U.S AEP Success Rides on Navigating Three Key Market Trends

Estimated reading time: 6 minutes

The U.S. advanced semiconductor packaging strategy is beginning to take a more recognizable shape. Recent developments point to three interconnected trends: advanced packaging is moving closer to traditional electronics assembly, high-bandwidth memory (HBM) packaging is becoming part of U.S. industrial policy, and photonics is emerging as another important layer of heterogeneous integration.

These trends could strengthen the U.S. position in the global advanced packaging economy. They also illustrate that much of the underlying supply chain remains incomplete. The U.S. is building more pieces of the puzzle at home. But the United States does not need to reproduce every part of Asia’s semiconductor supply chain to benefit from advanced packaging. It does, however, need to control enough critical integration capabilities to prevent new packaging technologies from creating a different set of foreign dependencies. As a strategy, this creates specific opportunities. Let’s look at the trends and their implications.

Packaging Moves Beyond the Fab

The first trend can be seen in the tagline for the 2026 IMAPS International Symposium on Microelectronics in Boston last month. The conference theme, “Intelligent Packaging for the AI Era: Heterogeneous Integration and Photonics,” encompassed 3D packaging, HPC and AI architectures, solder bumping and bonding, materials, equipment, metrology, and package design—all at the same time.¹ Such breadth of coverage at the show demonstrated just how much advanced packaging depends on manufacturing disciplines that extend beyond semiconductor wafer processing.

This need for multiple manufacturing disciplines broadens the opportunity for business growth. Since packaging increasingly involves materials, interconnect, bonding, inspection, thermal management, and assembly technologies—areas in which an ecosystem of service providers can develop in support of leading-edge wafer fabs—it’s not hard to imagine the development of boutique shops specializing in parts of the process.

Suppliers are responding to the demand, but with mixed results. For example, the IMAPS conference schedule showed Indium Corp. presenting new materials for heterogeneous integration, including ultra low residue flip-chip fluxes, fluxless soldering materials, and solder paste intended for ultra fine-pitch applications.² 

On the other side of the coin, however, Jan Pedersen’s recent article details how board materials are in short supply due to demand for AI and data center products. These shortages, according to Pedersen, are complicating the manufacture of even consumer-level conventional printed circuits.

Of course, strengthening one piece of the packaging chain does not eliminate dependencies elsewhere. But understanding where the gaps are is a good starting point. A market study released Sept. 28 by Research and Markets identifies HBM, substrates and interposers, advanced packaging services, bonding materials, and thermal management among the important requirements for AI semiconductor production. It also highlights emerging technologies, including hybrid copper-to-copper bonding, glass-core substrates, panel-level packaging, and in-package cooling.³

HBM may be one of the three emerging trends, but it also provides perhaps the clearest example of the remaining capability gaps. SK hynix is building a more than $4 billion advanced packaging operation in West Lafayette, Indiana. The project seems well-conceived, combining an HBM advanced-packaging production line with an R&D testbed, along with connections to Purdue University.⁴ Mass production at the facility is targeted for the second half of 2029.

That investment strengthens the U.S. position by increasing the share of AI semiconductor manufacturing on U.S. soil and connecting production to domestic research and workforce development. But mass production in 2029 also reveals the vulnerability. The facility represents future capacity rather than capacity available today. Clearly, the U.S.-based advanced packaging ecosystem, while making progress, still has a way to go.

The third trend—photonics—could push packaging even further toward system-level integration. Semiconductor system design has reached a point where data movement is the bottleneck; the ability to move data from chip to chip is as important as the ability to process it, and optical interconnects provide higher bandwidth and longer range than traditional electrical pathways.

Contributing to the photonics conversation, ASMPT has been highlighting 2.5D/3D packaging, thermocompression bonding, hybrid bonding, photonics, and co-packaged optics among the technologies it plans to showcase at SEMICON West. At the same time, California-based Arteris is developing technology intended to manage communication across multi-die chiplet architectures.

All three trends mean that the package is becoming intertwined with system architecture. Chiplets, HBM, optical communication, and advanced interconnect must function together rather than as isolated components. The handling of data between chips is being asked to match the onboard processing speed.

For the U.S., these trends create an opportunity to compete beyond semiconductor fabrication. Research, architecture, materials, equipment, packaging, and system integration can all contribute to the economic value of an advanced semiconductor system. Historically speaking, it’s this type of technology leapfrogging that the U.S. is good at.

This specialized manufacturing structure for supporting heterogeneous integration, however, creates more points of dependence. Every additional specialized material, substrate, memory stack, bonding process, optical component, and piece of manufacturing equipment becomes another part of the supply chain that must be available at the required performance, volume, availability, and cost.

The Challenge of Coordinating U.S. Investment

But how coordinated is the U.S. advanced packaging effort? It can be described as well thought out but inconsistently administered. In November 2023, the CHIPS for America announced a commitment of approximately $3 billion for the National Advanced Packaging Manufacturing Program (NAPMP), outlining six priorities:

• Materials and substrates
• Equipment and processes
• Power delivery and thermal management
• Photonics and connectors
• Chiplets
• Co-design

The plan included pilot manufacturing and workforce development, along with technology transfer into domestic manufacturing.

Federal research investment also continues, but the administration of the National Semiconductor Technology Center (NSTC) was transferred to the Department of Commerce. As a result, an audit found the loss of at least two years of planning and $64.1 million in administrative costs. While government support remains in place, these shifting administrative priorities have created an inconsistent environment for ongoing investment.⁵

Domestic Capacity, Global Dependencies

In June 2026, TSMC and Amkor announced a 10-year agreement establishing a framework for TSMC to procure advanced packaging and testing services from Amkor in Arizona.⁶ In July, Amkor announced a $1.5 billion partnership with NVIDIA that included supporting the expansion of U.S. packaging capacity and alignment of technology roadmaps.⁷ As previously mentioned, SK hynix’s Indiana project also combines planned HBM packaging production with an R&D testbed and a research agreement with Purdue University.

It's important to point out that domestic manufacturing capability already exists. Intel’s Rio Rancho, New Mexico, operations perform advanced packaging and chiplet integration. It documents manufacturing processes with approximately 2,700 employees and 500 suppliers. Existing capability, however, does not suggest sufficient capacity.⁸

New capacity additions remain scheduled for future production. Tellingly, all new U.S. capacity retains overseas inputs. Amkor’s published Arizona plan targets production beginning in early 2028. SK hynix promises to begin mass production of HBM in Indiana in the second half of 2029 and explicitly states that wafers manufactured in Korea will be shipped there for packaging and testing. Micron’s Singapore HBM packaging facility is expected to contribute meaningfully to supply in 2027. For all the work to create standalone domestic supply chains, the electronics manufacturing industry will persist as a global economic ecosystem.

Faced with this, simply reshoring electronics manufacturing to the U.S. isn’t a practical goal for a U.S. advanced electronic packaging strategy. Nor is choosing continued dependence on overseas providers.  Advanced packaging also multiplies the number of technologies that must smoothly come together to manufacture those systems; extreme care must be taken to manage these supply chain complexities. What we see in these three trends, and in the implementation details behind them, is that the U.S. is gradually filling gaps in an increasingly complex manufacturing chain.

The encouraging development is that advanced packaging offers multiple complementary ways to participate in the value created by AI and heterogeneous integration, without going head-to-head with global leaders in semiconductor fabrication—provided that future administrations keep a steady hand on the planned strategy.

References

1.  IMAPS Symposium 2026.
2. Indium Corporation Experts to Present Advanced Packaging, AI, and High-Performance Computing Materials Solutions at IMAPS Symposium, Sept. 25, 2026.
3. “High-Bandwidth Memory (HBM) and Advanced Packaging Materials Market for AI Semiconductors, 2027-2037 | Hybrid Bonding, Glass Substrates, and Advanced Cooling Unlock Growth,” Research and Markets, Sept. 28, 2026.
4. “SK Hynix Indiana Groundbreaking: Bringing Next-Generation AI Memory to the U.S.,” Sept. 17, 2026.
5. “Semiconductors: Commerce Needs Plan to Meet CHIPS for America R&D Requirements,” U.S. Government Accountability Office, GAO, August 2026.
6. “TSMC and Amkor Technology Announce Long Term Partnership to Accelerate Advanced Packaging in the United States,” TSMC and Amkor Technology, Amkor Technology, June 16, 2026.
7. “Amkor Technology Announces Strategic Partnership with NVIDIA to Expand Advanced Packaging and Test for Next-Generation AI Infrastructure,” Amkor Technology, Amkor Technology, July 23, 2026.
8. “Intel’s U.S. Advanced Packaging Enables Next-Generation AI Semiconductors,” Intel Foundry, Intel Newsroom, July 29, 2026.