Recently, there has been an obvious style switch within the semiconductor sector. Previously, market funds were concentrated on front-end tracks such as GPU, storage, and optical chips, which were highly volatile and divergent, making it difficult for many retail investors to obtain stable returns.
However, as the industry cycle changes, funds have completed the main line transfer, and the semiconductor packaging and testing sector has bottomed out and reversed the market, ushering in an inflection point of the economy; while the supply and demand pattern of ceramic packaging materials, the most upstream of the packaging industry chain, has reversed, and has entered the main upward channel with both volume and price rising.
Many ordinary investors have biased perceptions of chips. They only focus on high-end chip design and wafer manufacturing, and believe that packaging is just a simple foundry, and ceramics are just supporting consumables.
The following is a complete breakdown of the underlying logic behind this round of packaging recovery and the explosion of ceramic materials.
1. The packaging and testing sector bids farewell to the downturn, and multiple resonances usher in an industry turnaround
Semiconductor packaging is the last core process in the chip industry chain. It is responsible for chip cutting, wiring, heat dissipation, protection, testing and other tasks. It is a key bridge connecting wafer manufacturing and end products.
The packaging and testing industry has been under pressure in the past two years. The core reasons are weak consumer electronics demand, overcapacity, and the involution of low-end packaging.
But entering the second quarter of 2026, the four core variables have been implemented, and the bottom turning point of the industry has been confirmed.
1. **The demand for downstream computing power and automotive electronics continues to increase, and the order structure is fully optimized**: In the past, domestic packaging and testing factories relied mostly on traditional consumer electronics for their revenue. Now the customer structure has changed, and AI server chips, high-speed optical modules, new energy vehicle power semiconductors, and industrial control chips have become the main sources of increase.
Global cloud manufacturers are expanding their intelligent computing centers, the delivery volume of high-end GPUs and HBM memory chips has increased, and the demand for advanced packaging processes has increased. The advanced packaging production line capacity utilization rate of domestic leading packaging and testing companies is high, and orders are scheduled until 2027.
The penetration rate of new energy vehicles has increased, the demand for high-reliability packaging has increased, and the packaging and testing industry’s ability to withstand cycles has increased.
2. **Policies continue to increase, and advanced packaging becomes the best breakthrough for domestic substitution**: The consensus on the development of the domestic chip industry is that wafer manufacturing and high-end lithography machines have high technical barriers and a long catch-up period, while advanced packaging technology has low barriers to implementation and quick results, making it the core track for overtaking in corners.
The national and local governments have introduced supportive policies, and the Ministry of Industry and Information Technology has clarified that CPO optoelectronic co-packaging is the core base of computing power networks, driving an increase in orders from packaging and testing manufacturers.
3. **Industry inventories have been cleared, and the supply and demand relationship has returned to a tight balance**: The previous downturn in the industry was due to high terminal inventories, and downstream destocking reduced packaging and testing orders.
After inventory adjustments, global chip inventories have fallen, leading companies have started a replenishment cycle, overseas manufacturers have slowed down their production capacity expansion, packaging OEM quotations have stabilized and rebounded, and corporate profit margins have opened up.
4. **The popularization of Chiplet technology will open up the ceiling for packaging growth in the long term**: Moore’s Law is approaching its limit, and Chiplet packaging has become the choice of global chip companies, which can reduce costs and improve performance.
The implementation of core chip solutions by companies such as TSMC and Intel has driven the growth in demand for advanced packaging. Organizations estimate that the global advanced packaging market will exceed US$79.4 billion in 2030.
Multiple benefits are superimposed, the performance recovery of the packaging and testing industry is expected to be realized, institutional funds are increasing their positions, taking over the main line of the chip market, and also giving rise to the demand for upstream ceramic packaging materials.
2. Why can ceramic materials get out of the independent market?
Irreplaceable hardware is in urgent demand
The packaging sector is picking up, and ceramic materials have emerged from the main wave. The core lies in the mismatch of supply and demand, the irreplaceability of superimposed technologies and the dividends of domestic substitution.
(1) Traditional packaging materials can no longer keep up with the heat dissipation needs of high-end chips
Packaging substrates are divided into organic resin substrates, metal substrates, and ceramic substrates.
Traditional optical modules and consumer chips can just use organic substrates, but the new generation of AI hardware has higher heat dissipation requirements. Traditional resin substrates have insufficient thermal conductivity, and metal materials cannot meet insulation requirements. Only ceramic materials have leading thermal conductivity, matching thermal expansion coefficient, strong insulation and airtightness, high temperature resistance and corrosion resistance, etc., making them the only suitable substrate for high-end packaging.
(2) Three major booming tracks broke out simultaneously, and the demand was fully opened
The downstream applications of ceramic packaging materials no longer rely solely on computing power. AI computing power and high-speed optical communications, new energy vehicles and photovoltaic energy storage, 5G communications and military aerospace are simultaneously releasing increments.
The agency predicts that the domestic ceramic packaging materials market will be close to 15 billion yuan in 2026, and the growth rate of high thermal conductivity aluminum nitride substrates will exceed 40%.
(3) Overseas supply is limited, the gap between supply and demand continues to expand, and the cycle of rising volume and price has begun
The high-end aluminum nitride ceramic substrate and high-purity ceramic powder markets are monopolized by Japanese companies. In 2026, overseas manufacturers will experience supply constraints, and product out-of-stock rates will exceed 30%.
The surge in demand and contraction in supply have created a gap between supply and demand, product quotations have been raised, and downstream customers have accelerated the introduction of domestic alternatives.
3. The long-term logic of domestic substitution is determined, and the main rise of ceramic materials is sustainable
The market of ceramic materials is not a short-term hype, and is supported by three long-term logics:
1. **Autonomous control of the entire industry chain is a hard development goal**: Ceramic substrates and high-purity aluminum nitride powder are dependent on imports, and policies encourage local companies to tackle technological problems. Domestic companies have opened up a complete industrial chain, and there is broad room for import substitution.
2. **Technological iterations continue to increase the penetration rate of ceramic materials**: Future chip development trends will increase the proportion of ceramic substrates used. The popularity of third-generation semiconductors will prompt high-end ceramic substrates to replace traditional products, upgrade product structures, and increase value.
3. **Industry barriers continue to rise, leading companies are strong and strong**: Ceramic packaging materials have high technical barriers, making it difficult for new players to enter. Leading companies bind customers, orders are stable, market shares are concentrated towards the leader, and bargaining power is enhanced.
4. Potential risks that the industry needs to be objectively aware of and look at track opportunities rationally
Any high-prosperity track has uncertainties, and the ceramic materials industry is no exception:
1. **Overseas manufacturers expand production beyond expectations**: Japanese companies’ substantial expansion of production will alleviate the gap between supply and demand, weakening product price increases and the logic of domestic substitution.
2. **New entrants in the industry are releasing their production capacity**: Many companies are planning to build new production lines. If there is excess production capacity for low-end products, it will trigger price competition and compress gross profit margins.
3. **Downstream demand is lower than expected**: The slowdown in global computing capital expenditure and new energy vehicle sales will affect the growth rate of ceramic material orders.
4. **Technical route iteration risk**: The commercial use of new heat dissipation substrate materials will divert market demand for ceramic substrates.
When looking at the packaging and ceramic material tracks, it is necessary to track downstream customer order delivery, domestic product certification progress, industry quotation changes and other indicators, make judgments based on industry fundamentals, and avoid chasing ups and downs.
Everyone can exchange opinions in the comment area, such as the market duration after this round of chip main line switching, the growth space of the ceramic material subdivision track, and preferences when laying out the semiconductor sector, etc.
The above analysis is for knowledge sharing only and does not constitute investment advice. The stock market is risky, so investment needs to be cautious.
