Foundryecosystem Report: Capacity Shortages, Fabs, ASE, ATE
This report provides a snapshot of the latest announcements in the foundry, packaging and test markets
By Mark LaPedus
The foundry industry is an important part of the semiconductor business. IC packaging and test are also important.
Nearly every week, there are several new and major announcements in the semiconductor foundry, packaging and test markets.
To help the industry, Semiecosystem has released the latest edition of “The Foundryecosystem Report.” This report provides a snapshot of the latest announcements in the foundry, packaging and test markets. (The report is free for readers.) Here’s what this report covers:
1—Wanted: More AI chip foundry capacity
2—DDIC price hikes?
3—Micron expands in Taiwan
4—New InP fab
5—Arm’s CPU move
6—Made-in-China MCUs
7—ASE-AEM deal
8—ADI’s Thai plant
9—Advantest’s R&D facility
10—CPO tester
Wanted: More AI chip foundry capacity
AMD, Broadcom, Nvidia and many others are seeing enormous demand for their respective AI chips in the marketplace. But most, if not all, AI chip vendors are unable to meet demand, and for good reason: There is a shortage of leading-edge foundry capacity in the worldwide market.
TSMC, Samsung and other leading-edge foundry vendors are scrambling to expand their manufacturing capacities. But foundry vendors can’t keep up with the demand.
The larger AI chip vendors, such as AMD, Broadcom and Nvidia, are scrambling to secure enough foundry capacity. The startups are in the same boat, but they also face a slew of challenges here.
“Hyperscalers are not the only AI companies jockeying for fab production. Startups are being constrained by memory availability and fab access for their AI processors, and also by CPU availability. The supply chain becomes more critical to success than the design and the product. The AI processor startups have been phenomenally successful in raising capital, averaging $190 million, giving them a fighting chance to attract talented engineers and programmers. But on the manufacturing side, constraints are tighter. The fabs and fabricators have become the bottleneck to the industry’s growth, not customer demand, not clever and powerful designs, but nuts and bolts and blobs of silicon,” said Jon Peddie, president of Jon Peddie Research, in a blog.
“Startup AI chip companies face a structural disadvantage that capital alone cannot fix. Hyperscalers hold multi-year fab contracts, priority CoWoS allocations, and HBM supply agreements. Startups get whatever capacity remains. The best chip design in the market delivers zero revenue without a wafer start. The competitive moat in AI silicon has shifted from architecture to supply chain—and most startups are on the wrong side of it,” Peddie said.
“The AI processor market has reached an inflection point that inverts conventional startup logic. Historically, raising capital and recruiting engineers determined which companies won. Today, fab allocation and memory supply agreements determine who ships. TSMC, Samsung, and SMIC have become the de facto gatekeepers of AI hardware commercialization. Startups that cannot secure long-term wafer contracts before tape-out will find themselves technically competitive but commercially stranded. The constraint is not innovation—it is silicon, substrate, and HBM—and hyperscalers have locked up most of it,” he added.
DDIC price hikes?
Display driver ICs (DDICs) don’t get a lot of attention, but they are important. DDICs are semiconductors, or chips, that control the switching functions inside a flat-panel display as well as other types of displays. Cars, computers, monitors, smartphones, TVs and other products incorporate displays, or screens, in one form or another.
DDICs are manufactured in older 200mm and 300mm fabs using more mature processes, namely 90nm to 28nm high-voltage technologies. DDICs don’t require advanced processes.
The problem? “Rising semiconductor foundry and outsourced semiconductor assembly and test (OSAT) costs since 2025, along with continued increases in precious metal prices, are placing growing cost pressure on display driver IC (DDIC) suppliers,” according to TrendForce, a research firm.
In response, some vendors have recently begun discussions with panel makers to evaluate the possibility of adjusting DDIC pricing, according to TrendForce. TrendForce notes that tight capacity in 8-inch fabs and certain DDIC-related mature 12-inch nodes is driving wafer costs higher across the board, making it increasingly difficult for DDIC suppliers to absorb the increases internally and raising the likelihood that cost pressures will be passed downstream.
Micron expands in Taiwan
Micron Technology has completed the acquisition and assumed ownership of Powerchip Semiconductor Manufacturing Corp.’s (PSMC) P5 fab site in Tongluo, Miaoli County, Taiwan, under the acquisition agreement previously announced on January 17.
The new site will complement Micron’s existing operations in Taiwan as an extension of the company’s vertically integrated mega campus in Taichung, located approximately 15 miles away.
The new Tongluo-based site includes 300,000 square feet of existing 300mm cleanroom space. This fab will support Micron’s efforts to expand supply of leading-edge DRAM products, including HBM, to meet growing AI-driven demand. The new Tongluo site is expected to support meaningful product shipments from the existing fab beginning in fiscal 2028.
Micron is also planning the next phase of expansion at the site, with construction set to begin by the end of fiscal 2026 on a second facility of comparable scale, adding approximately 270,000 square feet of cleanroom space.
New InP fab
Lumentum Holdings has acquired a new U.S.-based fab facility in Greensboro, N.C. The 240,000-square-foot facility will produce advanced indium phosphide (InP)-based optical devices that serve as critical components in AI data centers.
Nvidia will serve as a customer of the facility. Nvidia recently announced plans to invest $2 billion in Lumentum to support R&D, future capacity and operations as the company builds out its U.S.-based manufacturing capabilities.
Lumentum’s Greensboro site was acquired from Qorvo. The purchase agreement includes the transfer of the workforce.
The new facility will expand Lumentum’s manufacturing capacity, leveraging 6-inch InP wafers. The facility will be retrofitted to manufacture Lumentum’s InP-based optical products, including continuous wave (CW) and ultra-high-power (UHP) lasers. The facility is expected to ramp production in mid-2028.
Arm’s CPU move
For years, Arm Holdings has been the largest provider of processor IP in the semiconductor industry.
Now, Arm is offering silicon products for the first time in the company’s history. This begins with the launch of the Arm AGI CPU, an Arm-designed CPU for AI data centers.
“The CPU targets both cloud and enterprise environments and initial benchmarks suggest performance/watt is 2x that of x86 chips. The current multi-year chip roadmap has committed orders (e.g. Meta, OpenAI, SAP, Cloudflare, etc.) for the first two chip generations and helps to de-risk the revenue forecasts. The AGI CPU is manufactured on TSMC’s 3nm process and utilizes a two chiplet architecture,” said Krish Sankar, an analyst at TD Cowen, in a research note.
Still, the questions are clear: Is Arm competing with its IP customers? If so, will Arm’s IP customers keep the company at arm’s length?
Made-in-China MCUs
STMicroelectronics has received its first microcontroller (MCU) products, which are manufactured by a foundry vendor in China.
The first batch of STM32 line of MCUs are produced for ST by China’s Huahong, a foundry vendor. The MCUs are being shipped to customers in China.
This is a major step forward in ST’s global supply chain strategy. ST has developed a dual supply chain, with fully processed and manufactured 40nm MCU products in China that are the same exact design and technology as those made outside China. The company has established a fully localized STM32 supply chain, covering all stages from wafer manufacturing to chip packaging and testing. Additional STM32 MCU families are planned for local volume production in 2026.
ASE-AEM deal
Taiwan’s ASE, the world’s largest OSAT, is investing in Singapore’s AEM Holdings Ltd. AEM is a supplier of test systems.
Under the terms, AEM will raise S$12 million in gross proceeds through a private placement of 3,350,000 million ordinary shares. Then, ASE will subscribe for S$12 million of the new AEM shares.
Proceeds from the private placement will support AEM’s continued expansion in Taiwan and the joint integration of AEM’s test technologies, including parallel test architectures and advanced thermal management capabilities, into ASE’s manufacturing and test environments. The funds will also be used to advance AEM’s product roadmap.
ADI’s Thai plant
Analog Devices Inc. (ADI) has opened a new IC assembly and test facility in Thailand. The facility will support various backend processes, including wafer-level processing, chip-scale packaging and final test.
The expansion builds on ADI’s hybrid manufacturing strategy, which leverages a global network of internal factories and external foundry/outsourced semiconductor assembly and test (OSAT) partners.
Advantest’s R&D facility
ATE giant Advantest will establish a new research and development hub, the “Omiya Tech Hub,” in Saitama, Japan. This new office will serve as a center for technology and information exchange, connecting the company’s major development sites.
Located in an urban area outside of Tokyo, the Omiya Tech Hub will be a strategic development space aimed at strengthening collaboration among Advantest’s R&D locations. The new hub is scheduled to open in the first half of fiscal year 2027.
CPO tester
Teradyne recently launched the Photon 100, an opto-electric automated test platform purpose-built to accelerate high-volume silicon photonics and co-packaged optics (CPO) manufacturing.
By integrating optical and instrumentation with Teradyne’s UltraFLEXplus ATE platform, the Photon 100 enables high-throughput, automated testing across all key manufacturing stages, including wafer, optical engine, and co-packaged module insertions.