The Next AI Chip Race Is About How Chips Connect
Applied Materials will lift its stake in Dutch equipment maker BESI from about 9% to 20%. The bet is less about control than about a new way to link chips.
Why would a chip equipment maker buy a stake in another one?
Applied Materials (AMAT), the US semiconductor equipment maker, announced on Oct. 26 at 4:30 p.m. ET an agreement to raise its stake in the Netherlands' BE Semiconductor Industries (BESI) to about 20%.
The two companies are already close. They have co-developed hybrid bonding technology since 2020, and AMAT first bought a 9% stake in BESI in April 2025. The new plan adds roughly 11 percentage points.
AMAT said it has no intention of seeking more than 20% or a seat on BESI's board. The announcement is therefore better read as an investment to deepen a long-term partnership with a key technology partner than as a step toward a full takeover.
Why shrinking chips is not enough
Process shrinks have long been the center of chip performance gains. Smaller transistors and higher density improve compute performance and power efficiency.
For AI workloads, though, moving data matters as much as computing speed inside the chip. However fast a GPU calculates, overall performance is capped if memory cannot feed it data quickly enough.
That is why advanced packaging has become important. It combines several semiconductor dies into one system and shortens the connections between them to move data more efficiently.
High-bandwidth memory (HBM) stacks multiple memory dies vertically to deliver high data bandwidth. Hybrid bonding is one technology that can be used for such dense chip connections. Not every HBM product is made with hybrid bonding today, however.
How does hybrid bonding work?
Some existing stacking methods use bumps, tiny metal protrusions, to make electrical connections between chips.
Hybrid bonding differs. It joins the insulating layer and the copper contacts on the chip surfaces directly.
Chip-to-chip connection methods compared
- Bump connection: connection through metal bumps
- Hybrid bonding: direct bonding of insulating layers and copper contacts
The original diagram is a concept illustration. It does not show actual contact size or spacing to scale.
The process is precise. The surfaces to be bonded are flattened and cleaned, and the copper contacts are aligned exactly. The insulating surfaces are then joined, and heat treatment completes the copper bond.
The method could allow tighter contact spacing and shorter wiring. That could improve connection density, data transfer efficiency and power efficiency.
The tradeoff is that tiny particles on the surface, flatness errors and misalignment can hurt yield. Equipment precision and process control therefore matter more.
What are AMAT and BESI developing together?
Their cooperation now goes beyond hybrid bonding alone.
| Development area | What it means |
|---|---|
| Hybrid bonding | Dense, direct connection between chips |
| 3D IC | Vertical integration of multiple chips |
| Logic-memory integration | Better connection between compute chips and memory |
| Thermocompression bonding (TCB) | Advancing the existing method of bonding with heat and pressure |
| Next-generation packaging | New manufacturing methods that attach dies to wafers, other dies and panels |
AMAT is strong in materials processes such as deposition, polishing, cleaning and inspection. BESI specializes in precision chip placement and bonding equipment.
Combined, these strengths could let customers adopt a manufacturing process whose pieces are optimized for each other, rather than buying individual tools. The core of the partnership is turning technology development into volume production.
What matters for chip equipment investors?
It is hard to say AI chip competition is moving entirely from process shrinks to packaging. The change looks more like both becoming important at the same time.
The deal suggests that companies like AMAT, strong in conventional wafer fabrication equipment, could also find business opportunities in advanced packaging. For BESI, wider adoption of hybrid bonding is a growth opportunity.
Some things remain to be confirmed. Even if a customer adopts the technology in a next-generation chip design, actual equipment orders, yield stabilization and volume ramp-up can take time. US antitrust review has also not been completed.
The equipment industry is also sensitive to customers' capital spending cycles. Even with a good long-term technology outlook, near-term orders and earnings can swing.
Insight Times Editorial Desk
