Article | Across the semiconductor industry, TSMC is considering raising prices. In addition to the 3nm advanced process, the price increase targets CoWoS advanced packaging. Next year, 3nm will rise by about 5%, while CoWoS will rise by 10% to 20%. "It's not a shortage of AI chi

article | Semiconductor industry overview

TSMC is considering raising prices. In addition to the 3nm advanced process, the price increase of

also includes cowos advanced packaging. Next year 3nm will rise by about 5%, while cowos will rise by 10% to 20%.

"It's not a shortage of AI chips, but a shortage of our cowos production capacity." This was TSMC Liu Deyin's answer in an interview. This technology, which TSMC has quietly cultivated for more than ten years, has become the focus of global attention.

cowos huge demand

With cowos, TSMC is almost becoming the world's largest packaging factory. The proportion of

advanced packaging in TSMC's overall performance has gradually increased, and the related gross profit margin has also gradually increased. Some analysts predict that TSMC’s advanced packaging revenue will exceed US$7 billion this year, challenging US$8 billion. Advanced packaging currently accounts for about 7% to 9% of TSMC's revenue, and the segment is expected to grow faster than TSMC's average over the next five years.

This is not unrelated to TSMC cowos packaging technology. Many AI chips require cowos packaging technology.

We can look at the market demand for cowos. Leading the charge is NVIDIA, which accounts for more than 50% of the overall supply. The previous a100 and h100 used cowos packaging. Later blackwell ultra products also used TSMC's cowos packaging process. Next year, Nvidia will promote the b300 and gb300 series using cowos-l technology. The mi300 of

amd uses two packaging technologies: TSMC SOIC (3D) and COWOS (2.5D). In addition, Broadcom, Microsoft, Amazon, and Google also have certain demand for cowos. According to agency statistics, AMD and Broadcom account for more than 27.7% of the demand for Cowos production capacity.

Currently, although AI chips do not use the most advanced manufacturing processes, they are highly dependent on advanced packaging technology. Whether global semiconductor companies can obtain more advanced packaging capacity from TSMC will determine their market penetration and control.

Therefore, there is news that Nvidia even expressed its willingness to increase the price of in order to obtain more cowos production capacity, thus widening the distance from its competitors. However, this news is not groundless, because Huang Renxun really emphasized in public: "TSMC not only produces wafers, but also deals with many supply chain issues." He also agreed that the current pricing is too low and supports TSMC's price increase.

Judging from the current cowos demand, Nvidia's 50% share of will not change even next year, while AMD's cowos packaging orders at TSMC will increase slightly. It is estimated that Nvidia's demand for Cowos-L process may increase significantly from 32,000 wafers in 2024 to 380,000 wafers in 2025, a year-on-year increase of 1018%.

Such huge demand for cowos has caused TSMC to frequently mention production expansion. How did

cowos get to this point?

cowos is not soaring into the sky, but moving forward quietly.

advanced packaging is not a new concept. Looking back on history, the year 2000 was the turning point of advanced packaging. Starting from this year, packaging has shifted from traditional wire bonding and flip-chip methods to "wafer-level packaging."

As early as 2008, TSMC established the Integrated Interconnect and Packaging Technology Integration Department (iipd) to enter advanced packaging.

At that time, TSMC fell into operating losses due to the impact of the financial crisis. Amid internal and external troubles, Zhang Zhongmou returned to take charge of TSMC. At the same time, he invited Chiang Shangyi, who had retired, to take the helm of research and development to develop advanced packaging technology for differentiated competition. According to Jiang Shangyi's recollection, the initial proposal of advanced packaging was regarded as a "joke" within the company (TSMC).

In 2011, TSMC developed the first generation of cowos packaging technology, which was the original origin. At that time, cowos used a silicon (si) substrate as an intermediate substrate (interposer) to integrate multiple chips into one package, achieving higher interconnect density and better performance.

Source: TSMC cowos chronicle table

At this time, people still lack interest in cowos. The first company willing to adopt the costly cowos technology is Huawei. The TSMC cowos note sheet shows that used the cowos process in the HiSilicon hi1616 chip in 2014.After

, cowos packaging has been continuously improved and developed. Now cowos is a 2.5d integrated production technology, which is a combination of cow and wos: cow is to stack chips on a wafer (chip-on-wafer), and wos is a wafer on a substrate (wafer-on- substrate), integrated into cowos.

According to different interposers, TSMC divides cowos packaging technology into three categories: the first category, cowos-s, uses si substrate as the interposer; the second category, cowos-r, uses the rewiring layer (rdl) as the interposer ; The third type of cowos-l uses chiplets and RDL as interposers.

In the latest speech, Hou Shangyong, director of TSMC's High-Efficiency Packaging Integration Department, said that as the best solution that can meet all conditions, TSMC's advanced packaging focus will gradually shift from cowos-s to cowos-l, and is also called cowos-l is a key technology for the future blueprint.

Hou Shangyong believes that since the cost of the top die is very high, cowos-l is the best solution that can meet all conditions better than cowos-r and cowos-s, and because of its flexibility, it can be implemented in its interposer layer Heterogeneous integration will have its specialized size and function. cowos-l is compatible with a variety of high-performance top-level chips, such as advanced logic, soic and hbm.

are all coveting cowos production capacity

• TSMC "eats meat"

TSMC cowos production capacity is all in Taiwan, China. There are five advanced packaging and testing plants, located in Longtan, Zhuke, Zhunan, Zhongke, and Nanke.

The first p1 factory in Nanke Chiayi Park started construction in May. However, suspected ruins were excavated during the construction process, and relevant treatment is now being carried out in accordance with the Cultural Assets Law. The official answer is that the relevant cleanup work will be completed in October this year, and the planned installation of TSMC Jiake's advanced packaging plant in the third quarter of next year will not be affected. According to previous plans, TSMC will build two cowos advanced packaging plants in Chiayi, with mass production originally planned for 2028. The

Zhunan Advanced Packaging Factory (ap6) has been officially opened in June 2023. After a year of operation, with the equipment moved to the ap6c factory, it has become TSMC’s largest cowos base. In the third quarter, the monthly cowos production capacity doubled. Increased from 17,000 pieces to 33,000 pieces.

In addition to the Zhunan plant ap6c, the Zhongke plant, which originally only undertook the os post-production process, will also gradually convert to the cow process, while the Chiayi plant is in the land preparation stage and is expected to progress faster than the Tongluo plant.

In the third quarter, TSMC also added new cowos-related machines and has asked equipment manufacturers to send additional engineers to increase the production capacity of the Longtan ap3 factory and the Central Science Park ap5 factory.

At the financial report conference, TSMC has made it clear that its cowos production capacity will double every year in 2024 and 2025, but demand will still exceed supply.

Now, TSMC’s advanced packaging production capacity will have a compound annual growth rate of more than 50% from 2022 to 2026. He Jun, vice president of operations, advanced packaging technology and services at TSMC, said: "In the past, it took 3 to 5 years to build a factory, but now it has been shortened to 2 years to build it to meet customer needs."

However, TSMC's cowos specific Production capacity was not disclosed in the financial report.

He Jun once humorously mentioned when showing the presentation data: "Nowadays, presentations are afraid to put (advanced packaging production capacity) figures because customers keep saying (capacity) is not enough, so I simply don't put specific figures."

TSMC’s current cowos are mostly agency predictions. Specifically, Investment Bank has evaluated . By the end of this year, TSMC's cowos monthly production capacity will exceed 32,000 pieces, and by the end of 2025, its monthly production capacity will be around 70,000 pieces. digitiems predicts that by the end of the fourth quarter of 2025, TSMC's monthly production capacity is expected to increase to more than 65,000 12-inch wafer equivalents. Citi Securities estimates that , TSMC’s cowos production capacity by the end of this year will be 30,000 to 40,000 pieces per month. After purchasing Innolux Nanke’s fourth factory, the cowos production capacity by the end of 2025 will be increased from 60,000 to 70,000 pieces per month. 90,000 to 100,000 pieces per month.

Industry insiders said that TSMC provided equipment manufacturers with machine requirements for 2026 and placed orders. Next year's delivery schedule is basically full, and TSMC is currently working with equipment suppliers to finalize shipment and installation plans for 2026.

• ASE "drinking soup"

As the truly world's largest packaging and testing manufacturer, ASE has received overflowing cowos demand from TSMC.

ASE has also mastered advanced packaging technology and has become TSMC's best partner to solve the tight cowos packaging production capacity. Among them, cowos-s works closely with TSMC in the advanced packaging back-end process.

industry insiders analyze that by 2025, TSMC may outsource 40% to 50% of the cowos-s back-end os packaging process to ASE Investment and Control, which can increase related performance by approximately US$150 million to US$200 million.

For the cowos business, ASE has recently made a large expenditure.

ASE's huge investment is mainly used to purchase the mature process exposure machine equipment required for cow, plus its silicon product Changhua Erlin Factory and Zhongke Factory and other strongholds have begun to expand clean rooms and install equipment machines.

You should know that ASE Silicon Products announced some time ago that it invested NT$419 million to obtain the land use rights of Zhongke Changhua Erlin Park to expand cowos advanced packaging. At the same time, Silicon Products also invested a further 3.702 billion yuan to acquire the Yunlin Douliu factory land from Minghui Energy, which is also to expand cowos advanced packaging production capacity.

is more than that. ASE announced in early October that the Kaohsiung City Dajiu K28 factory is expected to be completed in 2026. The main purpose is to expand cowos advanced packaging and testing production capacity.

• Amkor "gnawing bones"

A month ago, Amkor and TSMC announced that they had signed a memorandum of understanding to work together to introduce advanced packaging and testing capabilities to Arizona and further expand the region's semiconductor ecosystem.

According to the agreement, TSMC’s planned factory in Peoria, Arizona, will sign a one-stop advanced packaging and testing service contract with amkor. TSMC will rely on these services to well support its customers, especially those who use TSMC's advanced wafer manufacturing equipment in Phoenix. Among them, the packaging technologies involved in include TSMC's integrated fan-out technology (info) and chip-on-wafer technology (cowos) on the substrate.

In fact, TSMC is planning three advanced wafer manufacturing plants in Arizona, combined with Amkor’s advanced packaging production lines, which will help increase the added value of TSMC’s local plants and stabilize orders.

Conclusion

TSMC eats meat, ASE drinks soup, and Ankong gnaws bones.

According to the latest "State of Advanced Packaging in 2024" report released by yole, the compound annual growth rate of the advanced packaging market is expected to reach 11% from 2023 to 2029, and the market size will expand to US$69.5 billion. According to

digitimes research, driven by strong demand for cloud AI accelerators, global demand for cowos and similar packaging capacity may increase by 113% in 2025. Judging from the current demand for

, next year's cowos packaging will still be a good business.

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