AI Wave Drives Demand for HPC Chips and Advanced Packaging in Electronics

Foxconn The AI wave powered by ChatGPT is igniting a frenzy for high-performance computing (HPC) chips. Informed sources within the advanced packaging and testing supply chain confirm that both Microsoft and non-Microsoft camps are vigorously positioning themselves in the AI market.

Leading GPU manufacturer NVIDIA has recently been rumored to urgently increase its orders from TSMC, reserving an additional 10,000 units of CoWoS advanced packaging capacity. TSMC has promised to accommodate NVIDIA's needs, with expectations that TSMC's monthly support for NVIDIA's CoWoS capacity could increase by 1,000 to 2,000 units, given that we are already in the second quarter of 2023.

Due to the need for planning and scheduling in advanced packaging capacity, TSMC's monthly CoWoS capacity is currently only around 8,000 to 9,000 units. To provide additional support to NVIDIA in the coming months, an extra 1,000 to 2,000 units of CoWoS capacity per month would need to be allocated to them. This will result in a continued tight supply of CoWoS capacity.

Insiders familiar with the TSMC 3D Fabric platform reveal that in terms of packaging volume, Apple's InFO_PoP, which is used in iPhone application processors (AP), remains the largest player and is relatively mature. It is expected that even with the extension to 3 nanometers or even 2 nanometers, InFO packaging will still be supported. However, the smartphone market is expected to enter a corrective phase in 2023, which will impact the utilization rate of InFO packaging, fluctuating with industry seasonality.

TSMC has publicly stated that the demand for advanced packaging in 2023 may be slightly weaker than in 2022, accounting for about 6-7% of its performance, lower than the 7% in 2022. However, it is anticipated that the growth potential over the next five years will exceed the industry average.

Industry analysts believe that derived technologies such as CoWoS-S, CoWoS-R with organic interposer layers, and the larger mask size of CoWoS-L have all gained affirmation from top-tier customers. The expected high profitability and increased volume of HPC chips will support a significant portion of the advanced packaging business.

In addition to AI HPC applications, CoWoS-S has continued to penetrate high-end networking sectors, while the cost competitiveness of CoWoS-R remains evident. CoWoS-L is expected to meet the demands of future HPC customers requiring higher computing power and integrated high-bandwidth memory (HBM). These new technologies were first revealed at the TSMC North America Technology Symposium.

Insiders familiar with the 3D Fabric platform state that TSMC's internal advanced packaging department is highly optimistic about the future growth potential of CoWoS technology. By riding the strong growth wave of HPC and the benefits brought by the AI trend, TSMC's capacity demand remains relatively tight despite the downturn in the semiconductor industry.

The industry speculates that due to the relatively stable and mature smartphone market, TSMC's focus on expanding advanced packaging capacity will prioritize CoWoS technology, complemented by SoIC (System-on-Integrated-Chip) with 3D wafer stacking. After all, the integration of "SoIC+CoWoS" in the front and back ends of the 3D process remains a crucial solution to address the slowing of Moore's Law for HPC chips.