"Advanced packaging capacity shortage" will last another 18 months, TSMC's revenue in August, which "stalled Nvidia's neck," reached a 7-month high.

AI hype has ignited chip demand, and "water sellers" like NVIDIA have made big profits, with their supplier TSMC also reaping the benefits. Coupled with the strong demand for 3nm chips from the iPhone 15, TSMC's revenue in August reached its highest level in seven months.

According to the announcement released by TSMC on September 8th, the revenue in August was approximately NT$188.69 billion (US$5.89 billion), an increase of 6.2% compared to the previous month, but a decrease of 13.5% compared to the same period in 2022.

From January to August this year, TSMC's total revenue amounted to NT$1.36 trillion, a decrease of 5.2% compared to the same period in 2022. The chip manufacturer has lowered its full-year revenue forecast, expecting a decline of 10%, higher than the previously estimated mid-single-digit percentage contraction.

This decline is related to the downturn in the chip industry this year, but with the help of AI chip and iPhone 15 orders, TSMC is expected to achieve its revenue expectations for this quarter.

TSMC has stated that the growth in demand for AI-related applications will support the strong demand for 3nm chips, offsetting the impact of customers continuously adjusting their inventory. Apple is one of the first adopters of TSMC's most advanced technology, and NVIDIA's AI chip H100 GPU is manufactured using TSMC's 4nm process.

CoWoS packaging capacity shortage may continue until 2025 due to NVIDIA's AI chip supply shortage

It is worth mentioning that the surge in demand for AI chips has also caused a shortage of TSMC's advanced packaging capacity.

TSMC Chairman Liu Deyin recently pointed out at a public event that the demand for CoWoS has doubled in the past year. Currently, TSMC cannot meet 100% of customer demand, but will strive to meet about 80% of the demand.

Liu Deyin believes that the shortage of CoWoS packaging capacity is only a temporary phenomenon, and it will take about 18 months for TSMC to expand its packaging capacity and alleviate the supply shortage. This means that NVIDIA's data center GPUs may remain in short supply for some time in the future.

Currently, many of the most advanced chips on the market are composed of multiple semiconductor chips, which are manufactured separately and then connected together. One of the most commonly used technologies to connect chips together is CoWoS.

CoWoS packaging is the key bottleneck for NVIDIA's chip production, and HBM and CoWoS packaging complement each other. HBM has high requirements for the number of solder balls and the length of short traces, which requires advanced CoWoS packaging technology to achieve high density and short connections that cannot be achieved on PCB or even packaging substrates.

Currently, almost all HBM uses CoWoS packaging technology. TSMC uses CoWoS technology to produce NVIDIA's flagship product, the H100 graphics card. However, due to the explosive growth in demand, even with full production capacity, TSMC is struggling to bridge the supply-demand gap. According to Quartz, some server manufacturers have to wait for six months to get their hands on the H100 chip.

Expanding Production Capacity and Strengthening Research and Development

To address this issue, TSMC is expanding its production capacity. TSMC has recently opened three new factories in Zhunan, Longtan, and Taichung. The Zhunan factory covers an area of 14.3 hectares, which is larger than the total area of other packaging factories.

Currently, TSMC is constructing a new factory in Miaoli, Taiwan, to enhance its chip packaging production capacity. The project is expected to cost $2.9 billion.

In addition to expanding production capacity, TSMC is also investing in research and development. Earlier this year, the company provided detailed information about its new version of CoWoS technology called CoWoS-L. This technology will allow TSMC's customers to incorporate more transistors into their chips, thereby increasing processing speed.