The $100 Billion Semiconductor Boom: TSMC’s Transformative Investments in Advanced Packaging
Location: Taipei, Taiwan
Source: CNN
In a groundbreaking announcement that could reshape the landscape of semiconductor manufacturing, the Taiwan Semiconductor Manufacturing Company (TSMC) has unveiled a staggering $100 billion investment plan. This unprecedented investment is being hailed as the largest single foreign investment in U.S. history, capturing global attention and raising concerns in Taiwan.
The Powerhouse of Semiconductor Production
TSMC stands as a titan in the semiconductor industry, producing over 90% of the world’s advanced chips. These are the essential components powering everything from smartphones to artificial intelligence (AI) applications and even military weapons. The latest plan will see TSMC building two advanced packaging facilities in Arizona, among other state-of-the-art projects.
Why Advanced Packaging Matters
The demand for advanced packaging technology has surged, fueled by the global AI boom. Understanding advanced packaging is key to grasping the ongoing technological race between the U.S. and China. While the two nations have agreed to a temporary truce regarding trade tariffs, tension persists due to ongoing disputes over chip restrictions and other geopolitical issues.
Insights from Computex 2025
At the recent Computex trade show in Taipei, the significance of advanced packaging was eloquently highlighted by Jensen Huang, CEO of Nvidia. He emphasized its crucial role in the AI landscape, stating, "the importance of advanced packaging for AI is very high." His assertion that "no one has pushed advanced packaging harder than me" underscores the competitive environment in which these technologies flourish.
Unpacking the Concept of Packaging
In semiconductor manufacturing, packaging refers to the process of sealing a chip within a protective casing before mounting it onto a motherboard of an electronic device. Advanced packaging techniques allow multiple chips—such as graphic processing units (GPUs), central processing units (CPUs), or high bandwidth memory (HBM)—to be positioned closer together. This proximity elevates overall performance, accelerates data transmission, and reduces energy consumption.
Think of these chips like departments within a corporation. The closer they are, the more efficiently they can interact, much like how streamlined communication improves organizational effectiveness.
The Mechanics of Advanced Packaging
As Dan Nystedt, a vice president at investment firm TrioOrient put it, the objective is to "put the chips as close together as possible," while also facilitating effortless communication between them. This advanced approach effectively sustains Moore’s Law—the principle that the number of transistors on chips would double approximately every two years—despite rising costs and complexities in chip fabrication.
Among the various advanced packaging technologies, TSMC’s CoWoS (Chips-on-Wafer-on-Substrate) stands out, especially since the AI frenzy ignited by innovations like OpenAI’s ChatGPT. CoWoS is becoming so well-known that even Lisa Su, CEO of AMD, remarked that it’s a term everyone in Taiwan recognizes.
The Significance of CoWoS
CoWoS is integral to the production of AI processors, specifically the GPUs used in data centers and AI servers. "You could call it the Nvidia packaging process if you want to," said Nystedt, highlighting how prevalent this technology has become among companies engaged in AI chip development.
The skyrocketing demand for CoWoS has prompted TSMC to enhance its production capabilities. Jensen Huang noted during a visit to Taiwan that the current capacity for advanced packaging has likely quadrupled in just two years.
The Future of Chip Manufacturing in the U.S.
Having both advanced fabrication and advanced packaging technologies in Arizona positions the U.S. as a "one-stop shop" for chip production. This strategic move is expected to strengthen the United States’ competitive edge in the AI sector, benefiting major stakeholders such as Apple, Nvidia, AMD, Qualcomm, and Broadcom—some of TSMC’s primary clients.
Analysts, like Eric Chen from Digitimes Research, assert that establishing a complete supply chain for both manufacturing and packaging will bolster U.S. competitiveness in AI chips. This diversification also helps mitigate risks associated with reliance on a single geographic area for these critical technologies.
Mitigating Supply Chain Risks
The establishment of advanced packaging technologies in the U.S. not only offers a strategic advantage but also addresses supply chain vulnerabilities. "Instead of having all eggs in one basket, CoWoS would be in Taiwan and also the U.S., making the situation feel more safe and secure," explained Nystedt.
While the CoWoS technology gained attention recently, it has been around for over 15 years. Its development, initiated by a team led by TSMC’s former co-COO Chiang Shang-yi, aimed to address performance bottlenecks by fitting more transistors into chips. Initially, uptake was slow due to high costs, creating challenges for Chiang, who humorously recalled feeling like a corporate joke at the time.
However, the AI boom has revived interest in CoWoS, making it one of the most sought-after technologies in the market. "The result was beyond our original expectation," Chiang stated, reflecting on the technology’s transformation.
Key Players in Advanced Packaging
In the global semiconductor landscape, companies specializing in packaging and testing services are referred to as outsourced semiconductor assembly and test (OSAT) firms. Apart from TSMC, key players include South Korea’s Samsung, America’s Intel, and other OSAT firms like China’s JCET Group and Taiwan’s ASE Group and SPIL.
The realm of advanced packaging is evolving rapidly, influenced by the demands of an increasingly connected world, where AI applications require unprecedented processing power and efficiency to function seamlessly.
