TSMC warns of possible price increase for AI chips due to rising supply chain expenses
TSMC has issued a warning of a potential price increase for AI chips, citing rising supply chain expenses as a contributing factor.
Prices for artificial intelligence (AI) chips produced by the Taiwan Semiconductor Manufacturing Company (TSMC) are expected to rise due to the nature of its CoWoS chip packaging technology, according to a report from Taiwan. TSMC has seen strong demand for AI chips from major American technology companies like NVIDIA and Microsoft, which has been a boon during the semiconductor industry's ongoing challenges.
TSMC warns of possible price increase for AI chips due to rising supply chain expenses
The challenge for TSMC lies in its chip fabrication process, where packaging technology plays a crucial role. TSMC has traditionally used CoWoS (Chip on Wafer on Substrate) for its consumer-oriented products, and since AI chips require packaging, TSMC must balance its chip fabrication and chip packaging capabilities to meet customer demands.
CoWoS is a stacking technology that allows TSMC to stack multiple chip dies together on a silicon interposer, enhancing performance. This interposer is a critical component, and it's packaged on top of a circuit board through package balls.
The report suggests that the rising prices of these interposers will eventually lead to increased costs for TSMC's AI chips as the chip maker expands its production capacity.
To meet the strong demand for AI products, TSMC is investing billions of dollars in upgrading its packaging capacity. The company announced a $2.89 billion investment in a new chip packaging facility in Taiwan and aims to grow its packaging capacity to 30,000 wafers per month by the end of 2024. TSMC has ordered new packaging machines, and the price hike for AI chips is a result of this capacity expansion.
TSMC sources its interposers for CoWoS chips from United Microelectronics Corporation (UMC), Taiwan's second-largest contract chip manufacturer. UMC and ASE Group are expected to benefit significantly from the increased demand for TSMC's CoWoS products and have already received initial orders. Both companies are ramping up production to fulfill the first wave of data center and other AI orders before the current fiscal year concludes.
UMC, in response to growing orders, plans to double its production capacity for interposers, increasing it from 3,000 pieces to at least 6,000 pieces. Additionally, TSMC may outsource some orders to ASE if its in-house production lines become strained.
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