Background
The semiconductor industry is transitioning into the ‘Foundry 2.0’ era due to the rise of AI, demanding deep integration of wafer fabrication, advanced packaging, and testing. In the Chinese market, there is a shortage of domestic advanced packaging and testing capacity for AI computing chips, with an approximate 10% supply-demand gap for CoWoS. OSAT (Outsourced Semiconductor Assembly and Test) providers like ASE are indispensable in alleviating bottlenecks in AI chip design and manufacturing. Headquartered in Taiwan, ASE has been a global leader in semiconductor assembly and test since its founding in 1984, employing approximately 48,000 people across over 50 smart factories, offering a wide range of turnkey solutions from package design to wafer-level processing, system-in-package integration, and testing.
Key Findings
ASE Technology Holding has increased its 2026 capital expenditure to a record US$10.5 billion, announcing an ambitious goal to double the revenue of its leading-edge advanced packaging (LEAP) business by 2027. This strategic move addresses the explosive growth in AI chip demand and the corresponding strong need for advanced packaging capabilities. The company’s robust performance, with Q2 2026 consolidated net revenues reaching NT$126,148 million (approx. US$3.92 billion), a 36.3% year-over-year increase, underpins this accelerated investment, with packaging operations accounting for approximately 52% of total revenues.
Technical Details
- Growth of LEAP Business: ASE’s LEAP business is outperforming previous forecasts, driven by strong demand from AI-driven new applications, hardware, and industrial, power, connectivity, and storage devices. To meet this demand, ASE has raised prices for various advanced packaging technologies, including CoWoS and FoCoS, by over 20%, reflecting increased raw material costs and capital expenditures.
- Mass Production of FOPLP: Central to ASE’s advanced packaging strategy is its 310x310mm fully automated Fan-Out Panel-Level Packaging (FOPLP) production line, expected to commence mass production in Q1 2027. Panel-level manufacturing enables larger-scale and more cost-efficient packaging than traditional wafer-level processes, making FOPLP a critical technology for integrating large chiplets, especially for AI and High-Performance Computing (HPC).
- Outlook for CPO and Glass Substrates: Initial low-volume deployment for Co-Packaged Optics (CPO) is anticipated by the end of 2026. However, mass production of glass substrate technology is not expected within the next 12 months. ASE’s VIPack platform is built upon six technology pillars, including fan-out, embedded integration, 2.5D and 3D architectures, Through-Silicon Vias (TSV), and CPO, providing comprehensive solutions for next-generation semiconductors.
Strategic Significance & Outlook
ASE’s record capital expenditure and aggressive expansion strategy for its LEAP business will strengthen its leadership in the AI era. The mass production of FOPLP will enhance the efficiency and scalability of AI chip manufacturing, contributing to alleviating market supply shortages. Furthermore, the early adoption of innovative technologies like CPO underscores the importance of optical interconnects in future AI and HPC infrastructures. ASE’s comprehensive technology portfolio and substantial investments are expected to drive innovation in back-end semiconductor processes and play a central role in accelerating the development of AI technology.
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