As demand for NVIDIA’s AI chips skyrockets, TSMC faces a significant shortage in CoWoS (Chip on Wafer on Substrate) advanced packaging capacity. In a strategic move, TSMC has outsourced the key front-end CoW (Chip-on-Wafer) process for the first time to ASE Technology Holding. This development marks a pivotal moment for ASE, significantly boosting its advanced packaging orders and enhancing its profit margins due to the high technical and financial value of these orders.
Neither TSMC nor ASE Technology Holding commented on the rumors as of August 6. However, reports suggest that AMD is also vying for ASE’s advanced packaging capabilities, making ASE a vital second supply chain partner for both AI chip giants, NVIDIA and AMD. The industry is abuzz with ASE’s newfound prominence.
The outsourcing agreement holds three major implications for ASE Technology Holding:
First-Time Front-End Order Release: TSMC’s decision to release front-end CoWoS orders reflects the urgency of AI chip customers seeking rapid fulfillment of their demands.
Expanded Role in TSMC’s Supply Chain: Previously responsible for the back-end WoS (Wafer-on-Substrate) processes, ASE now handles both the CoW and WoS segments, consolidating its position in high-end packaging and testing.
Enhanced Profitability: The CoW process involves more advanced front-end technology and yields higher profits. By securing this order, ASE demonstrates its technological prowess and secures higher-margin business compared to the lower-profit WoS process.
CoWoS technology, encompassing 2.5D and 3D packaging, involves stacking chips to reduce space, power consumption, and cost. This approach is increasingly critical as the semiconductor industry seeks efficiency gains.
The order will be fulfilled at ASE’s Silicon Products Zhongke Factory, which is expanding its capacity with new machinery installations expected by the second quarter of next year and production ramp-up in the third quarter.
TSMC’s decision to outsource the CoW process aligns with Chairman C.C. Wei’s commitment to addressing CoWoS capacity shortages. TSMC aims to achieve a balance between supply and demand from 2025 to 2026 through strategic partnerships with packaging and testing companies.
Tien Wu, ASE’s Chief Operating Officer, echoed TSMC’s strategy, highlighting the group’s long-standing collaboration with foundry partners on CoW and WoS processes. This collaboration positions ASE Technology Holding as a critical player in the evolving landscape of semiconductor packaging.
