Nomura: Three Major Trends in Advanced Packaging Worldwide Benefit Taiwan Semiconductor and United Microelectronics

Nomura Securities released a report indicating that three major trends in advanced packaging are expected to emerge globally starting this year, namely CoWoS-L, System-on-Integrated-Chip (SoIC), and upgrades in Integrated Fan-Out (InFO) technology. Among Taiwanese manufacturers, Nomura is optimistic about Taiwan Semiconductor Manufacturing Company (TSMC) (2330) and United Microelectronics (UMC) (2303), both of which have been given a "Buy" rating, while ASE Technology Holding Co., Ltd. (3711) is rated as neutral. The first trend is that CoWoS technology will transition from CoWoS-S to CoWoS-L/R. Nomura pointed out that NVIDIA's B100 graphics processing unit (GPU) is adopting CoWoS-L technology, and TSMC has begun to shift a significant portion of its CoWoS-S capacity to CoWoS-L starting in the second half of 2024. Nomura estimates that about 20% of TSMC's total CoWoS capacity in 2024 will be CoWoS-L, and by 2025, the proportion of CoWoS-L will increase to nearly 60%. However, as NVIDIA has requested suppliers outside of TSMC to expand CoWoS-S capacity, Nomura estimates that CoWoS-S capacity will exceed end-user demand starting in the second half of 2024, leading to an oversupply. Therefore, Nomura has become more cautious about the CoWoS supply chain, only favoring companies benefiting from CoWoS-L. Nomura noted that there are still three positive factors for CoWoS-S supply, including the demand for DeepSeek incentivizing Hopper GPU, further restrictions from the U.S. government forcing customers in mainland China to purchase more Hopper GPUs, and stronger market demand for AI chips outside of NVIDIA. The second trend is that after the adoption of HBM5 with SoIC, Apple may also follow suit starting next year, driving continued growth in SoIC adoption. SoIC is a long-term trend, but it still faces three headwinds this year: first, Intel is reducing capital expenditures; second, there are no new major customers besides AMD; and third, since the second half of last year, AMD's AI GPU demand has not been as strong as expected. Thirdly, Apple may promote InFO technology upgrades starting in 2026. Nomura believes that Apple may plan to adopt an upgraded version of InFO and ubump/Through-Silicon Via (TSV) starting in 2026, as Apple may need to change the application processor (AP) from InFO Package-on-Package (PoP) to InFO-M (multi-chip), and use InFO-M and SoIC for Apple's future mobile and high-performance computing (HPC) chips