TSMC Advances CPO Production as ABF Supply Tightens

According to industry reports, surging demand for high-speed data transmission in AI data centers is accelerating the commercialization of co-packaged optics (CPO) technology, with TSMC continuing to expand its advanced optical integration roadmap. Commercial Times reported that TSMC’s “COUPE on Substrate” solution is expected to enter mass production in the second half of 2026, marking a major step in bringing CPO technology to the substrate level.

The move signals that AI chip development is evolving beyond competition in advanced process nodes alone, entering a new phase centered on co-packaged optics, system-level integration, and high-bandwidth interconnect technologies.

Industry sources indicate that if CPO becomes the mainstream architecture for future AI servers, NVIDIA is likely to secure advanced substrate capacity through long-term agreements, prepayments, and deeper strategic partnerships to avoid supply shortages similar to those previously seen in CoWoS packaging and HBM memory markets.

Commercial Times analysis suggests that the rapid adoption of AI GPUs, AI accelerators, and CPO technology could trigger another supply gap for high-end ABF substrates by 2027. Compared with traditional CPU substrates, AI chip packages require significantly larger substrate areas and more layers, increasing ABF material consumption by an estimated five to ten times. As demand for AI processors and high-performance networking chips continues to expand, tight supply conditions for advanced ABF substrates may persist over the long term.

At present, NVIDIA and major cloud service providers are aggressively pursuing higher rack deployment efficiency and lower overall power consumption. As a result, strategic AI infrastructure resources now increasingly include foundry capacity, HBM memory, optical fiber, optical transceivers, and advanced ABF substrates.

To strengthen its high-speed optical communication ecosystem, NVIDIA has recently expanded investments across the optical component industry. According to Commercial Times, the company has deepened cooperation with Corning to expand production capacity for optical communication components used in AI data centers and secure next-generation high-speed interconnect technologies.

CNBC also reported that Corning has established three new manufacturing facilities in Texas and North Carolina, projects expected to create more than 3,000 new jobs after completion.

Separately, market research firm TrendForce reported that NVIDIA has finalized a US$4 billion investment plan, evenly allocating funding to Lumentum and Coherent while also signing long-term procurement agreements to secure priority access to advanced lasers and optical components.

The series of investments highlights NVIDIA’s strategy to secure critical optical interconnect components and strengthen its long-term position in next-generation photonics and laser technologies for AI infrastructure.

TrendForce forecasts that CPO penetration in the AI data center optical transceiver market will continue to rise steadily, with market share expected to reach approximately 35% by 2030.