Taiwan Semiconductor Manufacturing Co (TSMC) confirmed on Thursday that it is seeking a brand new chip packaging technology for artificial intelligence, but warned that AI chip production will remain constrained until 2025, longer than previously expected.
In a sign of the chipmaker’s confidence that demand will remain strong, TSMC said its 2024 capital expenditure to increase advanced chip production and advanced packaging capacity will be between $30 billion and $32 billion, the upper end of its forecast.
We are looking at this kind of panel technology, but the maturity is not there today,’ said C.C. Wei, chairman and CEO, adding: ‘After three years, I believe panel fan-out technology will be introduced, and we are working on it and will be ready for it.
The CEO’s comments confirm Nikkei Asia’s earlier report that TSMC is exploring the use of rectangular substrates instead of the traditional round wafers for chip assembly and packaging.
Wei said the company currently expects strong demand for smartphones, but capacity for its flagship CoWoS advanced chip packaging technology will be constrained next year. CoWoS is seen as essential for producing cutting-edge artificial intelligence chips for customers such as Nvidia. TSMC’s advanced chip packaging technology can interconnect graphics processors, central processors and high-bandwidth memory (HBM) chips.
Demand is very high,” Wei said, adding: “Supply will continue to be very tight until 2025, and hopefully we can relax in 2026. … We continue to increase [capacity] wherever we can, whatever we can. From last year to this year we have more than doubled [CoWoS capacity] and maybe next year we will double it again”. TSMC has previously stated that such constraints could be resolved by the end of 2024.
Wei also gave an update on the company’s chip production roadmap. TSMC is on track to bring the next most advanced chip manufacturing technology, 2-nanometre technology, into mass production in the second half of 2025 and an updated version of 2 nm in 2026. He said that the 1.6nm (A16) node, an even more advanced technology, will enter production in the second half of 2026.
Wei also said, “AI is so popular that all my customers want to add AI to their devices. … This AI functionality will promote shorter replacement times,’ Wei said.
The chipmaker reported that net profit for the April-June period rose 36.3% year-on-year to NT$247.84 billion ($7.66 billion). Quarterly revenue rose 40.1% to an all-time high of NT$673.51 billion, rebounding from last year’s slowdown thanks to strong demand for artificial intelligence.
TSMC estimates revenue for the July-September period to be between NT$22.4 billion and NT$23.2 billion, in line with analysts’ expectations.
Trump: Taiwan should pay us
TSMC’s upbeat news came after a tough day on the stock market. Following former US President Donald Trump’s comments that ‘Taiwan should pay us for defence’, the price of US depositary receipts fell nearly 8% overnight, while the share price on the Taiwan Stock Exchange fell nearly 2.4% on Thursday ahead of the earnings release. The Republican presidential candidate also cast doubt on US-Taiwan relations if re-elected, saying Taiwan ‘takes about 100 per cent of our chip business’.
Wei said the company’s overseas expansion projects are on track and no changes are expected at this time. In response to an analyst’s question, he said TSMC was not considering joint ventures with the US government to reduce geopolitical uncertainties.
Before Trump’s comments, TSMC’s Taipei shares and US warehouse receipts were up nearly 80 per cent year-to-date.
TSMC produces chips for nearly all of the world’s leading chip designers, including leading-edge AI chips for Nvidia, AMD and Intel, and core processor chips for AI computers for Qualcomm, AMD and Intel. It is the sole supplier of processors for the new iPhone, which will be able to run Apple Intelligence, the company’s artificial intelligence platform.
Wei said his company was considering raising prices for top AI computer chip developer Nvidia.
‘Our pricing strategy is strategic, not opportunistic,’ Wei said, highlighting growing geopolitical uncertainty and pressures: ‘We continue to work closely with customers to [convince] them of our value.
Analysts expect price hikes next year.
