Demand for artificial intelligence and high-performance computing chips has reached record levels worldwide. This intense demand began to strain the advanced packaging technology CoWoS capacity of TSMC, the leading manufacturer of the sector.

TSMC is having trouble meeting increasing orders due to supply chain bottlenecks. This situation paves the way for other manufacturers and rival companies in the sector to come to the fore.

Competition is heating up in the advanced packaging market

Although TSMC’s CoWoS technology has been the standard choice of the department for a long time, increasing demand makes production insufficient. Intel, its EMIBIt aims to become the second largest player in the market by filling this gap with its technology.

Not only Intel, but also Taiwanese packaging and testing companies such as ASE, SPIL, Powertech and KYEC are meeting the overflow of orders from TSMC. These companies are actively taking advantage of order slippage resulting from TSMC’s capacity constraints.

TSMC operates in five different facilities in Taiwan: Hsinchu, Southern Taiwan, Taoyuan Longtan, Central Taiwan and Miaoli Zhunan. In addition to building new facilities in Taiwan to increase production capacity, the company plans to establish two factories in Arizona, USA.

Giant customers such as NVIDIA and AMD are trying to guarantee their production processes by reserving TSMC’s capacity in advance. Reports that NVIDIA will shift packaging orders for next-generation Feynman GPUs to Intel reveal the extent of the change in the industry.

Next generation chips and manufacturing strategies

AMD continues to produce EPYC Venice chips on TSMC’s N2P node and plans to benefit from TSMC’s technologies again for the next generation MI400 and MI500 series.

These chips will be used in large-scale data centers and hyperscale platforms around the world.

TSMC is trying to manage this period by focusing on highly profitable processes and large customers. However, the risk that customers will turn entirely to rival factories for their packaging needs poses a serious challenge for the company.

How do you think these production shifts in the industry will affect the chip supply chain in the long term?