[Taiwan Chip Report] TSMC Advanced Packaging Orders Surge, Boosting Equipment and Outsourcing Partners

CoWoS Packaging Demand Surges
Capacity Expansion and Outsourcing Accelerate
Outsourcing Partner ASE Expects 60% Growth Next Year

Amid the artificial intelligence (AI) semiconductor boom, high-performance computing (HPC) orders have surged, resulting in a flood of orders for TSMC's entire CoWoS (Chip on Wafer on Substrate) series packaging. The CoWoS process refers to TSMC's advanced packaging technology, which stacks multiple semiconductor chips vertically and horizontally on a silicon interposer to create a single package. As TSMC accelerates the establishment of advanced packaging and contract manufacturing, the performance of domestic equipment suppliers and outsourcing partners is also soaring.

According to Taiwan Economic Daily News on December 15, TSMC's CoWoS orders are now so backlogged that the company can no longer accept new requests. Industry experts analyze that the AI boom has become the core axis of current technological industry development, leading to an explosive increase in HPC orders from major companies such as Nvidia and AMD.

TSMC's CoWoS (Chip on Wafer on Substrate) series packaging structure. Screenshot from TSMC website

In particular, TSMC has recently been actively expanding its CoWoS-L process. Major customers include Nvidia, AMD, Apple, Broadcom, as well as various cloud service providers and design companies. In the past, TSMC provided a one-stop service for this process, but now it is expanding by outsourcing to customers in order to smoothly integrate various technologies for the silicon interposer that connects semiconductor dies, and to promptly meet customer demands.

Market research firm Counterpoint reports that demand for advanced packaging remains strong, and predicts that, driven by increased orders for Nvidia's graphics processing units (GPUs) and application-specific integrated circuits (ASICs), TSMC will reach a monthly wafer production of 100,000 units by the end of next year. In its previous earnings announcement, TSMC stated that its current CoWoS production capacity is severely lacking. In addition to its own capacity expansion efforts, TSMC plans to collaborate with packaging and testing partners to achieve supply-demand balance by 2026.

This is also boosting the performance of Taiwanese equipment suppliers. TSMC's partners include Hongxiong, Lequan, Xintong, Quantai, and Zhimau. Outsourcing packaging and testing company ASE Technology Holdings is also benefiting. ASE’s subsidiaries, ASE Semiconductor and SPIL, have recently invested more than 10 billion New Taiwan dollars to expand production in order to meet large-scale order volumes. ASE Technology Holdings is expected to achieve its annual advanced packaging sales target of 1.6 billion New Taiwan dollars, and is forecasting growth of over 60% by next year. TSMC plans to outsource major processes to SPIL.

As TSMC's advanced packaging orders reach saturation, major manufacturers such as Apple and Qualcomm are reportedly considering Intel's advanced packaging technology as an alternative. However, the earliest Intel solutions could be adopted is expected to be 2028.

An industry official stated, "Given that TSMC provides turnkey services for advanced process facilities, the volume of advanced packaging orders shifting to Intel will likely be limited."

Taiwan Economic Daily News = Yun Hyejung, Li Mengshan; Translation = The Asia Business Daily