How the Chip Supercycle Is Hitting Packaging—and the Price Analog Producers Are Paying

Since the summer of 2025, the semiconductor marketplace has entered a period of high demand, tighter supply, and strained manufacturing capacity for many of the world’s most prominent chipmakers. For most of this time, the surrounding discussions and media coverage have focused on the semiconductors themselves—DRAM, NAND, high-bandwidth memory (HBM), microcontrollers (MCUs), and CPUs, among other in-demand chips.

The manufacturers of those products have consequently turned to a host of strategies for managing—and arguably taking advantage of—this stark supply and demand mismatch. They’ve raised prices, put specific customers into allocation, and made difficult decisions about how to prioritize their limited manufacturing capacity.

In recent months, however, those market dynamics have migrated down the semiconductor supply chain. Now, the back-end stages where chips are assembled, packaged, and tested are being squeezed, leading to a major new bottleneck in the global chip manufacturing ecosystem. The result is that many of the world’s foremost packaging companies are now stretching out their lead times by months, struggling to find capacity for burgeoning demand, and scrabbling to source enough packaging equipment to increase—or even just maintain—their existing capacities.

Why Are Back-End Manufacturers Getting Squeezed Right Now?

There are a myriad of overlapping variables that led the semiconductor supply chain to this point—in which packaging companies are facing ravenous demand and rapidly evolving into a new bottleneck.

Unlike so many other dimensions of the current semiconductor squeeze, understanding the growing packaging constraints doesn’t start with AI and its ferocious buildout. Instead, this causal chain goes back to the seldom-discussed downturn in the semiconductor industry, following the boom period between 2020 and 2022. After demand tapered off over the following few years, packaging was the first manufacturing stage where investment dollars dried up. Over the three-year period between 2023 and 2025, packaging capacity expanded very little outside of China and Taiwan, as manufacturers operating in the semiconductor supply chain looked to cut costs and reach a water level that matched what had become a more tepid chip market.

That all changed over the past 18 months, however. Going back to the summer of 2025, demand has surged, and chipmakers have responded by redoubling their efforts to churn out as many semiconductor products as possible. As a result, most fabs have been running at full capacity for well over a year now.

The capacity for the back-end manufacturing stages has not expanded at the same pace, however. This is in part because stakeholders didn’t invest funds there as quickly or aggressively as they did in fabs. The result has been the stark mismatch the industry is now navigating, in which significantly more wafers are coming out of fabs than the packaging companies and OSATs (outsourced semiconductor assembly and test) are able to handle. Finished wafers are now ending up in long queues—waiting to be packaged and, in the meantime, adding to the swelling lead times for these OSAT firms.

There are more predictable factors at play, too, including one most readers have likely heard ad nauseam over the past 12 months: soaring AI demand for chips. The artificial intelligence infrastructure buildout is absorbing enormous amounts of memory products and other semiconductor commodities, while automotive, industrial, and consumer electronics are experiencing a recovery that’s led them to source increasing numbers of chips for their own manufacturing booms.

Because of all this, chipmakers like Nvidia, Infineon, Microchip, and Qualcomm are sending more and more of their products to packaging companies for the back-end production stages. This is putting more and more pressure on OSATs, straining their capacities and testing their ability to expand production under unreasonably short timelines.

Finally, these companies are facing another variable—one that’s stymying their ability to effectively expand capacity. The sophisticated, hyper-niche equipment required to carry out chip packaging is becoming harder to source, and OSATs are reporting major challenges with obtaining the tools that bond chips together inside their protective shells.

Top Packaging Companies Are Struggling to Match Demand

Surging demand for back-end manufacturing is being felt by the industry’s most prominent players. Leading companies like ASE, Amkor, and Powertech have seen their sales increase sharply year-over-year, and packaging firms are responding by raising prices and stretching out lead times.

• ASE: The world’s largest OSAT, ASE Technology Holding saw its sales increase by 45% since last year, and the company recently reported a record gross margin of 22%. The Taiwanese firm is expecting advanced packaging sales to hit $4 billion in 2026, with that figure projected to double in 2027.

• Amkor: The U.S. packaging firm has received advanced payments from at least a dozen customers since 2025, most of which are for their advanced packaging services based in South Korea and Arizona. Amkor is currently building four new facilities in Gwangju, South Korea, for packaging data center CPUs. These new plants are expected to become operational in 2027 and 2028.

• Unimicron: Substrate and packaging manufacturer Unimicron said on October 20 that lead times have increased by more than 80% in recent months, with waiting times for some technologies now extending out as long as 30 months.

• Besi: Orders placed with Besi, a Dutch manufacturer of chip packaging equipment, increased nearly 100% year-over-year in the period from July through September.

• OSATs (Packaging Contractors): Packaging contractors in China and Taiwan have reportedly raised their prices by up to 30% over the past year, with those increases doubled for customers requesting rushed orders.

Analog Chipmakers Can’t Get Their Products Packaged and Tested

There’s an unexpected casualty in this complex chain reaction spanning from the downturn in back-end manufacturing investments to the AI boom that blitzed chipmakers over the past 18 months. Analog chip manufacturers are finding themselves competing over a shrinking amount of available floor space in semiconductor packaging facilities, and the effects of these constraints are being felt throughout this segment of the supply chain.

Back-end manufacturers are currently prioritizing the vast majority of their new capacity for their high-paying AI customers. In addition, demand from automakers and industrial customers is rapidly recovering from the swoon experienced in 2023 and 2024, leading to increased competition over their finite existing capacity.

As a result, analog chipmakers are finding themselves in the lurch, struggling to get their products packaged and tested at facilities where they’ve been deprioritized. These stiff constraints are manifesting in the form of increased prices and protracted lead times, among other outcomes.

• Texas Instruments (TI): Lead times for TI’s analog products increased by an average of two-and-a-half weeks from September to October alone, with lead times going up for 85% of TI’s analog parts. According to the U.S. chipmaker, "We are not getting as much as we wanted from our OSAT partners.”

• Renesas: Lead times for analog products from Renesas rose even more sharply, increasing by nearly seven weeks from September to October. Lead times for over 90% of their analog products went up during that timespan.

• Broader Analog Market: Lead times for every specific commodity within the larger category of analog chips either rose or held steady in the month of October, a testament to the stubborn challenges these chipmakers are facing.

Packaging Lead Times Are Scraping Historic Highs

Nowhere is the growing bottleneck more evident than in the increased prices and lengthening lead times for the most popular packaging types. Using Z2’s internal database, we’ve compiled a list of year-over-year price and lead time changes among some of the more popular packaging technologies.

Price and Lead Time Changes for Top Packaging Types

Navigate the Supply Chain Crunch With Maximum Visibility

For this report, we drew on Z2’s internal pricing and lead time data. The electronic supply chain platform features a parts database with over one billion components, including 1,000+ commodity types. Users are able to carry out complex parametric searches in this database, filtering for parts based on a multitude of factors that contribute to part resiliency:

• Regulatory Compliance

• Obsolescence/Lifecycle Forecast

• Country of Origin (COO)

• Market Availability

• Multisourcing

In addition, Z2 offers detailed market information on suppliers and their products, giving users the ability to see and compare prices, availability, and other key criteria. Market data includes:

• Market availability

• Pricing

• Lead time

• Inventory

• Cost and availability of cross-references

To learn how Z2 can help your business see deep into the semiconductor marketplace, schedule a free trial with one of our product experts.