Nokia expands US chip packaging to feed AI demand

Nokia is investing $30 million to expand its Allentown, Pennsylvania chip testing and packaging facility. The project targets a tenfold capacity increase from the third quarter and links AI infrastructure growth to optical interconnect supply, CHIPS Act incentives and US manufacturing expansion.

• $30m Allentown expansion draws state funding and CHIPS Act credits

• Optical interconnect supply becomes a new AI infrastructure bottleneck

The fact

Nokia is investing $30 million to expand its Allentown, Pennsylvania chip testing and packaging facility, aiming for a tenfold capacity increase from the third quarter. The project includes $4 million in state funding and $10 million in CHIPS Act tax credits, and forms part of Nokia's broader $4 billion US R&D commitment. The expansion will double the site's workforce to over 500 roles. Nokia said the move responds to strong AI-driven demand, following first-quarter AI and cloud sales growth of 49% and a 6% rise in Network Infrastructure revenue.

The Assessment

AI clusters need faster data movement, not just faster chips — and optical interconnect sits right in that bottleneck. Nokia's packaging expansion, backed by state and federal incentives, positions it deeper in this layer of the AI supply chain. For internet infrastructure, as the AI race intensifies, the hidden choke points are the packaging and optical links that let components connect and communicate.

What to Watch

Watch whether Nokia hits its €1 billion AI and cloud revenue target by 2028, whether Allentown capacity converts into customer orders, and whether other European equipment makers follow with US manufacturing moves.