Rising global uncertainties following Donald Trump's presidential victory have led TSMC to recalibrate its ambitious expansion plans for Chip-on-Wafer-on-Substrate (CoWoS) packaging technology, particularly as the semiconductor industry faces new geopolitical challenges.
AI boom drives initial expansion
The semiconductor industry had previously identified AI as the primary growth driver for 2025, prompting TSMC to aggressively expand its CoWoS production capacity. The company's initial strategy focused on significant capacity increases over the next two years, with targets being repeatedly revised upward.
Geopolitical factors force strategy shift
However, recent developments, including heightened US restrictions on Chinese AI chips and uncertainties surrounding the incoming Trump administration, have reportedly led TSMC to reassess its expansion plans. While the company still expects to double its capacity by 2025, growth projections for 2026 have been moderated, affecting the planning of factory engineering and equipment orders.
Industry leaders remain bullish
Despite market uncertainties, industry leaders maintain an optimistic outlook. Nvidia CEO Jensen Huang recently emphasized extraordinary demand for the company's Blackwell architecture, citing strong interest from major tech companies including Microsoft, OpenAI, and Meta. Similarly, TSMC CEO C.C. Wei has affirmed the legitimacy of this "insane" AI demand, noting that the company's partnership with virtually all major AI chip manufacturers provides unique market insights. This is reflected in the rising utilization rates for TSMC's 5nm and 3nm processes.
Capacity targets undergo revision
TSMC's advanced packaging roadmap has seen multiple adjustments throughout 2024. The company's latest projections now target monthly CoWoS capacity of approximately 35,000 units for 2024, 75,000 units for 2025, and 135,000 units for 2026 - slightly reduced from previous estimates of 80,000 and 140,000 units for 2025 and 2026 respectively. Industry sources suggest these revisions reflect growing geopolitical and economic uncertainties.
Impact on the broader ecosystem
The potential slowdown in CoWoS expansion has broader implications for the semiconductor supply chain. Sources indicate that reduced capacity expansion could affect factory engineering requirements and equipment material orders. Furthermore, TSMC's more cautious stance necessitates a reevaluation of plans for overflow orders and Outsourced Semiconductor Assembly and Test (OSAT) expansion, particularly given the company's inability to accept orders from Chinese AI chip customers due to trade restrictions.
