NVIDIA to Slash CoWoS-S Orders by 80% in 2025!

According to Taiwan's Economic Daily, NVIDIA is set to drastically cut its CoWoS advanced packaging orders for 2025, following the gradual discontinuation of its Hopper GPU and a slowdown in demand for several products. Orders for CoWoS-S from TSMC and UMC will see reductions of up to 80%, which is expected to result in a 1% to 2% decrease in TSMC's revenue.

On January 13, supply chain reports surfaced suggesting NVIDIA's reduction of CoWoS orders from TSMC. However, industry sources quickly denied the rumors, stating no such cuts were confirmed.

Despite these denials, stock prices for TSMC, ASE Group, and King Yuan Electronics all saw declines on January 13. Analysts speculated that the weak performance of AI-related stocks could be linked to expectations of an upcoming U.S. export ban on AI chips, prompting large investors to adopt a wait-and-see approach.

Recent reports indicate that NVIDIA's decision to cut back on its CoWoS-S orders stems from the phased discontinuation of the Hopper platform chips, limited demand for the new GB200A chips, and slow adoption of the GB300A chips. The expected reduction of 50,000 CoWoS-S units annually is anticipated to cut TSMC's revenue by 1% to 2%.

TSMC's CoWoS platform includes the most mature CoWoS-S, based on silicon interposers, as well as CoWoS-L and CoWoS-R, which use organic interposers. The Hopper GPU platform is built using CoWoS-S packaging, while the newer Blackwell GPU uses CoWoS-L. As production of the Hopper GPU decreases, NVIDIA's demand for CoWoS-L packaging will also diminish.

Morgan Stanley reports that, with CoWoS-S capacity reductions, NVIDIA has requested TSMC to reallocate this capacity to CoWoS-L to manufacture the GB300A. The report also highlights that other TSMC clients, including AMD and Broadcom, are scaling back their CoWoS-S orders due to weaker demand.

However, Morgan Stanley also noted that overall demand for TSMC's CoWoS technology remains stable. The production of the GB300A may see slight increases later this year.

Despite the significant reduction in CoWoS-S orders, AI remains a key growth driver for TSMC's revenue, contributing more than 20% to its earnings. Therefore, TSMC's "Buy" rating remains unchanged, with a target price of NT$1,400.

Regarding TSMC's Q1 revenue outlook, analysts predict a 6% sequential decline, but a 24% year-on-year growth. The expected decline is mainly due to seasonal factors, although the impact is mitigated by increased AI GPU and ASIC production and the upcoming release of Apple's affordable iPhone SE 4.