Advanced chip packaging to reach $28 billion by 2026

$28 billion in capital spending on advanced chip packaging is expected by 2026, according to estimates from research firm Yole Group reported by Reuters. The firm forecasts that revenue from advanced packaging will overtake traditional approaches in 2026, a shift that follows a sharp rise in demand for processors used in artificial intelligence workloads.

The central consequence is clear: surging demand for AI processing hardware has redirected billions of dollars toward advanced packaging, turning a previously overlooked stage of semiconductor production into a critical capacity bottleneck. Capacity limits at existing facilities have pushed major customers such as Nvidia and AMD to broaden their supply chains alongside Taiwanese partners.

Who is building capacity

TSMC remains dominant in the most advanced packaging technology, including CoWoS, an architecture that mounts separate silicon pieces such as processors and memory onto a common substrate to enable extremely high-speed data exchange. Reuters reports that TSMC has filled its factory capacity, prompting Nvidia to commit billions of dollars to develop CoWoS lines at SPIL, a unit within ASE Technology.

Powertech Technology is also moving to capture market share. The company plans a joint production line with Broadcom in Singapore, targeting a 2028 start and announcing a $400 million investment to support a panel-based packaging approach. "Everyone is looking for a solution outside of TSMC. They do not want to be completely dependent on TSMC," D.K. Tsai, chairman of Powertech Technology, said. Jim Lin, senior vice president of Powertech Technology, added: "The most important issue right now is capacity."

Former Intel chief executive Pat Gelsinger commented on the shift in emphasis toward packaging, saying: "Packaging was always the thing you never worried about." Gelsinger estimated that advanced packaging could eventually account for as much as half the value of a semiconductor product, noting that modern processors can integrate as many as 10 or even 20 separate silicon components.

AMD's chief executive said: "I think CoWoS and advanced packaging for high-performance compute will be very important for us in the future. TSMC has been an outstanding partner in advanced packaging and we will continue to work closely together. Yes, overall we need more capacity."

Expanding this infrastructure has also drawn makers of semiconductor production equipment into the market. Suppliers such as Tokyo Electron and Applied Materials are developing larger-scale, specialized tools to meet the needs of advanced packaging production.