TSMC’s cautious assessment of the impact of the AI boom on its business in April has given way to greater confidence in continued strong demand for AI chips. Chairman CC Wei said TSMC’s supply capacity for AI chips will be constrained through 2025.
Image source: TSMC
Accordingly, if the deficit does recede a little, it will not happen before 2026. The contract manufacturer’s confidence in maintaining high demand is also indicated by the increase in the lower limit of the range of capital expenditures for this year, as well as an improved forecast for revenue growth. In addition to the actual silicon wafer processing lines, TSMC is forced to spend more money on packaging chips for AI systems with a complex spatial layout. The company is ready to look for a more advanced alternative to the CoWoS method, which is currently used to package Nvidia chips used in computing accelerators. “Demand is very high, supplies will be very limited up until 2025 inclusive, and we hope that relief will come in 2026. We continue to increase production capacity in any place and by any means,” explained C.C. Way.
According to TSMC CEO Xi Xi Wei, the company is currently experimenting with the FOPLP (panel fan-out technology) packaging method, but it is not yet ready for mass production. This will happen in about three years, as the head of the company assumes. By that time, TSMC itself will be ready to master this chip packaging method in mass production conditions. The head of the company added that in terms of CoWoS, it has more than doubled its core production capacity by this year, and may double it again next year. Previously, it was believed that the deficit in this area would be eliminated by the end of 2024.
CC Wei explained that the first generation of 2nm chips will hit TSMC’s production line in the second half of 2025, with the second generation following in 2026. The company plans to begin manufacturing products using the more advanced A16 process technology in the second half of 2026.
In the field of artificial intelligence, according to the head of TSMC, demand will also extend to peripheral devices of computing systems such as smartphones and PCs, but so far this has no effect on the quantitative indicators of product deliveries in the relevant market segments. Over the next two years, the development of the market for devices with AI acceleration functions will reduce the operating cycle of such devices. Currently, demand from TSMC customers is especially high for the production of products using 5-nm and 3-nm process technologies. Work is already underway to provide customers with adequate quotas for the production of such products for 2026.
Despite the controversial statements made in the American media yesterday by one of the candidates for the US presidency, TSMC management did not revise its plans regarding the construction of its overseas enterprises. In this area, everything is on schedule and no changes are expected now, as Xi Xi Wei made clear.
It was previously noted that TSMC management does not rule out the possibility of raising prices for its services to Nvidia. Today, C.C. Wei added that his company is facing increasing price pressure. Costs are rising due to the complexity of technological processes, rising electricity prices in Taiwan, and high capital expenditures on the construction of overseas enterprises. At the same time, TSMC insists that it does not take an opportunistic approach to pricing and builds its relationships with customers, trying to convince them of the adequate value of its services. Analysts at Nomura Global Market Research believe that TSMC will raise prices for its services by 5-10% from January 2025.
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