TSMC Sees Surge in Orders as NVIDIA Secures 70% Capacity

TSMC has experienced a substantial increase in demand for its advanced packaging services, as industry sources report that NVIDIA has significantly boosted orders for its latest Blackwell architecture GPUs. NVIDIA has secured over 70% of TSMC's CoWoS-L advanced packaging capacity for 2024, with shipments expected to grow by more than 20% each quarter, adding to TSMC's operational momentum.

TSMC has declined to comment on the reports, but market analysts anticipate that NVIDIA will announce strong results and a positive outlook for the upcoming quarter when it releases its earnings report on February 26. This surge in demand from NVIDIA signals a continued ramp-up in shipments of AI chips, bolstered by robust orders from major cloud service providers (CSPs), further strengthening the company's financial outlook.

The push for advanced AI servers, driven by the U.S. Stargate initiative, is expected to fuel additional demand for NVIDIA's chips, potentially leading to further orders from TSMC as the year progresses.

TSMC has been expanding its advanced packaging capacity to meet growing demand. In a statement during its January earnings call, TSMC Chairman C.C. Wei confirmed that the company is actively scaling up production to support customer needs. TSMC projects that advanced packaging will account for 8% of its revenue in 2024, with this figure expected to exceed 10% by the end of the year, aiming for a gross margin above the company’s average.

Industry sources also indicate that NVIDIA plans to gradually phase out the previous generation Hopper-based H100 and H200 chips as Blackwell production ramps up, with a full transition expected by mid-2024.

Despite utilizing TSMC's 4nm process, the Blackwell chips feature specialized advancements, including high-performance computing (HPC) B200/B300 variants and the consumer-focused RTX50 series. These chips will adopt TSMC's CoWoS-L advanced packaging, which combines re-distribution layers (RDL) and silicon interposers (LSI). The CoWoS-L technology increases chip size, transistor density, and memory bandwidth, resulting in improved performance, yield, and cost efficiency compared to earlier packaging technologies like CoWoS-S and CoWoS-R. This advancement is expected to be a key selling point for NVIDIA's new chips.

To support the growing demand for Blackwell-based GPUs, TSMC is ramping up production of its CoWoS-L capacity, with expectations that NVIDIA’s chip shipments will see rapid growth, increasing by over 20% each quarter. Analysts predict that NVIDIA will account for more than 70% of TSMC's CoWoS-L output this year, with total shipments expected to surpass 2 million units.