On July 31, the US Department of Commerce officially announced, under the CHIPS and Science Act, an investment of $1.5 billion into domestic advanced packaging to build infrastructure covering manufacturing, R&D, and validation. The news instantly fueled US market enthusiasm for semiconductor back-end processes, with advanced packaging concept stocks rallying. Experts widely view this as a key signal that US semiconductor policy is shifting from "manufacturing-focused" to "manufacturing + packaging/testing equally emphasized."

Policy Implementation: Where Does the $1.5B Go?

According to the Department's plan, the $1.5 billion will be allocated in two directions: $1 billion for building two advanced packaging pilot fabs in the US, focusing on breakthroughs in 2.5D/3D integration and Chiplet heterogeneous integration; the other $500 million will establish a "National Advanced Packaging Innovation Center," partnering with universities, national labs, and semiconductor companies to conduct frontier packaging R&D and provide tape-out validation platforms for SMEs. The Department requires all funded projects to achieve mass production capability by 2028.

Industry insiders view this as a critical catch-up step for reshoring US semiconductor manufacturing. Over the past three decades, global advanced packaging capacity has been highly concentrated in Asia, with Taiwan, South Korea, and Southeast Asia accounting for nearly 80% of global packaging and testing capacity. Companies like TSMC, ASE, and Amkor have led the technological evolution from traditional packaging to advanced solutions like CoWoS and InFO. The US, by contrast, has relatively weak packaging capabilities—a shortfall that has become a potential bottleneck in the US semiconductor supply chain, especially as AI chips increasingly rely on advanced packaging.

How Will US Stocks React? OSAT Sector Rises in Tandem

Following the announcement, US markets voted with real money. In after-hours trading, advanced packaging equipment suppliers such as Applied Materials (AMAT), Lam Research (LRCX), and packaging materials provider Carpenter Technology all saw gains of 2% to 4%. Amkor, seen as the OSAT leader, surged as much as 7% on expectations that the company will become a major player in domestic capacity build-out.

In fact, Amkor has been actively expanding in the US in recent years. In 2025, its advanced packaging plant in Peoria, Arizona, is set to be one of the largest packaging and testing facilities in the country, with total investment reaching $3 billion. The new federal subsidies could ease project funding pressure and attract more customers to lock in capacity early. Additionally, Intel and Samsung are actively incorporating advanced packaging capabilities into their US fabs, likely benefiting from the ecosystem synergy created by this policy.

Industry Logic: Why Is Advanced Packaging a Critical Chokepoint?

As process scaling approaches physical limits, advanced packaging has become a core means of boosting chip performance. For example, in NVIDIA's latest AI accelerator, the communication between its HBM high-bandwidth memory modules and GPU die is enabled by CoWoS (CoWoS-S) 2.5D packaging. With exponentially growing compute demands from AI models, TSMC's CoWoS capacity has been undersupplied for multiple quarters, with lead times reaching 18 months.

The US's heavy subsidy for advanced packaging reflects recognition of the "barrel effect" in the industry chain. The US leads in chip design, materials, and manufacturing equipment but relies heavily on Asian suppliers for packaging. Under extreme geopolitical scenarios, this shortfall could prove more damaging than chip manufacturing itself. That is why the US National Semiconductor Technology Center (NSTC) has repeatedly urged including advanced packaging in strategic frameworks. The Department's substantive funding now marks formal policy confirmation.

From a global competitive perspective, the US entry will accelerate technological diversification in advanced packaging. Currently, the global advanced packaging market is a "three-way standoff": TSMC dominates high-end AI chip packaging with CoWoS and InFO; ASE (ASE Technology) covers 2.5D/3D and fan-out packaging comprehensively; and Amkor, leveraging both IDM and OSAT roles, operates across North America, Malaysia, and Vietnam. If the US industry fund materializes, it could nurture local newcomers and disrupt the existing oligopoly.

Potential Impact on Asia-Pacific and Southeast Asian Industry Landscape

US strengthening of domestic packaging capacity does not necessarily mean a blow to the Asia-Pacific chain. On the contrary, the policy's spillover effects may pull some high-value-added processes back to the US, while accelerating the shift of traditional and mature-node packaging to Southeast Asia. Malaysia, Vietnam, and Thailand—with lower labor costs and tax incentives—are emerging as the "second tier" of global OSAT capacity. Penang and Kedah in Malaysia, for instance, have formed packaging industry clusters, with ASE and Amkor both making huge local investments.

Industry analysts note that new US packaging fabs will focus on high-end applications such as HBM and Chiplet, while the Asia-Pacific region will continue to handle large-scale mass production and cost-sensitive packaging. This division of labor—"advanced high-end in the US, volume production in Asia"—will become increasingly clear over the coming years. For domestic enterprises, this means securing a more precise positioning: either climbing the technology pyramid or digging deeper into cost advantages.

Investment Strategy: Finding Beneficiaries with Certainty

In the short term, this policy directly benefits three types of US-listed targets. First, packaging equipment suppliers such as Applied Materials, Kulicke & Soffa (K&S), and BESI (French, but with US ADRs). Second, packaging materials suppliers, including substrate, molding compound, and carrier board makers. Third, Amkor, viewed as a public-service-style OSAT.

However, institutions also caution that the subsidy amount remains a "drizzle" relative to the overall US semiconductor industry, and the rollout timeline is long. Investors should focus on whether companies secure substantive project shares and whether their technology roadmaps align with policy direction. Long term, advanced packaging is a growth track with certainty in the post-Moore era, and the US market is expected to assign higher valuation premiums to the sector for years to come.

Summary

The $1.5 billion US investment in advanced packaging is both a remedial move and a frontier expansion. For US markets, this policy signal will redefine the valuation logic of the OSAT sector—from "foundry supporting actor" to "strategic infrastructure." Driven by AI demand and geopolitical forces, the era of advanced packaging has just begun.