As the importance of the artificial intelligence (AI) sector continues to grow, TSMC’s advanced packaging capacity is currently at full capacity. This is a major concern for the AI ​​industry, but the Taiwanese giant has taken a strategic step to manage this demand.

TSMC Unable to Keep Up with High Demand

Advanced packaging solutions, which play a key role in enhancing the performance of AI chips by combining chips, have become a ‘holy grail’ for manufacturers. Therefore, interest in TSMC’s CoWoS (Chip-on-Wafer-on-Substrate) solutions from major companies like NVIDIA, AMD, Google, Apple, and MediaTek has peaked.

However, according to information from supply chain sources, TSMC can no longer meet the packaging demand alone. To meet these “overflowing” orders and balance demand, the company has decided to outsource some of its orders. In this context, Taiwanese companies such as ASE Technology and SPIL are taking on these additional orders from TSMC.

TSMC is actively expanding its CoWoS production lines by building new facilities in both Taiwan and the US. However, given the urgency of customer demand, the Taiwanese giant has made a significant strategic shift, embracing outsourcing.

Firms like ASE Technology are reporting spending “billions” of dollars to expand their production footprints to meet anticipated demand. This outsourcing is seen as a way for TSMC to meet customer demands, as well as preventing competitors like Intel from gaining an advantage in the packaging segment.

Advanced packaging is now as critical to tech giants as cutting-edge manufacturing processes. NVIDIA, AMD, and Apple are among the largest customers of CoWoS-L and CoWoS-S. However, with other companies like Google, Qualcomm, and MediaTek always seeking alternatives, Intel has emerged as a new competitor in this area.

By outsourcing its demand, TSMC gains access to a wider range of production lines, which is a way to prevent competition for customer orders. The future evolution of the advanced packaging supply chain, which is rapidly gaining importance in the IT world, is a matter of curiosity, as it is becoming clear that no single player can fulfill all industry orders alone.