TSMC Continues to Boost Chip Packaging Capacities and Offers Next-Generation Technology

In July last year, TSMC leadership promised to double its chip packing capacity using the CoWoS method by the end of this year. The move was aimed at combating service shortages sparked by the growing demand for artificial intelligence (AI) accelerators. Now, TSMC acknowledges that it will need to further increase capacity in the next year while preparing for the next generation of CoWoS packaging.

The CoWoS packaging is used in NVIDIA’s computing accelerators, which are featured in many artificial intelligence systems. The scarcity of these accelerators is largely due to TSMC’s limited capabilities in packaging and testing chips using this technology. Despite no significant capital expenditure changes for this year, the company is leaving no stone unturned to alleviate the shortage. Published reports this week indicate that TSMC will spend between $28 and $32 billion on expanding production capabilities and developing new technologies this year. Packaging costs will account for no more than 10% of this expenditure. This allocation is roughly equivalent to last year’s, implying a linear expansion of related capabilities, without sharp jumps in productivity.

TSMC CEO C.C Wei acknowledged during thequarterly earnings conference that demand for chip packaging services is exceptionally high. TSMC continues to struggle to meet customer demands, with Wei admitting: “This situation may continue until next year. However, we are actively trying to increase capacity. For instance, we’re doubling it this year, but it’s still not enough. So we will continue to do so next year.” Wei also mentioned that the company has been investing in ancillary technologies for over the last ten years. He estimated that the CoWoS segment would grow more than 50% annually on average over the next five years and that TSMC is fully capable of meeting all customer demand.

The CEO declined to comment on the growth rate of TSMC’s packaging capacity next year. Speaking about a significant client, presumed to be NVIDIA, Wei said TSMC is working hard to meet its requirements with adequate production capacity — but achieving 100% problem-solving is yet to be attained. However, TSMC is already developing a new generation of CoWoS packaging, that has not only impressed this specific client but all others as well, which reaffirms the company’s necessity for further capacity expansion.