Nvidia plans to begin high-volume production with King Yuan Electronics, better known as KYEC, in April 2027.
The plan follows a prepayment agreement the two companies signed on October 13, 2026. That deal reserves future semiconductor testing capacity in the US.
What Nvidia is paying for
KYEC’s board approved an investment of up to $1.4 billion on July 10, 2026. The money is earmarked for expanding the company’s testing capabilities in the US.
The American operation will run through a KYEC subsidiary called AeternZ Semiconductor Testing Corporation. That setup replaced an earlier arrangement, which included a $300 million guarantee that has since been canceled.
The US push sits on top of an already aggressive spending year. KYEC’s capital expenditure for 2026 is set at a record NT$50 billion, approximately $1.45 billion.
Why testing suddenly matters so much
KYEC is a leading Nvidia supplier. It focuses on final test and probing services for high-power AI components.
Probing checks chips while they are still on the wafer. Final test checks finished, packaged parts before they ship.
Next-generation AI chips require over 70% longer test times than older models.
If each chip spends far longer on a tester, then the same factory floor produces far fewer finished parts per day. To keep output steady, you need more testing equipment and more space.
The onshoring angle
The research behind the deal points to a shortage of domestic testing infrastructure in the US. A chip can be made domestically and still need to travel overseas to be checked before it ships.
AeternZ is positioned to serve exactly that need. If it comes online as planned, it would give Nvidia a US-based testing partner it already knows well.
What this means
Testing capacity is finite, and specialized high-power testing even more so. A customer that reserves space early can leave rivals with fewer options when demand peaks.
Several milestones are worth tracking from here. The first is whether the AeternZ facility stays on schedule for an April 2027 ramp. The second is how much of the up to $1.4 billion KYEC ultimately deploys, since board approval sets a ceiling rather than a fixed figure.
The jump to over 70% longer testing for next-generation chips is already reshaping capacity plans.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.