TSMC's CoWoS advanced packaging capacity fully booked for AI accelerators; overflow orders divert to Intel and rival Taiwanese foundries.

TSMC is experiencing a surge in AI chip orders utilizing its advanced CoWoS (Chip-on-Wafer-on-Substrate) packaging technology, but the Taiwanese semiconductor leader cannot keep pace with demand. As AI and HPC chip demand reaches unprecedented levels, TSMC—which pioneered advanced packaging and has dominated the sector for years—is hitting capacity bottlenecks even as customers like NVIDIA, AMD, and Amazon AWS reserve future capacity that hasn't yet been manufactured.

The supply shortfall is redirecting orders to competitors. Intel, with active U.S. government support, is aggressively pursuing advanced packaging using its EMIB technology, which offers advantages over CoWoS. Simultaneously, Taiwanese packaging and test specialists—ASE, SPIL, Powertech, and KYEC—are capitalizing on the spillover effect.

TSMC currently operates five advanced packaging and testing facilities across Taiwan: Hsinchu Science Park, Southern Taiwan Science Park, Taoyuan Longtan, Central Taiwan Science Park, and Miaoli Zhunan. The company is constructing additional facilities in Taiwan and has two more plants planned in Arizona as part of its twelve-fab expansion plan.

AMD is already using TSMC's CoWoS to produce its next-generation EPYC Venice chips on the N2P node in volume production, and will also utilize TSMC's advanced packaging for its upcoming MI400 and MI500 chips, expected to power multiple Frontier-Scale and Hyperscaler platforms. Meanwhile, NVIDIA is directing orders for its next-generation Feynman GPUs to Intel, leveraging Chipzilla's improved EMIB technology.

While the capacity constraints boost TSMC's revenue and wafer pricing, the situation carries risk. If high-end customers permanently shift to competitors rather than wait for TSMC capacity, the company could lose strategic customers despite strong near-term profits. The spillover effect may ultimately benefit TSMC as it focuses on the most profitable processes, but only if customers choose to return once capacity becomes available.