinger noted that advanced packaging could eventually account for as much as half the value of a chip product, as today's graphics and central processing units can integrate 10 or more chips. Research firm Yole Group forecasts that revenue from advanced packaging will overtake traditional routes for the first time in 2026, with capital spending nearing $28 billion.

Taiwan's TSMC currently dominates the most sophisticated advanced packaging technology, known as chip-on-wafer-on-substrate, or CoWoS. This technology links separate pieces of silicon on a shared base and is widely used by Nvidia, AMD, Broadcom, and cloud companies developing their own AI chips.

However, capacity limits at TSMC have pushed chip designers to seek alternative suppliers. Nvidia is providing billions of dollars in financing to expand CoWoS packaging capacity at Siliconware Precision Industries, a unit of Taiwan's ASE Technology. The funding supports new factory space and equipment, according to an industry executive.

The capacity constraints have also opened opportunities for smaller suppliers like Taiwan's Powertech Technology. Powertech is investing in panel-level packaging, which uses rectangular panels instead of round wafers to accommodate more chips per production run and reduce material waste. Powertech is working with AMD and Broadcom on the technology and plans to invest $400 million in an advanced packaging joint venture with Broadcom in Singapore, with production potentially beginning in 2028.

Other industry players are also making major moves. AMD has unveiled investments of more than $10 billion across Taiwan's semiconductor industry, including partnerships with ASE, SPIL, and Powertech. Meanwhile, TSMC is developing its own panel-based technology called chip-on-panel-on-substrate, or CoPoS, having built a pilot line with production expected within a couple of years.

The packaging boom is also creating a new market for semiconductor equipment makers. Equipment providers such as Tokyo Electron and Applied Materials note that advanced packaging technologies are growing rapidly, with panel-level and related formats becoming a near-term focus for the industry.

"The shift toward advanced chip packaging highlights how hardware manufacturing must evolve to support the intense demands of artificial intelligence workloads. When a foundational part of a supply chain faces bottlenecks, it creates immediate opportunities for alternative suppliers, joint ventures, and equipment makers to innovate. For businesses operating in high-performance computing, diversifying manufacturing partnerships and investing in scalable packaging technologies will be critical to overcoming capacity constraints in the coming years." — Dr. Shishir Gupta, Founder & CEO, StartupLanes