After Jensen Huang's visit to Taiwan, Morgan Stanley raised its expectations for Taiwan Semiconductor's CoWoS capacity: an expansion of over 20% by 2026 is needed to keep up with the growth in 3nm capacity

Morgan Stanley has raised its expectations for TSMC's advanced packaging (CoWoS) capacity, predicting that to match the growth in 3nm chip production, CoWoS capacity needs to expand by over 20% by the end of 2026. This adjustment highlights the immense supply chain pressure brought about by demand for artificial intelligence. According to news from the Wind Trading Platform, based on research released by Morgan Stanley analysts Tiffany Yeh and others on the 17th, the firm currently expects TSMC's CoWoS monthly capacity to reach at least 120,000 to 130,000 wafers, up from the previous estimate of 100,000 wafers. This significant upward revision is based on the firm's latest industry survey. The survey in the report indicates that after Jensen Huang visited Taiwan to secure capacity for his next-generation "Rubin" platform, TSMC has decided to increase its monthly 3nm front-end wafer capacity by 20,000 wafers. To support the expansion of front-end processes, a simultaneous increase in back-end advanced packaging capacity has become essential. The new capacity will be deployed in the AP8 P1 and P2 facilities, with the specific timeline depending on the progress of factory construction and equipment installation. Morgan Stanley believes that this capacity expansion is beneficial for the CoWoS supply chain and AI semiconductor customers. The institution pointed out that this expansion decision is particularly positive for CoWoS equipment suppliers that underperformed in 2025, while also being optimistic about AI ASIC customers needing 3nm capacity receiving support through design service companies like Alchip and MediaTek. CoWoS Capacity Catching Up with 3nm Pace According to Morgan Stanley's AI tracking report, TSMC's decision to increase 20,000 wafers of 3nm front-end wafer capacity has prompted the company to simultaneously plan for a significant expansion of CoWoS capacity. This decision was made after Jensen Huang's visit to Taiwan seeking Rubin capacity. The institution's analysis shows that CoWoS capacity will reach at least 120,000 to 130,000 wafers per month by the end of 2026, a substantial increase from the previously expected 100,000 wafers per month. This expansion exceeds 20%, aimed at matching the growth demand for 3nm process capacity. Morgan Stanley pointed out that CoWoS, as an advanced packaging technology, is a key link supporting high-performance AI chips. As the 3nm process enters mass production, the corresponding packaging capacity must expand simultaneously to meet the delivery needs of AI customers. The report states that the new CoWoS capacity will be deployed in the P1 and P2 phases of the AP8 wafer fab. However, the final production schedule will depend on the speed of factory construction and equipment installation, introducing some variables regarding whether the capacity can be delivered on time. Equipment and Service Vendors to Benefit TSMC's expansion plan is expected to bring a new round of growth momentum to the entire semiconductor supply chain, with equipment and service vendors benefiting first. Morgan Stanley believes that this capacity adjustment is "very positive" for CoWoS equipment suppliers and specifically notes that the stock prices of these suppliers have been relatively lagging since 2025. The firm reiterated its "overweight" rating on AllRing and ASMPT. The report analyzes that AllRing is TSMC's main OS (osmium) supplier, while ASMPT remains the exclusive supplier of TCB (thermal compression bonding) equipment on TSMC's CoWoS-L substrates In terms of service providers, Morgan Stanley also maintains an "Overweight" rating on ASE Technology Holding Co. and King Yuan Electronics. In addition, customers of AI ASIC (Application-Specific Integrated Circuit) capacity at 3nm need to obtain design services through Creative Electronics and WorldChip Technology, which are also listed as beneficiaries by the firm