Recently, there have been reports that TSMC (Taiwan Semiconductor Manufacturing Company) has purchased the 5.5th generation LCD panel factory of Innolux (Group Creation) for a total price of about 20 billion New Taiwan dollars.
In July this year, Innolux announced that in order to support the company's operations and future development momentum, and to replenish operating funds, it plans to sell the related real estate of the TAC factory in the Nantze D factory area (5.5th generation factory). To meet business needs and strive for timeliness, the board of directors authorized Chairman Hong Jinyang to negotiate the disposal conditions and sign the sales contracts with potential transaction counterparts, based on not lower than the book value of the assets to be disposed of in the latest financial statements, referring to professional appraisal reports and market information (replacement cost of the same scale factory building).
There have always been rumors that Micron, the packaging and testing giant Nan Mao, and TSMC are all competing to purchase the 5.5th generation factory of Innolux. Recent news shows that TSMC intends to buy Innolux's Nantze No. 4 factory for 20 billion New Taiwan dollars, which will be used to expand advanced packaging and even subsequent advanced process production.
The industry expects that the purchase may include advanced packaging for subsequent expansion of production, R&D of new packaging for subsequent mass production, and even flexible land for subsequent 3nm and below advanced process expansion in Nantze.
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TSMC's Chiayi factory is an important base for CoWoS (Chip on Wafer on Substrate), but recently it has been stuck due to relic issues. If TSMC successfully grabs the Nantze No. 4 factory, it will have the opportunity to alleviate the tight CoWoS production capacity.
It is not difficult to see that TSMC is once again focusing on the production capacity of advanced packaging.
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Recently, several advanced packaging giants have expanded production
The supply chain in Taiwan, China, said that the demand for TSMC's advanced packaging CoWoS production capacity is still strong. Even if the production capacity is doubled in 2024 and cooperates with professional packaging and testing factories (OSAT), it still cannot fully meet the needs of customers.Currently, TSMC's advanced packaging is in high demand and short supply. To meet customer needs, on the one hand, TSMC is actively expanding production; on the other hand, TSMC is releasing overflow orders to be shared by subcontractors such as Amkor (AnKang) and ASE (Advanced Semiconductor Engineering). These subcontractors have initiated capacity expansion projects for the Wafer on Substrate (WoS) or Chip on Wafer (CoW) process, with several advanced packaging giants announcing their expansion plans.
ASE: In the past three months, ASE has invested NT$22.142 billion in purchasing equipment and factory facilities, revealing the group's active strengthening of capacity and gearing up to welcome the industry's growth boom.
ASE is highly optimistic about the future market for advanced packaging business. At the beginning of this year, it was originally expected that the revenue from advanced packaging would increase by $250 million. With demand stronger than expected, the date has revised the estimated amount and optimistically expects the growth trend to continue into next year.
ASE explained that the original estimate was that the advanced packaging business would account for about 4% to 5% of the total packaging and testing revenue. It now appears that the proportion will exceed 5%, and the relevant proportion will continue to grow next year, with a positive outlook for the overall advanced packaging revenue to double next year.
In addition, ASE recently announced that its subsidiary's board of directors has resolved to invest NT$5.263 billion to purchase the K18 factory held by related party Hongjing Construction (2527-TW) to meet the company's future expansion needs for advanced packaging capacity.
To accommodate the operational growth of the Kaohsiung factory, ASE purchased the newly built K18 factory located in the first industrial park of the Nanzi Technology Industrial Park, mainly setting up production lines for wafer bump packaging and flip-chip packaging processes. In addition to expanding the production capacity of advanced packaging, it is expected to enhance the packaging and testing integrated service efficiency of ASE Semiconductor in the first industrial park with the best capacity allocation, and continue to strengthen the overall development of the company.
Amkor: Another semiconductor product packaging and testing service provider, Amkor, recently announced that it has completed the investment to expand the 2.5D advanced packaging capacity at the Songdo K5 factory in Incheon, South Korea, with the capacity increasing about three times compared to the second quarter of last year. It is expected that Amkor's sales of 2.5D advanced packaging will increase fourfold year-on-year this year.
In addition, at the end of July, the US Department of Commerce announced that it had signed a non-binding preliminary memorandum with Amkor. The US government will grant Amkor up to $400 million in direct financial assistance and $200 million in loans according to the "Chips and Science Act." This proposed funding will support Amkor's investment of about $2 billion and 2,000 jobs in a greenfield project in Peoria, Arizona.
It is reported that Amkor's new factory in Arizona will become the largest of its kind in the United States. Amkor said that the advanced packaging and testing facility will provide a complete end-to-end advanced packaging for the world's most advanced semiconductors, used for high-performance computing, artificial intelligence, communication, and automotive end markets.
Siliconware: TSMC recently announced that for the first time, it has outsourced the key front-end CoW process of CoWoS technology to Siliconware. Siliconware will be responsible for building new capacity, planning to introduce equipment in the second quarter of next year, and starting mass production in the third quarter.However, the search for a new factory building has become a major issue in the expansion of Siltron's factory. The latest situation shows that the Tanzi factory area, which was sold to Huadian for 27.93 billion yuan in the middle of last year, has been bought back by Siltron. This factory area is expected to become the main base for Siltron's expansion, and in addition, the existing Zhongshan and other factory areas have also started to rearrange and move space.
TSMC: TSMC President Wei Zhe Jia previously revealed that this year's CoWoS production capacity will more than double, and it is estimated that the increase in related production capacity in 2025 may also more than double. The company will continue to cooperate with OSAT to layout advanced packaging.
At present, TSMC has a total of five advanced packaging and testing factories, located in Zhuke, Zhongke, Nankang, Longtan, and Zhunan. Among them, the AP6 in Zhunan was officially put into use in June 2023, becoming TSMC's first fully automated factory that integrates the front-end to the back-end process and testing of 3D Fabric, and after one year of operation, it has become the largest CoWoS packaging base in Taiwan, China.
TSMC also plans to increase investment in the new advanced packaging factory in the Chiayi Science Park. The park has decided to allocate six new factory sites to TSMC, two more than originally expected, with a total investment exceeding 50 billion Taiwan dollars.
There are reports that in order to quickly increase the CoWoS packaging production capacity, TSMC plans to build another advanced packaging and testing factory in Pingdong, southern Taiwan, and is currently looking for a location.
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NVIDIA and AMD AI chip products both use CoWoS technology
CoWoS advanced packaging can be roughly divided into two steps: CoW and WoS. The former combines the chip with the interposer, while the latter is responsible for packaging the interposer with the substrate together. In short, CoWoS stacks the chips and then packages them on the substrate, ultimately forming a 2.5D, 3D shape, thereby reducing space and reducing power consumption and cost. In the silicon interposer, TSMC uses microbumps, silicon through-vias, and other technologies to replace traditional wire bonding for chip-to-chip connections, greatly improving interconnection density and data transfer bandwidth.
At present, NVIDIA and AMD's AI chips have all adopted TSMC's CoWoS advanced packaging solution.
NVIDIA's current main H100 chip mainly uses TSMC's 4-nanometer process and adopts CoWoS advanced packaging, presenting to users in a 2.5D packaging form with SK Hynix's high-bandwidth memory (HBM).In addition, the Blackwell package is the first large-capacity design to use the CoWoS-L technology for packaging, but currently, there are design flaws in the CoWoS-L technology. On the one hand, embedding multiple fine protruding bridges in the middle layer and organic intermediate layer may lead to a mismatch of the thermal expansion coefficients between the silicon chip, bridge, organic intermediate layer, and substrate, resulting in warping. On the other hand, the top few newly designed global wiring metal layers will cause the Blackwell chip to bulge. In addition, TSMC also has a problem with insufficient CoWoS-L production capacity.
To meet the demand, Nvidia has launched a Blackwell GPU called B200A, which is based on the B102 chip and can be packaged using the CoWoS-S technology. B200A will be used to meet users' needs for low-end and mid-range artificial intelligence systems and will replace the B100 and B200 chips in the HGX8-GPU form. It has an HGX form of 700W and 1000W, up to 144GB of HBM3E, and a maximum memory bandwidth of 4TB/s.
AMD is the first customer of TSMC's SoIC, and its MI300 accelerator card uses the SoIC+CoWoS packaging solution, which can integrate chips of different sizes, functions, and nodes in a heterogeneous manner. Different from Nvidia, AMD first uses SoIC to vertically stack and integrate CPU and GPU chips, and then use advanced packaging of CoWoS with HBM.
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Driven by AI demand, TSMC's CoWoS demand surges
With the slowdown of Moore's Law, the cost of advancing to more advanced processes is getting higher and higher, and advanced packaging can improve chip integration and interconnect speed in a more cost-effective way, achieving higher bandwidth, and has been widely used. In high-end consumer electronics, artificial intelligence, servers, automotive, and other fields, advanced packaging has penetrated into the end applications of various industries.
In the field of AI, computing power and power consumption are the most critical indicators of AI chips. With the slowdown of Moore's Law, relying solely on advanced processes to improve the cost-effectiveness of computing power is becoming increasingly low, and advanced packaging plays an increasingly key role. Currently, the AI chips of Nvidia and AMD both use TSMC's advanced CoWoS packaging.
In practical applications, CoWoS technology can seamlessly integrate high-end processing units such as GPUs and AI accelerators with HBM. This integration is particularly important for AI applications because large-scale computing power and fast data access are the most important in AI applications. CoWoS places processing elements and memory elements close to each other, minimizing latency and improving throughput, thus bringing unprecedented performance improvements for memory-intensive tasks.
Against the backdrop of surging computing power demand in artificial intelligence, autonomous driving, and other fields, advanced packaging plays an increasingly important role in improving chip integration, shortening chip distances, accelerating the speed of electrical connections between chips, and optimizing performance. The demand for end-user products is recovering, which is also key to market recovery. In the long run, the demand for automotive, HPC (high-performance computing), and AIoT (artificial intelligence Internet of Things) will support the semiconductor market to return to an upward trajectory.
Industry sources say that all AI chip manufacturers are currently catching up with TSMC's production capacity. In addition to Nvidia, which has locked in 50% of its production capacity for the next three years in advance, AMD, Google, Intel, Microsoft, Meta, Amazon AWS, and Tesla, among many other large factories, are also on TSMC's list of foundry service customers.Data shows that the shipment of artificial intelligence (AI) servers has surged significantly, reaching nearly 1.2 million units in 2023, with a compound annual growth rate (CAGR) of 22% expected between 2022 and 2026. The demand for AI chips, especially for GPUs that use higher specification High Bandwidth Memory (HBM), has led to a tight capacity for TSMC's Chip-on-Wafer-on-Substrate (CoWoS) packaging, with Nvidia being its main customer. TSMC has chosen to actively expand its CoWoS packaging capacity, largely to meet the order requirements of Nvidia.
Nvidia's founder and CEO, Huang Renxun, visited TSMC's headquarters in June this year and met with TSMC's chairman and CEO, Wei Zhejia, as well as TSMC's founder, Zhang Zhongmou. During the meeting, he requested TSMC to establish a dedicated CoWoS production line for Nvidia. However, this request was questioned by the senior management of TSMC, leading to a tense situation.
Currently, TSMC is actively cooperating with ASE Technology, which is capable of performing complete 2.5D CoWoS packaging and testing. With the development of artificial intelligence, advanced packaging technology will undoubtedly become the mainstream process for future AI chips.
Affected by the continuous shortage of CoWoS supply, TSMC has previously entrusted part of the Wafer-on-Substrate (WoS) process to OSAT companies to enhance the overall capacity of CoWoS. Recently, TSMC has expanded its outsourcing to the CoW stage. As TSMC expands its order release, AMD is also actively attracting ASE Technology in the field of advanced packaging. ASE Technology has become the second supplier of advanced packaging favored by both Nvidia and AMD, the two major AI chip giants.
The supply gap of CoWoS advanced packaging is severe, and the growth of advanced packaging equipment exceeds expectations.
It is estimated that in the second half of 2024, TSMC's monthly CoWoS production capacity is expected to gradually increase from the originally established 32,000 wafers to 40,000 wafers, and in 2025, the monthly production capacity will gradually increase to 58,000 wafers. By 2028, when the new plant in Chiayi is put into operation, the capacity will continue to grow year by year.
Based on the Blackwell platform, such as the B100, its bare die size is doubled compared to the existing H100. It is estimated that TSMC's total CoWoS production capacity will increase by 150% in 2024, and as it becomes mainstream in 2025, the annual growth rate of CoWoS production capacity will reach 70%, with NVIDIA's demand accounting for nearly half.
In terms of HBM, as NVIDIA's GPU platform advances, the H100 mainly carries 80GB of HBM3, and by 2025, the B200 will reach 288GB of HBM3e, with a single carrying capacity nearly 3-4 times the growth. According to the current expansion plans of the three major manufacturers, the production volume of HBM is expected to double in 2025.
The important equipment required for advanced packaging is more complex than that for traditional packaging because advanced packaging needs to encapsulate more chips inside, requiring higher precision, more complex movements, faster speed, and higher quality requirements. Moreover, advanced packaging requires more advanced packaging materials.Reports indicate that TSMC has placed a large order for CoWoS (Chip on Wafer on Substrate) packaging manufacturing equipment to expand its production capacity. TSMC has disclosed on multiple occasions that AI servers will bring considerable revenue in the coming years, and has revised its production planning, placing CoWoS-related equipment orders with the supply chain. It is known that supply chain partners including Hongshu Technology, Scientech, GMM Corp, and GPM Corp have accelerated production to meet the orders. Sources say that their new order schedules have been extended to 2026.
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