TradingKey - On July 23, Eastern Time, Nvidia ( NVDA) and semiconductor packaging and testing provider Amkor Technology ( AMKR) signed a multi-year packaging services agreement valued at approximately $1.5 billion. Boosted by the news, Amkor's stock price rose over 12% in Thursday after-hours trading. As of press time, Amkor rose over 9% in Friday pre-market trading.

[Source: TradingView]

Under the agreement, Nvidia will provide an advance payment to support Amkor in expanding capacity at its new advanced packaging facility in Peoria, Arizona. The facility's first manufacturing building is expected to be completed by mid-2027, with production planned to begin in early 2028. Amkor has secured up to $400 million in direct subsidies approved by the U.S. Department of Commerce under the CHIPS and Science Act to support the construction of the project.

The collaboration between the two parties focuses on advanced packaging technologies such as high-density interconnects and next-generation heterogeneous integration, aiming to integrate chips made with different processes into a single package to meet the demand of AI chips for higher bandwidth and lower power consumption. This technological direction falls within the scope of 2.5D/3D advanced packaging, such as CoWoS.

Over the past two years, CoWoS capacity has been one of the primary bottlenecks in Nvidia's AI chip supply. Although TSMC ( TSM) has continued to expand capacity, it remains difficult to meet the demands of multiple customers simultaneously. Partnering with Amkor is a key move for Nvidia to establish a second packaging source outside of TSMC and diversify supply chain risks.

It should be noted that Nvidia's search for a "second packaging source" does not mean replacing TSMC. In fact, Amkor and TSMC signed a 10-year cooperative agreement in June 2026 to deepen their collaboration on advanced packaging in Arizona. This means that Amkor's Arizona facility will complement TSMC's wafer fabs in the supply chain, rather than acting as a simple replacement.

Amkor is the largest domestic semiconductor packaging company in the United States and one of the few independent outsourced semiconductor assembly and test (OSAT) providers with 2.5D/3D advanced packaging capabilities. With the new Arizona facility commencing production, the U.S. will have large-scale advanced packaging capacity domestically for the first time, completing the final link from wafer fabrication to packaging and testing.

For Nvidia, a $1.5 billion long-term commitment represents a limited portion of its AI chip revenue, which exceeds $100 billion, but its strategic significance is substantial. It not only locks in advanced packaging capacity for the coming years in advance but also reduces reliance on a single supplier.

This transaction also reflects the critical importance of advanced packaging in the AI chip sector. Chip performance gains no longer rely solely on process node shrinking; packaging is becoming a key factor influencing bandwidth, power consumption, and cost.

Consequently, Nvidia's proactive securing of a second packaging source implies that advanced packaging capacity is extending from wafer fabs to independent OSATs, allowing Amkor to further consolidate its position in the AI chip advanced packaging supply chain.

It should be pointed out that there is a production ramp-up cycle of about two years from signing to mass production. Whether Amkor's capacity can stably meet Nvidia's yield and performance requirements after production begins remains uncertain. In the short term, the tight supply of TSMC's CoWoS capacity will not be immediately alleviated by this agreement; in the long run, however, this collaboration points toward a shift from concentrated to diversified supply chains.

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