ASE Wins Major CoWoS Contract from TSMC

NVIDIA's surging demand for AI chips has caused a significant shortage in TSMC's CoWoS advanced packaging capacity. Reports suggest that TSMC has urgently sought support from ASE Technology Holding Co., Ltd. (ASE), marking the first time it has outsourced crucial front-end CoW (Chip-on-Wafer) processes. ASE's subsidiary, SPIL (Siliconware Precision Industries Co., Ltd.), has been awarded these outsourcing orders, leading to a dramatic increase in ASE's advanced packaging orders. The high-tech nature and better profit margins of these orders are expected to significantly enhance ASE's profitability.

Both TSMC and ASE declined to comment on these reports as of August 6th. In addition to TSMC's expanded orders, AMD is also actively engaging ASE for advanced packaging solutions, making ASE a coveted second-tier supplier for both NVIDIA and AMD, the two major players in the AI chip industry.

Industry analysis highlights three key implications of ASE securing TSMC's CoW process orders. First, this is the first time TSMC has outsourced CoWoS front-end processes, indicating strong demand from AI chip customers. Second, ASE was already a partner for the back-end WoS (Wafer-on-Substrate) process, and now with the new front-end CoW process orders, ASE is poised to handle all high-end packaging orders for NVIDIA. Third, CoW processes, which are more advanced and profitable compared to WoS, signify a recognition of ASE's technological capabilities and will drive stronger profitability for the company.

CoWoS technology includes both CoW and WoS processes. CoW, or Chip-on-Wafer, involves stacking chips before packaging them onto a substrate, while WoS, or Wafer-on-Substrate, stacks chips directly onto the substrate. CoWoS technology reduces space, power consumption, and costs by creating 2.5D and 3D packaging solutions.

ASE's subsidiary SPIL will handle the new orders at its Chungli facility, where it is also expanding its production capacity. New equipment is expected to be installed by Q2 next year, with production ramping up in Q3.

This move by TSMC aligns with Chairman CC Wei's earlier statement about addressing the severe CoWoS capacity shortage and achieving supply-demand balance by 2025-2026. ASE’s Chief Operating Officer, Tien Wu, reiterated the company's long-standing collaboration with its foundry partners on both CoW and WoS processes.