As the demand for AI GPUs increases, TSMC’s advanced packaging capacity for CoWoS is struggling to keep up. Recently, according to a report from Commercial Times, NVIDIA has reportedly turned to Intel for advanced packaging solutions.

According to industry sources cited by the same report, TSMC’s CoWoS-S and Intel’s Foveros packaging technologies are similar, allowing clients to turn to Intel and secures the capacity needed quickly.

Despite its current struggling on transformation, Intel has been gradually developing its ‘s foundry services. In addition to clients like Qualcomm and Microsoft, Intel’s advanced packaging has also attracted interest from companies like Cisco and AWS.

Under the IDM 2.0 strategy, Intel has opened up its wafer outsourcing and foundry services to customers, establishing an the independent IFS foundry service. Earlier this year, Intel secured a major USD 15 billon foundry order from Microsoft for the first system-level AI foundry service, which is expected to use the Intel 18A process.

The report from Commercial Times further suggested that Microsoft’s move is anticipated to reduce its heavy reliance on TSMC. The report also indicates that chip customers, including NVIDIA, have engaged with Intel. Intel’s flexible foundry strategy, which can provide advanced packaging, software, and chiplet services tailored to customer needs, has been well-received by chipmakers.

Sources cited by the same report reveal that the U.S. has begun allocating specialized funds to increase investments in the advanced packaging sector as well. This move could highlight the importance of advanced packaging as the next key area for global competition in production capacity.

In November last year, the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) released a report titled “National Advanced Packaging Manufacturing Program,” highlighting that advanced packaging technology is one of the key technologies in semiconductor manufacturing.

Additionally, the U.S. Department of Commerce plans to invest approximately USD 3 billion to advance the National Advanced Packaging Manufacturing Program. Intel, alongside Amkor, is another giant in local advanced packaging in the U.S.

The main focus of advanced packaging is on interconnect density, power efficiency, and scaling. From Foveros to hybrid bonding technology, Intel is gradually scaling down bumping pitch sizes, which allows for higher current loads and better thermal performance.

Furthermore, in May last year, Intel’s advanced packaging technology roadmap outlined plans to transition from traditional substrates to more advanced glass substrates.

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(Photo credit: Intel)

TSMC is set to conduct an investor meeting on the 19th, with Morgan Stanley, UBS, and Bank of America Securities releasing their latest reports ahead of the event. These reports highlight five main areas of interest:

1. Q4 Operational Outlook
2. Future Gross Margin Trends
3. Potential Adjustments to Full-Year Revenue Estimates and Capital Expenditure
4. Economic and Operational Outlook for the Coming Year
5. 2nm Production Plans

Despite market uncertainties surrounding factors such as end-market demand, the Chinese mainland’s economic trajectory, and semiconductor industry cycles, Morgan Stanley Securities anticipates a 10% QoQ increase in TSMC’s Q4 revenue. They attribute this to strong demand for AI GPUs and ASICs, urgent orders from products like smartphone system-on-chips (SoCs) and PC GPUs, as well as sustained demand for Apple’s iPhones. Additionally, the gross margin is expected to benefit from the depreciation of the New Taiwan Dollar, potentially reaching 53%, surpassing the market consensus of 52.2%.

Bank of America Securities similarly projects a 10% QoQ revenue growth for TSMC in Q4, with a gross margin estimate of 52.7%. UBS Securities, on the other hand, has adjusted its Q4 revenue growth forecast from 10% to 7% while maintaining their expectation of a 10% YoY decline in full-year revenue.

In terms of capital expenditures, Morgan Stanley Securities, taking into account factors such as Intel’s 3nm outsourcing and delays in the U.S. factory expansion, estimates that TSMC’s capital expenditures will remain around $28 billion for both this year and the next. UBS Securities, however, believes that due to a slower short-term business recovery, capital expenditures for this year and the next will be adjusted to $31 billion and $30 billion, respectively.

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(Photo credit: TSMC)