According to ST STAR Market Daily, hit by massive orders for AI GPUs from NVIDIA, TSMC’s in-house CoWoS advanced packaging production lines have been running at full capacity. To ease capacity bottlenecks, TSMC plans to further outsource manufacturing steps, contracting leading OSAT players including ASE Group to handle the CoW (chip bonding onto interposer) segment within the CoWoS process.

CoWoS is TSMC’s mainstream 2.5D advanced packaging solution and an essential manufacturing process for today’s high-performance AI accelerator chips. The architecture uses an interposer as an intermediate carrier. An AI compute chip is placed at the center, surrounded by multiple HBM high-bandwidth memory modules. This setup shortens data transmission distances between chips and boosts bandwidth.

The full workflow is split into two major phases: CoW and WoS. Previously, TSMC only outsourced a small portion of the later-stage WoS substrate bonding process, while retaining the technically critical CoW chip-mounting step in its own fabs. This large-scale outsourcing marks a major adjustment to its supply chain model.

Supply chain sources indicate that NVIDIA has reserved capacity for 800,000 to 850,000 CoWoS wafers from TSMC for 2026, capturing more than half of the annual capacity allocation. With capacity heavily consumed by this top-tier customer, packaging resources available for custom chips from Broadcom, AMD and cloud vendors will become tight.