TSMC Expands Outsourcing of Key Packaging Step CoW… Expected to Ease AI Chip Manufacturing Bottleneck TSMC is expanding outsourced production of a major process step for artificial intelligence (AI) chips. The move is seen as a step toward resolving the bottleneck in AI chip manufacturing. Much of the volume TSMC had been handling in-house is set to go to outsourced semiconductor assembly and test (OSAT) firms, and a large-scale wave of equipment investment is expected to follow. According to industry sources on the 4th, TSMC has decided to place additional CoW (chip-on-wafer) packaging volume — part of the CoWoS process used to manufacture AI chips — with ASE and other OSAT providers. In response, major OSAT companies are moving ahead with equipment orders to build new production lines. Purchase order (PO) discussions are also reportedly underway with Korean materials, components, and equipment suppliers. The specific investment scale has not been disclosed, but capacity is expected to be expanded substantially versus current levels. CoWoS is TSMC's 2.5D packaging technology, used in building AI chips. A processor (SoC) for AI workloads, such as a GPU, sits at the center with high-bandwidth memory (HBM) placed around it, and an intermediate substrate called an interposer is used to connect the two. TSMC refers to the step of attaching the chips to the interposer as CoW, and the step of bonding that interposer to the main substrate as WoS (wafer-on-substrate). Until now, TSMC has mainly outsourced WoS, the bonding to the main substrate. ASE, Amkor, and SPIL have been producing it under technology licenses from TSMC. Some CoW work was also outsourced, but only in limited volumes. The decision to significantly expand CoW outsourcing this time is attributed to the persistent bottleneck in AI chip manufacturing. Demand has surged as not only global AI chip designers (fabless firms) led by Nvidia, but also AI data center operators, move to develop and deploy their own custom silicon. TSMC is estimated to hold roughly 90% of the global AI chip manufacturing market. With demand continuing to grow and TSMC's own capacity insufficient to meet it, the company is looking to increase outsourcing. "TSMC has continued to invest in packaging capacity for AI chip manufacturing, but it is still being criticized for bottlenecks at the packaging stage," an industry official said. "This expansion of outsourcing is an attempt to scale up capacity together with its key OSAT partners, as market demand keeps expanding." As OSATs receiving CoW volume from TSMC ramp up equipment investment, back-end materials, components, and equipment suppliers are also expected to benefit. Investment is seen concentrating in particular on dicing — cutting wafers and interposers — and on the bonding processes that join wafers to interposers. According to multiple sources in the Korean equipment industry, discussions on supplying CoW-related tools are underway in the laser processing and bonding segments. $ASX $AMKR

"TSMC plans to build 25 fabs over 5 years." $TSM is responding to semiconductor supply shortages & demands driven AI data centers. This would increase production capacity by 1.5 times from current levels (currently 16 fabs: 11 front-end, 5 back-end). Huge incremental revenue🔥

TSMC’s US$100 billion addition to its US investment plans – now totaling $265 billion – will expand TSMC Arizona to 12 fabs, but the market fears the move will hurt profitability, media report, noting construction costs are 4 to 5 times higher than Taiwan (from TSMC’s CFO). The fear is TSMC’s gross margin may fall below 65%, given margin pressure from ramping 2nm (3-4 percentage points) and overseas fab investments (2-3 percentage points). The report argues such worries are overdone. TSMC is playing the long game, building critical AI infrastructure for the long haul – with capex raised to $60-$64B from $52-$56B previously, and it takes 5-years years for advanced fabs to ramp up to mass production, from the initial groundbreaking. Operationally, mass production at TSMC Arizona means costs go down as fabs ramp up through volume and efficiency gains. Production lines improve as workers better understand their jobs; construction improves the same way. $TSM #semiconductors#

TSMC and other high energy users may soon see costs rise: Taiwan lawmakers will on Wednesday (7/22) review a proposal to require major electricity consumers (TSMC is the biggest) to install their own power supply for 5MW or more power contracts, media report, noting around 400 companies in semiconductors, AI data centers, optoelectronics, and more will be affected. The idea is to avoid straining Taiwan’s power grid. $TSM $UMC $ASX $BE $GE #semiconductors#

TSMC’s Q2 net income jumped 77.4% YoY, yet $TSM closed 2.3% lower. 📉 AI optimism had already raised expectations. Now margins are the next test. See what could shape TSMC’s next quarter 👇 #WallStreetMonth#

TSMC reported second-quarter revenue that rose 36% from a year earlier to a record high on surging interest in artificial intelligence applications. Read more:

TSMC workers are reportedly angry over rumors that employee bonuses could be cut, even though the company’s profits jumped 58% due to huge demand for AI chips. Many employees feel the timing makes no sense. The company is making record profits, yet workers face talk of smaller bonuses amid long hours and high-pressure work in chip fabs. TSMC normally doesn’t face such worker backlash and some employees are even discussing possible “Samsung-style” strikes, which are rare in Taiwan’s chip industry. Since TSMC produces chips for companies like NVIDIA, Apple, and AMD, even minor disruptions could affect the global AI and semiconductor market, with another price increase too