According to a recent Morgan Stanley report, global packaging and testing leader ASE Holdings plans to increase its back-end wafer packaging and testing prices for 2026, with hikes expected to reach 5%-20% — exceeding earlier market forecasts of 5%-10%. This move signals the industry's shift toward a tight supply-demand balance driven by explosive AI semiconductor demand.
The price adjustment is driven by both strong demand and rising costs. On the demand side, AI GPU and high-performance computing (HPC) applications have pushed ASE’s capacity utilization to around 90% as of Q3 2025, nearing full load. Meanwhile, OSAT capacity in Greater China continues to recover, creating tight supply conditions that strengthen pricing power. On the cost side, increasing expenses for substrates, precious metals, and electricity have added pressure, leading ASE to pass on costs and prioritize higher-margin AI customers.
Amid this industry shift, ASE is focusing strategically on advanced packaging. Taking advantage of tight CoWoS capacity at TSMC, ASE is positioned to capture spillover orders and aims to double its advanced packaging capacity from 5,000 wafers per month (Kwpm) by end-2025 to 20,000 Kwpm in 2026. Its proprietary 2.5D packaging technology, FoCOS, has already been adopted in projects for clients like AMD and NVIDIA, creating a diverse customer portfolio. Morgan Stanley has raised its advanced packaging and testing revenue forecast for ASE to $3.5 billion in 2026, highlighting the segment as a key growth engine.
Price increases and advanced packaging expansion are expected to boost ASE’s financial outlook. In the near term, Morgan Stanley projects mid-to-high single-digit sequential revenue growth in Q4 2025 and gross margins approaching 18%, supported by AI demand and favorable currency trends. Long-term, EPS forecasts for 2025-2027 have been raised by 3%-4%, with Morgan Stanley reiterating an "Overweight" rating and increasing its price target to NT$308 (bull case NT$365).
To capitalize on the AI wave, ASE has raised its 2025 machinery capital expenditure to $2.86-$2.96 billion, with a focus on AI-driven advanced packaging and testing. This investment is expected to support revenue growth beyond 2026 and help gross margins return to a 24%-30% range. Morgan Stanley estimates the AI chip market will reach $550 billion by 2029, with related foundry revenue seeing a 60% CAGR. While risks such as currency fluctuations and geopolitics remain, steady iPhone demand provides a stable revenue base, positioning the packaging and testing industry for a strong growth cycle.
ICgoodFind : ASE's price increase reflects robust demand in the packaging and testing sector, with advanced packaging becoming a competitive focal point driven by AI. We are committed to helping the industry connect with high-quality packaging and testing resources to capture growth opportunities.
