HPC orders are booming, TSMC is urgently expanding production

The latest news reveals that AI chip orders remain high, causing TSMC's advanced CoWoS packaging capacity to continue to fall short of demand. In June, it was reported that the shortfall was as high as 20%. Now, TSMC is urgently expanding production and asking equipment suppliers to support by shortening delivery times.

 

Previously, it was reported that Nvidia and other HPC customers' orders were robust, causing TSMC's advanced CoWoS packaging capacity to be tight with a shortfall of 10% to 20%. Customers requested TSMC to expand CoWoS production capacity. TSMC has confirmed that the sudden increase in demand for AI orders has caused the demand for advanced packaging to far exceed existing production capacity, forcing them to urgently increase production capacity.

In fact, the main bottleneck for AI GPU supply is the CoWoS packaging process. As an advanced packaging technology, CoWoS was originally used in niche markets such as high-speed computing. Its main customers are Nvidia, Google, AMD and Amazon. The cost is high, about $4000 to $6000 per wafer, far higher than TSMC's other packaging technology, InFO, which costs $600 per wafer. Now, CoWoS has become a widely used packaging technology in the fields of HPC and AI computing. Most high-performance chips that use HBM, including AI training chips from most startups, use CoWoS.

 

Regarding the shortage of GPUs, some semiconductor equipment manufacturers have stated that Nvidia and TSMC had previously estimated their annual production capacity and orders quite conservatively. They did not anticipate the sudden surge in demand for AI GPUs and other HPC chips. The CoWoS wet process advanced packaging equipment, which already had limited production capacity, is now unable to meet demand. In addition, some packaging equipment and zero components have lead times of up to 3 to 6 months. The new production capacity will not be available until the end of the year at the earliest. In other words, the next six months will be a period of shortage. It is rare to see TSMC place an urgent order without lowering prices.

 

For TSMC, expanding CoWoS production capacity is currently a top priority. Recently, there have been industry rumors that due to the soaring demand for CoWoS, TSMC placed an order with equipment suppliers at the end of June, requesting that they shorten delivery times and provide full support. It is expected that from the fourth quarter of this year to the first quarter of next year, there will be a large wave of machine shipments.

 

Some equipment manufacturers have stated that TSMC's advanced packaging capacity is mainly InFO, with Apple as the main customer. CoWoS production capacity is driven by Nvidia, and is expected to rise significantly in the second quarter of 2023. TSMC's annual production capacity in 2023 is expected to be at least 120,000 wafers, with the capacity increasing to nearly 175,000 to 200,000 wafers in 2024. Nvidia has secured 40% of the capacity in advance.