ASE boosts advanced packaging outlook as AI chip demand surges

ASE Technology Holding is betting that the hardest part of the AI hardware buildout is no longer just making faster chips, but putting them together. Taiwan’s largest chip packaging and testing company said its leading-edge advanced packaging business should rise 10% in 2026 to more than $3.5 billion, a sharper outlook than the $3.2 billion target it set in February.

That upgrade matters because advanced packaging has become one of the few true chokepoints in the AI supply chain. High-performance processors increasingly depend on complex packaging methods to combine multiple chips and memory parts into one system, and ASE’s expanding forecast suggests that demand for those services is still running ahead of supply. The company’s Siliconware Precision Industries unit remains a major packaging supplier for Nvidia’s AI chips, placing ASE directly in the path of the strongest part of the semiconductor cycle.

ASE’s first-quarter numbers reinforced that momentum. Net revenue reached NT$173,662 million, up 17.2% from a year earlier, while net income attributable to shareholders rose to NT$14,148 million from NT$7,554 million a year earlier. The company’s shares have climbed 95% this year, far ahead of the broader Taiwan market’s 36% gain, even after slipping 1.4% before the earnings update.

The company is also spending to make sure it can keep up. Chief Financial Officer Joseph Tung said ASE planned to add another $1.5 billion in machinery capital expenditure in 2026, on top of last year’s $3.4 billion, while buildings and facilities spending would stay near last year’s roughly $2.1 billion. That follows a separate increase of $900 million for buildings and infrastructure and $600 million for machinery, a sign ASE expects demand to remain firm enough to justify more capacity rather than waiting for the cycle to cool.

ASE’s broader expansion plans underline how strategic the packaging race has become. On April 10, the company broke ground on a new facility in Renwu Industrial Park in Kaohsiung, with total investment exceeding T$108.3 billion. The site will focus on advanced semiconductor testing for AI, high-performance computing, 5G communications and automotive electronics, and first-phase operations are scheduled for April 2027, followed by a second phase in October 2027. Industry estimates place the project’s eventual annual output value at as much as T$177.3 billion.

TSMC is also expanding its CoWoS packaging capacity, but ASE’s spending spree shows the pressure is not limited to one company. As demand for high-end AI processors spreads deeper into the supply chain, packaging capacity may determine who can ship, who can wait, and who can charge more.