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 TSMC: Advanced Packaging Capability Full for Two Years Due to AI Demand

 Key Points:
- TSMC’s advanced packaging production line is fully booked until 2026.
- Growing demand for AI chips from Nvidia and AMD is the main driver of this saturation.
- TSMC is expanding global production capacity to meet demand.
- Logistical and natural problems, such as a recent earthquake, further complicate the situation.

TSMC, the Taiwanese semiconductor manufacturing giant, has announced that its production capacity for advanced packaging is booked for the next two years. This situation is largely attributable to increased demand for AI-ready chips from tech giants such as Nvidia and AMD. 

Advanced packaging, which is essential to protect and connect silicon chips, is crucial to ensure the functionality and durability of electronic devices. According to the Economic Daily News, most of the demand comes from major cloud service companies, a trend confirmed by statements from C.C. Wei, CEO of TSMC, during a recent corporate earnings call.

In response to this growing demand, TSMC is actively expanding its advanced packaging capability. Wendell Huang, the company’s CFO, outlined plans for global capacity expansion to meet market demand. It is expected that by the end of 2025, the production capacity of System-on-Integrated-Chips (SoICs) could reach 10,000 units per month.

Nvidia and AMD rely on TSMC for their flagship chips for AI. Nvidia uses the 4nm process and advanced Chip-on-Wafer-on-Substrate (CoWoS) packaging for its H100 chips, while AMD leverages 5nm and 6nm processes for its MI200 series AI accelerators. AMD also uses SoIC packaging to integrate CPUs and GPUs and CoWoS for high-bandwidth memory (HBM) products. By the end of the year, TSMC plans to produce CoWoS at a monthly rate of 45,000 to 50,000 units, while SoIC production is expected to reach 5,000 to 6,000 units per month.

Despite efforts to increase capacity, TSMC faces significant challenges in managing limited production resources. During a recent earnings call, it emerged how the company is trying to balance the needs of large customers with support for smaller or strategic partners. Jeff Su, TSMC’s director of investor relations, said the company is working to significantly increase capacity, which will be more than doubled this year from last year, but still remains insufficient to fully meet market demand.

Further complicating the situation, a recent earthquake struck the CoWoS manufacturing plant, causing significant damage. Despite this, TSMC assured that chip supply was not affected, although the event may affect future capital investment. At the same time, the memory industry experienced an increase in DRAM and NAND flash prices as a result of the earthquake, with further increases expected in the coming months.