TSMC Expands Advanced Packaging Outsourcing, Boosting Orders for Korean Post-Processing Equipment Makers

Global OSAT Leaders ASE and Amkor Ramp Up Facility Investments
Strong Performance Growth Expected for Intekplus and Gigavis

TSMC, the world's top foundry (semiconductor contract manufacturing) company based in Taiwan, has begun outsourcing a significant portion of its core advanced packaging processes to external companies in order to resolve the production bottlenecks caused by the explosive surge in demand for artificial intelligence (AI) semiconductors. As global outsourced semiconductor assembly and test (OSAT) firms ramp up their facility investments in response, domestic back-end equipment manufacturers that supply machinery to these companies are expected to enjoy a full-fledged boom in orders.

According to the industry on the 14th, TSMC started delegating the 'Chip on Wafer' (CoW) process, which is the initial part of its core packaging technology called 'Chip on Wafer on Substrate' (CoWoS), to OSAT companies from the beginning of this month.

CoWoS is a 2.5D advanced packaging technology that maximizes data transfer speed by placing graphics processing units (GPUs) or logic chips responsible for computation alongside high-bandwidth memory (HBM) on a single substrate in close horizontal proximity. It involves laying an interposer (sometimes known as a "silicon highway"), a fine circuit board between chips, to reduce data bottlenecks. This makes the technology essential for manufacturing AI accelerators.

Until now, TSMC had only outsourced the back-end process of mounting assembled chips onto a substrate, while directly handling the critical CoW process of mounting semiconductor chips onto a silicon wafer. However, with orders for AI chips from major companies like Nvidia soaring, it appears that TSMC has decided to resolve production bottlenecks by outsourcing even its core processes.

Shinhan Investment Corp.'s corporate analysis team 1 commented, "CoWoS is essentially monopolized by TSMC, and the lead time for advanced packaging equipment itself is long, so capacity expansion cannot keep up with the pace of demand growth. Nvidia's preemptive allocation of capacity, based on its market dominance, is also regarded as a cause of the bottlenecks." TSMC's monthly CoWoS production capacity is estimated at 90,000 to 120,000 wafers (based on wafer input), and the industry believes that Nvidia has already secured more than 50% of this capacity.

With a surge in outsourced orders from TSMC, specialized external vendors are competing to significantly expand their facilities. ASE Group, the world’s largest OSAT company, has set this year's capital expenditure at $10.5 billion (about KRW 15 trillion), up 98% from last year. North American leader Amkor also plans to establish a state-of-the-art packaging plant in Arizona worth $7 billion (about KRW 10 trillion) and operate it in connection with TSMC’s local plant in the United States.

This global investment boom is providing a strong growth engine for domestic materials, parts, and equipment (so-called "materials·parts·equipment") companies that are considering advanced packaging equipment adoption. Especially, new packaging technologies—such as glass substrates and hybrid bonding—that existing back-end equipment cannot accommodate are emerging, further stimulating demand for new specification equipment among external vendors.

Intekplus, a semiconductor substrate inspection equipment manufacturer, passed a quality test for pilot equipment supplied to a Taiwanese OSAT firm’s CoWoS production line in the first quarter of this year and is preparing for a formal contract. In anticipation of rising orders, it plans to increase its production capacity by about 50%. The orders backlog is projected to grow from KRW 61 billion at the end of the first quarter to KRW 172.5 billion by year-end.

Gigavis, a company specializing in inspection and repair equipment for semiconductor substrates, began operating a new factory in Hwaseong, Gyeonggi Province, increasing its annual production capacity to KRW 350 billion. As the circuits on semiconductor substrates become finer, the price of core equipment has risen from the previous $400,000 to up to $1 million (about KRW 1.4 billion). Next year's revenue is expected to reach KRW 174.6 billion, up 90% from the previous year, and operating profit is projected to increase by 176% to KRW 77.5 billion.

Pemtron also received an order worth KRW 10 billion for HBM inspection equipment from SK hynix, and has since expanded its supply chain to include global foundries and OSAT firms. With the start of HBM4 mass production in the second half of this year, supply of inspection equipment is expected to ramp up in earnest.

An industry official stated, "The focus of semiconductor equipment investments, which used to be on front-end capacity expansion, is now shifting to advanced packaging and back-end inspection and metrology. Until around 2027, when global OSAT and substrate companies’ capacity expansion enters full swing, the profit growth of key domestic back-end equipment firms is set to accelerate."

This content was produced with the assistance of AI translation services.