TSMC to Boost AI Chip Packaging Capacity Ahead of Schedule, Says Morgan Stanley

Taiwan Semiconductor Manufacturing Company (TSMC) is set to accelerate its AI chip packaging capacity growth, completing its expansion by 2025, a year earlier than planned, according to Morgan Stanley. This move comes in response to rising demand from AI sectors, particularly for NVIDIA GPUs.

TSMC to Accelerate CoWoS Semiconductor Packaging Growth by 2025, Driven by AI Demand and GPU Orders

Morgan Stanley anticipates that Taiwan Semiconductor Manufacturing Company (TSMC) will increase its CoWoS semiconductor packaging capacity by 2025, a year ahead of its initial plan. TSMC had initially intended to augment this capacity by 2026. However, the investment bank has reported that the company is expediting the timeline due to the increasing demand from the artificial intelligence sector, which has resulted in substantial GPU orders, particularly from NVIDIA. Morgan Stanley has increased its price objective for TSMC's shares from NT$1,220 to NT$1,280, which indicates its optimism.

Zhan Jiahong, an analyst at Morgan Stanley, stated in a report published by Taiwanese media that TSMC's objective to increase CoWoS packaging capacity to 80,000 transistors per month by 2026 is now anticipated to be accomplished by 2025. This accelerated timeline results from TSMC's acquisition of a factory in Taiwan for NT$17 billion in August. Jiahong is also optimistic about TSMC's advanced 3-nanometer semiconductor manufacturing process, anticipating a rise in production capacity from 90,000 wafers per month in 2024 to 120,000 wafers per month in 2025. As with packaging, this growth is expected to be driven by the AI industry.

Packaging and fabrication must operate in conjunction to ensure AI chips' performance and power efficiency. Packaging is responsible for assembling the chips into functional form for end products. Therefore, TSMC must enhance its packaging and 3nm manufacturing capabilities to satisfy the expanding AI market's requirements.

Intel Outsourcing to TSMC Expected to Boost 3nm Production, as TSMC Expands Global Operations

Intel's outsourcing some of its semiconductor production to TSMC is also anticipated to benefit 3nm technology. Morgan Stanley's model incorporates this action but has yet to be verified. Apple's demand for the 3nm node, particularly for the 2025 iPhone, which will employ the advanced N3P variant, is expected to expand capacity.

TSMC's 2nm node is also on the brink of expansion. Morgan Stanley anticipates that 2nm capacity will increase from 10,000 wafers per month in 2024 to 50,000 wafers in 2025, ultimately reaching 80,000 by 2026, when the next-generation iPhone begins production. However, Apple's orders for 2nm chips are not anticipated until after 2025. TSMC's 3nm capacity is expected to reach 140,000 wafers per month by 2026, with 20,000 wafers originating from its facilities in the United States.

In addition, Morgan Stanley increased its 2025 capital expenditure forecast for TSMC by 8.5%, anticipating that it will increase from $35 billion in 2024 to $38 billion in 2025. Due to the surging demand for AI and geopolitical tensions, TSMC has been required to expand its manufacturing capacity and diversify its production away from Taiwan.

The company is currently in the process of establishing new plants in the United States and Japan. Reports indicate that discussions are underway regarding establishing semiconductor manufacturing facilities in the water-scarce Middle East.