Taiwan Semiconductor Expands Outsourcing of CoW Packaging for AI Chips, Easing Capacity Bottlenecks

Taiwan Semiconductor is significantly opening up its core AI chip packaging processes to outsourcing vendors. This move is viewed as a crucial step to address ongoing supply bottlenecks and is expected to drive a wave of investment in equipment for backend semiconductor processes.

According to South Korea's Electronic News, Taiwan Semiconductor has decided to additionally outsource the Chip-on-Wafer (CoW) stage of its CoWoS packaging technology to OSAT (Outsourced Semiconductor Assembly and Test) companies such as Advanced Semiconductor Engineering. Previously, Taiwan Semiconductor's outsourcing scale for the CoW stage was quite limited; this expansion marks a strategic shift. Relevant OSAT companies are actively advancing equipment procurement for new production lines, and it is reported that they have begun purchase order (PO) negotiations with local South Korean materials, components, and equipment firms.

This expansion of outsourcing is expected to directly boost demand for backend process equipment. In particular, investments in equipment for wafer and interposer dicing, bonding, and other processes are anticipated to surge, potentially benefiting local South Korean equipment manufacturers.

CoWoS Technology Architecture: CoW is the Core Bottleneck

CoWoS is Taiwan Semiconductor's 2.5D packaging technology, specifically designed for AI chip manufacturing. The process involves placing High Bandwidth Memory (HBM) around AI processors (SoCs) such as GPUs and connecting the two via an interposer.

Taiwan Semiconductor refers to the process of attaching chips to the interposer as CoW, and the process of bonding the interposer to the main substrate as WoS (Wafer on Substrate). Previously, Taiwan Semiconductor mainly outsourced the WoS process, with companies like ASE, Amkor, and SPIL obtaining technical licenses from Taiwan Semiconductor and undertaking related production. Although some CoW processes were outsourced, the scale was extremely limited.

The fundamental driver behind Taiwan Semiconductor's significant expansion of CoW outsourcing is the sustained explosion in demand for AI chips. Demand from global AI chip design companies (Fabless), led by NVIDIA, remains robust. Meanwhile, AI data center operators are also independently developing and deploying custom chips, causing overall demand to rise sharply.

Taiwan Semiconductor currently estimates that it holds approximately 90% of the global AI chip manufacturing market share. However, even as Taiwan Semiconductor continues to increase investment in packaging capacity, the bottleneck in the packaging segment has not been fundamentally resolved. An industry insider stated, "This expansion of outsourcing is an active attempt by Taiwan Semiconductor to jointly increase capacity with major partner OSATs against the backdrop of continuously expanding market demand."

South Korean Equipment Manufacturers Seize Order Opportunities

As OSAT companies undertaking CoW processes accelerate equipment investment, South Korea's backend process equipment supply chain is poised to benefit directly. According to several sources in the South Korean equipment industry, negotiations for the supply of specialized CoW equipment in the fields of laser processing and bonding are currently underway, with investment focus expected to concentrate on wafer and interposer dicing and bonding processes.

While the specific investment scale has not yet been disclosed, the industry expects that relevant OSAT companies will significantly expand existing capacity, resulting in substantial equipment procurement demand.