TAIPEI (Taiwan News) — A new “TSMC-like” supply chain is emerging in Taiwan as semiconductor packaging firms ramp up production lines designed to meet the chipmaker’s standards, CTEE reported Monday.

The increase in demand for artificial intelligence processors is pushing TSMC’s advanced packaging capacity to its limits. The company’s chip-on-wafer-on-substrate (CoWoS) packaging, a key technology for high-performance AI chips, is operating near full utilization.

Industry estimates indicate TSMC currently handles roughly 75,000–80,000 wafers per month and aims to raise capacity to 120,000–130,000 wafers by the end of next year. Analysts say that even this expansion may not meet growing orders from Nvidia, Google, AMD, and other major chip developers.

To ease internal capacity pressure, TSMC has begun outsourcing certain redistribution layer products with relatively simple structures to outsourced semiconductor assembly and test firms. This move not only provides short-term relief but also opens the door for OSATs to enter the high-end advanced packaging supply chain.

OSAT providers have responded by building new production lines that match TSMC’s equipment, processes, and quality requirements. Some lines are dedicated to TSMC-outsourced work, while others are tailored to customers that want a second supply chain separate from TSMC.

ASE Technology Holding is at the forefront of this expansion. Equipment suppliers estimate the company could triple its monthly CoWoS output to 20,000–25,000 wafers by late next year, supported by incoming orders from TSMC and other global chip firms seeking diversified packaging capacity.

Subsidiary Siliconware Precision Industries is also handling advanced work. Together, ASE and Siliconware are currently processing CoW steps for Google and AMD, and providing back-end substrate packaging for Nvidia’s Vera CPU.

Other Taiwanese OSAT providers are accelerating their efforts as well, according to Pocket Securities.

Powertech Technology is moving into high-bandwidth memory packaging and CoWoS back-end work, with plans to enter the more complex front-end stages. UMC has announced research into 2.5D advanced packaging technologies, though mass production is still far off.

Upstream equipment and materials suppliers, including Grand Process Technology, Scientech, C Sun Manufacturing, and Gallant Micro Machining, are expected to benefit as OSAT firms invest heavily in new facilities and tooling to support the next wave of CoWoS-capable capacity.

Taiwan maintains a significant lead in CoWoS and related advanced packaging processes.

CoWoS stacks multiple chips, such as processors and memory, closely together instead of spreading them out and connecting them with long wires. This design allows data to move faster and boosts overall performance.