Analysis shows Onto Innovation’s 80% packaging growth is offset by underlying lithography bottlenecks that could constrain advanced chip yield rates.

LG Electronics has secured its first disclosed commercial order from an outsourced semiconductor assembly and test company for a maskless laser direct imaging system designed for advanced semiconductor packaging. The system reportedly supports substrates up to 600 × 600 mm and produces 1.5 µm line-and-space patterns, placing it directly within the large-panel packaging market targeted by Onto Innovation’s JetStep lithography systems.

One LG order will not overturn Onto’s installed base. However, the order matters because it confirms that another major electronics company has moved beyond equipment development and persuaded a semiconductor-packaging customer to qualify an alternative lithography platform. LG is not entering an uncontested market. Nikon has begun taking orders for its maskless DSP-100, Canon already sells a panel-level packaging stepper, Veeco continues to receive AP300 orders, SUSS MicroTec is developing a new generation of back-end lithography systems, and ASML shipped its first advanced-packaging scanner in 2025.

This competitive expansion comes at an awkward time for Onto. The company expects advanced-packaging revenue to increase approximately 80% in 2026, but it does not disclose JetStep lithography revenue separately. Its largest announced HBM agreement—valued at more than $240 million—covers Dragonfly inspection and 3D bump metrology, not lithography. Investors therefore know that Onto’s overall advanced-packaging business is growing, but they do not know whether JetStep is participating proportionately or losing ground as new systems enter the market.

That is the investment issue behind the LG announcement. LG does not threaten Onto’s entire advanced-packaging portfolio, and it does not compete with Dragonfly. It challenges the financially undisclosed JetStep franchise, whose competitive performance is obscured by Onto’s much stronger inspection and metrology growth.

**The Other Face of Lithography Returns**

The competitive implications of LG’s entry become clearer when viewed against the history of advanced-packaging lithography and the earlier disruption of the market by Rudolph Technologies, the company from which Onto inherited JetStep. In June 2016, I published an article titled “The Other Face of Lithography—Ultratech and Rudolph Technologies.” At the time, most semiconductor investors associated lithography almost exclusively with ASML Holding (NASDAQ: ASML), extreme ultraviolet technology and the race to pattern increasingly small transistors. I argued that another lithography market was developing behind the semiconductor wafer: the specialized exposure equipment used to manufacture advanced packages.

That advanced-packaging lithography market generated only $195 million in 2015, compared with $5.6 billion for mainstream semiconductor lithography. However, advanced-packaging lithography was growing 18.6%, nearly four times the 4.8% growth rate of mainstream lithography. Its technical requirements were also fundamentally different. Packaging systems had to expose thick photoresists and dielectric materials while accommodating silicon, glass, organic substrates, reconstituted wafers, substantial topography and several millimeters of substrate warpage.

Ultratech led the market with $75 million in advanced-packaging lithography revenue, but I warned that its position was vulnerable. Ultratech relied on 1X steppers, an architecture that projected the mask image onto the substrate without reduction. Rudolph Technologies had entered the market with its 2X JetStep reduction stepper, offering better resolution, stronger distortion correction and higher throughput.

My cost-of-ownership model showed that the two systems carried approximately the same $4.1 million purchase price, but Rudolph’s JetStep processed 83 wafers per hour compared with 66 wafers per hour for the conventional 1X stepper. JetStep reduced the cost per exposed layer from $2.29 to $1.73, giving Rudolph an approximately 25% cost advantage. Ultratech remained the market leader, but Rudolph’s lithography revenue increased 287.7% in 2015.

Corporate names subsequently changed. Veeco Instruments (NASDAQ: VECO) acquired Ultratech in 2017, while Rudolph Technologies combined with Nanometrics in 2019 to create Onto Innovation (NYSE: ONTO). JetStep, once the disruptive challenger, became part of a larger equipment company whose advanced-packaging position is now promoted as an important beneficiary of artificial intelligence, high-bandwidth memory and heterogeneous integration.

According to Table 1: The Advanced-Packaging Lithography Market in 2015, Ultratech held approximately 38.5% of the 2015 market. Rudolph was much smaller, but its extraordinary growth and superior cost structure suggested that the incumbent’s advantage was already weakening.

**Onto’s Advanced-Packaging Growth Is Not JetStep Growth**

Onto Innovation now projects that its advanced-packaging revenue will increase approximately 80% in 2026 over 2025, a significant increase from its earlier growth expectations. Advanced Packaging and Specialty Devices collectively represented nearly half of Onto’s record $343.1 million in second-quarter 2026 revenue.

Those figures sound highly favorable for JetStep. The problem is that Onto does not report JetStep revenue separately. It combines lithography with inspection, metrology, software and other products within its broader market classifications.

The distinction is important because Onto’s largest disclosed advanced-packaging wins are not lithography orders. In February, the company disclosed a volume purchase agreement valued at more than $240 million through 2027 with a leading HBM manufacturer. That agreement covers Dragonfly 2D inspection and 3D bump metrology systems. It does not cover JetStep lithography.

Onto has also reported strong sequential growth for Dragonfly and more than $50 million of orders related to silicon photonics. These developments validate Onto’s exposure to AI packaging, but they do not tell investors whether JetStep shipments, revenue or market share are growing. Onto reported total 2025 corporate revenue of $1.005 billion, yet the financial contribution from its advanced-packaging lithography franchise remains undisclosed. Onto’s 2025 results identify the $240 million HBM agreement specifically as Dragonfly inspection and metrology.

According to Table 2: What Onto Discloses About Advanced Packaging—and What Remains Hidden, nearly every number supporting Onto’s strongest advanced-packaging narrative either includes several product categories or relates specifically to inspection and metrology. Investors therefore cannot assume that an 80% increase in advanced-packaging revenue translates into an 80% increase in JetStep revenue.

**JetStep Moves From Disruptor to Incumbent**

Table 3: The Expanding Advanced-Packaging Lithography Competitive Field illustrates how the landscape has evolved since the early 2010s. What began as a niche segment dominated by a single architecture has matured into a multi-vendor ecosystem. JetStep’s trajectory mirrors that of many successful hardware platforms: initial disruption gives way to entrenched installation bases, followed by sustained competition from legacy incumbents and agile newcomers alike.

**LG Is the Catalyst, but Nikon May Be the Larger Threat**

LG’s qualification of a maskless laser direct imaging system signals that tier-one electronics manufacturers are actively diversifying their advanced-packaging toolsets. While LG provides immediate visibility into alternative lithography pathways, Nikon’s DSP-100 represents a more structurally significant challenge. Nikon’s established presence in semiconductor manufacturing equipment, combined with its aggressive push into maskless patterning, positions it to capture share across both large-panel and traditional substrate formats. Canon’s existing panel-level stepper sales and ASML’s 2025 scanner shipment further compress the addressable margin for any single vendor.

**The Advanced-Packaging Market Can Grow Without Onto Maintaining Share**

Advanced-packaging lithography is expanding rapidly, driven by heterogeneous integration, AI accelerator packaging, and next-generation memory architectures. However, market expansion does not guarantee proportional revenue growth for incumbent suppliers. As customers qualify multiple lithography platforms to mitigate supply-chain risk and optimize cost-per-layer, Onto’s JetStep franchise faces mounting pressure to defend its installed base rather than rely on category-wide tailwinds.

**Investor Takeaway**

Onto Innovation’s advanced-packaging segment is undeniably growing, but the composition of that growth remains opaque. The company’s $240 million HBM agreement, $50 million+ silicon photonics orders, and strong Dragonfly momentum highlight its dominance in inspection and metrology. Yet none of these metrics confirm JetStep’s financial contribution or market-share trajectory. With LG, Nikon, Canon, Veeco, SUSS MicroTec and ASML all active in the space, Onto must provide granular disclosure on its lithography franchise to allow investors to accurately assess whether the 80% growth projection reflects broad-based strength or inspection-led expansion masking underlying lithography headwinds.