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Nvidia CEO Jensen Huang's visit to Taiwan in June this year set off an artificial intelligence (AI) craze. In addition to visiting TSMC founder Morris Chang and then-president Wei Zhejia, he also paid a visit to TSMC headquarters in person.

People familiar with the matter revealed that Huang Renxun once proposed that TSMC set up a CoWoS production line dedicated to Nvidia outside the factory, but he was unexpectedly questioned and rejected by TSMC senior management. Both sides spoke in arrogant tones and the scene was tense and awkward.

There are actually signs that TSMC responded in this way. TSMC Chairman Wei Zhejia pointed out at a recent earnings conference that AI chips have driven strong demand for CoWoS advanced packaging, and it is estimated that CoWoS production capacity will more than double in 2024 and 2025. It is expected that supply tension will ease in 2025 and supply and demand will be balanced in 2026. Many customers are eager for advanced process capacity, and TSMC will do its best to strike a balance between price and capacity.

Wei Zhejia mentioned that the demand for CoWoS is very strong, and TSMC continues to expand production, hoping to achieve a balance between supply and demand in 2025-2026. "The capital expenditure of CoWoS cannot be clearly stated at present, because we are working hard to increase it every year. Last time, it was mentioned that the production capacity will more than double this year."

Wei Zhejia said that in order to meet the strong demand from customers, TSMC will do its best to increase CoWoS production capacity and continue to cooperate with the back-end professional packaging and testing foundry (OSAT) to deploy advanced packaging. In terms of the gross profit margin of advanced packaging CoWoS, it is also getting closer to the company's average gross profit level. TSMC's announcement showed that the gross profit margin in the second quarter was 53.2%.

TSMC previously expected that the compound annual growth rate of CoWoS capacity would exceed 60% from 2022 to 2026. It is reported that TSMC's Advanced Packaging and Testing Plant 5 in Zhongke is expected to mass produce CoWoS in 2025; Advanced Packaging and Testing Plant 6 in Zhunan, Miaoli, will be put into use in early June 2023, integrating SoIC, InFO, CoWoS and advanced testing; Advanced Packaging and Testing Plant 7 in Chiayi started construction in May this year, but suspected ruins were dug up in June and construction was temporarily suspended.

Regarding TSMC's layout of other advanced packaging technologies besides CoWoS, Wei Zhejia said that TSMC continues to pay attention to fan-out panel-level packaging (FOPLP) technology, but the relevant technology is not yet mature; he personally expects that FOPLP technology will mature in three years, and TSMC will continue to develop FOPLP technology and will be ready by then.

Legal persons estimate that TSMC's 5nm/3nm capacity utilization rate is currently fully loaded. In order to meet the needs of various manufacturers, 3nm has accelerated its expansion, and its monthly capacity will gradually increase from 100,000 pieces to about 125,000 pieces in the second half of the year. It is expected that 2nm will be mass-produced as early as the fourth quarter of 2025, with a target monthly capacity of 30,000 pieces. With the future expansion of the Kaohsiung plant, the monthly capacity of Hsinchu Science Park and Kaohsiung is expected to reach 120,000 to 130,000 pieces.

As geopolitical risks continue to rise, Wei Zhejia said that he has not changed any expansion strategy, including the factories in Arizona, USA, Kumamoto, Japan and future Europe, which are all proceeding according to plan.

Currently, TSMC's investment in its US plants has reached US$65 billion. It is expected that there will be three plants in Arizona. The first two will be put into mass production in 2025 and 2028 respectively, with the production process nodes being 4nm/3nm and 3nm/2nm. (Proofread by Zhang Jie)