Can Advanced Packaging Demand Drive KLAC's Next Growth Phase?

KLA CorporationKLAC is seeing strong demand for its process control products as AI infrastructure investment increases the need for advanced semiconductors. As chips become more complex, manufacturers need better inspection and measurement tools to identify defects and improve production yields. Advanced packaging is becoming an important growth driver for KLAC, as new chip designs require more sophisticated manufacturing processes.

KLAC expects revenues from its advanced packaging process control systems to reach approximately $1.1 billion or more in 2026, suggesting growth of more than 70% year over year. This is nearly twice the expected growth rate of the advanced packaging market. The company is benefiting from the growing use of advanced packaging in AI infrastructure. Packaging technologies are also adopting more complex wafer manufacturing processes, which increase the need for KLAC's inspection and measurement solutions.

Demand for more advanced inspection tools is also increasing. Hybrid bonding and complex logic devices require higher inspection sensitivity to identify smaller defects. KLAC is seeing demand shift toward more advanced systems, including laser scanning and Gen 4 tools, while its macro inspection products continue to serve as key solutions. The company believes its existing technology portfolio and research and development investments position it well to meet these changing customer needs.

Looking ahead, KLAC expects its advanced packaging business to continue growing faster than the market in 2027. Strong AI infrastructure investment and rising chip complexity should support demand for its process control solutions. As of now, the company will need to manage supply constraints and increase production capacity to meet customer requirements. Overall, advanced packaging is emerging as an important growth driver for KLAC and could support its broader growth outlook over the next few years.

KLAC Faces Tough Competition

Onto InnovationONTO is seeing strong demand for its advanced packaging inspection and metrology solutions as AI chip designs become more complex. In the second quarter of 2026, Onto Innovation's revenues increased 35% year over year to $343 million, while its inspection business grew 30% sequentially, driven by 2.5D logic and high-bandwidth memory applications. The company raised its 2026 advanced packaging growth outlook to approximately 80%, up from its previous expectation of 50%.

Applied MaterialsAMAT is also benefiting from increased investment in advanced packaging. The company expects its packaging revenues to grow more than 70% in 2026, supported by demand for HBM, 3D chiplet stacking and AI-related semiconductor technologies. Applied Materials is expanding its portfolio with new plating, chemical mechanical planarization and e-beam systems for advanced packaging. It also expects its process diagnostics and control business, which includes inspection and metrology solutions, to grow more than 50% in 2026 as chipmakers focus on improving production yields and output.