TSMC Overwhelmed by Advanced Packaging Demand, Forced to Accelerate Production by Nearly a Year

TSMC is facing unprecedented demand for its advanced packaging technologies, driven primarily by explosive growth in the AI sector and the relentless cadence of new chip launches from NVIDIA and other major players. According to recent remarks from TSMC’s Vice GM of Advanced Packaging Technology (via TED), the company has been forced to fast-track production schedules by as much as three quarters - and in some cases, nearly an entire year - just to keep up with customer roadmaps.

Traditionally, TSMC deployed new packaging production lines in a sequential manner, but the sheer demand for solutions like CoWoS (Chip-on-Wafer-on-Substrate) and SoIC (System-on-Integrated-Chips) has made that approach unsustainable. AI GPU vendors such as NVIDIA are now operating on six-month to one-year product cycles, meaning packaging capacity must be ready well in advance of each generational leap. For instance, after Blackwell Ultra enters mass production, Rubin is slated to debut just six months later, creating enormous strain on the supply chain.

To respond, TSMC has adopted a strategy of “future-proofing” by ordering critical equipment far ahead of schedule and forging stronger partnerships with local suppliers. Earlier this year, the company announced the 3DIC Advanced Packaging Manufacturing Alliance, which brings together TSMC, ASE Technology, and several other Taiwanese firms to expand production capabilities.

The concentration of advanced packaging in Taiwan highlights a structural bottleneck in the semiconductor supply chain. While TSMC has plans to establish packaging capacity in the United States, the immediate pressure is being shouldered by Taiwanese suppliers, who are now accelerating collaboration to meet demand.

This surge reflects not just AI GPU demand but the broader industry shift toward heterogeneous integration, where advanced packaging is becoming as critical as leading-edge lithography. With every AI cycle requiring massive architectural changes, the packaging sector is under more pressure than ever to scale at unprecedented speed.

Do you think TSMC and Taiwan’s packaging ecosystem can keep up with NVIDIA’s and others’ rapid AI roadmaps, or will supply bottlenecks inevitably slow down the industry?