An AI chip isn't born from one print run. It's a single GPU that has to sit right up against several stacks of HBM memory on a tiny silicon sheet called an interposer, all assembled into one package. That step is called CoWoS, and only one factory in the world can do it at that level: TSMC. Today, AI-chip demand isn't stuck on NVIDIA's design — it's stuck because TSMC can't build CoWoS fast enough. This lesson goes to the deepest layer: who actually "makes" and "assembles" AI chips, and why assembly capacity is the true bottleneck of the whole AI boom.
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Onto Innovation Raises Advanced Packaging Outlook to 80% on Dragonfly G5 Demand
Onto Innovation has raised its full-year 2026 advanced packaging growth outlook to at least 80% from more than 50% previously, citing strong demand for its Dragonfly G5 inspection platform. The company generated $343.1 million of quarterly revenue, up 35.3% year over year, while its inspection business, dominated by Dragonfly systems, grew approximately 30% sequentially on demand from 2.5D logic and HBM applications. Onto launched Dragonfly G5 in March 2026 and disclosed in April that the platform had been qualified for 2.5D AI packaging applications, with demand strongest among HBM manufacturers and AI-focused OSATs, including more than $200 million in Dragonfly orders from a single OSAT, most slated for 2027. Management said demand for the Dragonfly platform is expected to grow more than 50% in 2026 from 2025 and expects further growth in 2027 with no signs of customer overcapacity. Competitors are also benefiting from the same AI-driven spending: KLA now expects 2026 wafer fabrication equipment spending in the low-$150 billion range, up from $135-$140 billion, and Applied Materials expects advanced packaging revenue to grow more than 70% in 2026, up from its prior outlook of more than 50%.
September Tankan: Large Manufacturers' DI Expected to Improve 4 Points to Plus 26
Forecasts from 12 private think tanks and other institutions for the Bank of Japan's September National Short-Term Economic Survey of Enterprises, or Tankan, to be released on the 1st of next month, were all in by the 25th. The average forecast for the business conditions diffusion index, which gauges corporate sentiment, stands at plus 26 for large manufacturers, a 4-point improvement from the previous June survey. The dominant view is that demand related to artificial intelligence and semiconductors will lift sentiment, and this would mark the sixth consecutive quarter of improvement for manufacturers. While industries producing equipment and materials related to semiconductor manufacturing, such as electrical machinery and production machinery, are analyzed as performing well, it has been pointed out that automobiles may act as a drag due to sluggish growth in export volumes. The average forecast for large non-manufacturers is 36, down 1 point from the June survey, with many companies expecting flat or slightly worse conditions due to weak inbound demand and rising costs such as fuel and labor expenses. Based on this Tankan, the Bank of Japan plans to analyze risks such as higher crude oil prices and AI-driven upward pressure on prices, and to look for the timing of an additional interest rate hike.
TISCO Says Era of Capital Competition Will Keep Interest Rates High Through 2028
The TISCO Economic and Strategic Analysis Center, or TISCO ESU, assesses that global financial markets are entering a phase of capital competition, as governments around the world need to borrow heavily to expand defense budgets while private-sector big tech and hyperscaler firms seek to raise enormous sums to accelerate the buildout of data center infrastructure, chip fabrication plants, AI facilities, and power plants. This is pushing interest rates and government bond yields up by roughly 0.60 to 0.90 percent. Komson Prapakpol, head of the TISCO Economic and Strategic Analysis Center, said the United States plans to expand its defense budget from 1 trillion dollars to 1.5 trillion dollars, an increase of 50 percent, while Japan aims to raise defense spending from below 2 percent to 3.5 percent of GDP, the highest level since the period from 1970 to 1980. Germany and France are also accelerating increases in their security budgets. Thanaphat Thanachat, an analyst at TISCO ESU, said the United States has public debt exceeding 100 percent of GDP, or more than 40 trillion dollars, and a fiscal deficit as high as 6 percent of GDP per year, driving its interest burden to double that of four to five years ago. France's public debt has risen by nearly 20 percent of GDP between 2019 and 2025, with an annual deficit of 5 percent of GDP. As for the interest rate path of the three major central banks, TISCO ESU expects the Federal Reserve to raise rates one more time, by about 0.25 percent, at its December meeting, ending at 4.25 percent, and to hold at that level through 2027 before cutting in 2028. The European Central Bank is expected to raise rates one more time, by about 0.25 percent, in December, while the Bank of Japan is expected to gradually keep raising rates until they reach 1.75 percent in mid-2027. The yield on 10-year U.S. government bonds is expected in the base case to hold steady at 5 percent through the end of 2026, but if the Federal Reserve fails to control inflation, the worst case could see the bond yield rise to 6 percent.
Musk says xAI's Colossus 2 could double Nvidia chip count by year-end
Elon Musk said Colossus 2, the AI computing cluster built by his xAI business, could more than double its current number of Nvidia chips by the end of the year. In a post on X, the Tesla and SpaceX CEO said the Memphis-area cluster now runs 110,000 Nvidia GB200 chips and 440,000 GB300s, with another 220,000 GB300s due to be fully operational next week and a further 220,000 expected in November. An additional 220,000 GB300s may come online in late December if we get lucky, he added, giving the most detailed timetable yet for the expansion. Musk also noted that Colossus 1 comprises 150,000 H100, 50,000 H200 and 30,000 GB200 chips. The SpaceX unit previously said it plans to equip its Memphis facility with 1 million graphics processing units by 2026.
Trump and Xi Discuss AI, Trade and Taiwan at the White House
President Donald Trump and President Xi Jinping held a joint summit at the White House, discussing artificial intelligence, security and technology. It marked the first joint statement between the two leaders, amid concerns among executives at major technology companies and some U.S. policymakers that AI could pose a threat to humanity. Trump affirmed that AI development should proceed freely in order to preserve the United States' advantage, while China criticised U.S. semiconductor export controls as creating restrictions on Chinese companies. Xi Jinping said China and the United States have both the capability and the responsibility to develop and manage AI for the benefit of humanity, and that it should always remain under human control. He also called on Trump to change the U.S. position on Taiwan by opposing Taiwan independence. Trump said the two sides had made substantial progress on points of disagreement, referring to efforts to expand access to the Chinese market for U.S. farmers and ranchers under the trade committee mechanism, and he did not mention the Taiwan issue. After the meeting, China announced that it had reached a new joint agreement with the United States, according to Xinhua News Agency, without disclosing details. A few hours earlier, the United States had announced an extension of the trade truce with China by another two months, until January 10. Xi Jinping also said there is potential to add direct flights between the two countries, and announced that two pandas will arrive at Zoo Atlanta in the U.S. state of Georgia within a few days.
Trio-Tech Posts Q4 Non-GAAP EPS of $0.02 on $14.9M Revenue
Trio-Tech reported fourth-quarter non-GAAP earnings of $0.02 per share on revenue of $14.9 million, up 39.3% year over year. Total backlog stood at $24.2 million at June 30, 2026, compared with $11.0 million a year earlier, with SBS backlog of approximately $19.8 million and IE backlog of approximately $4.4 million. Net cash provided by operating activities rose to $3.4 million from $0.4 million in fiscal 2025, while cash, cash equivalents, short-term deposits and restricted term deposits totaled approximately $28.5 million, versus approximately $19.5 million at June 30, 2025. The company said it enters fiscal 2027 with continued demand for semiconductor back-end testing services across AI, high-performance computing and automotive applications, including EV and autonomous-vehicle semiconductors. During fiscal 2026, Trio-Tech delivered approximately $6.3 million of the previously announced $14.2 million in burn-in board-related orders, leaving approximately $7.9 million still to be delivered, and in the first quarter of fiscal 2027 it received an additional purchase order of approximately $1.5 million.