Introduction
TSMC, the world’s leading semiconductor foundry, has reportedly slowed its expansion plans for Chip-on-Wafer-on-Substrate (CoWoS) capacity for 2026.
The decision comes despite the booming AI sector, which has driven a surge in demand for advanced chips.
The move reflects caution due to geopolitical uncertainty, particularly regarding former President Donald Trump’s potential return to power. TSMC is adopting a “wait and see” approach to reassess demand before committing further to expansion plans.
Background of TSMC’s CoWoS Expansion
TSMC has been aggressively expand its CoWoS packaging capacity to meet the demands of AI and high-performance computing (HPC) markets.
CoWoS technology allows multiple chips to be stacked and interconnected efficiently, improving performance and reducing energy use—vital for AI workloads.
In 2024 and 2025, TSMC had planned to double its CoWoS output consecutively. The company aimed to keep up with the growing need for chips, especially for AI data centers. However, despite ambitious targets, supply has struggled to meet demand.
Key Updates on TSMC’s CoWoS Expansion
- Ambitious 2024–2025 Production: TSMC aimed to double its CoWoS output in 2024 and 2025 to keep pace with the growing demand from AI companies.
- Pause in 2026 Equipment Demand: TSMC has informed suppliers to pause equipment demand for 2026. This is a shift from earlier plans, where equipment orders were already in the works for that year.
- Geopolitical Concerns: Industry sources suggest that geopolitical risks, particularly potential shifts in U.S. policies if Trump returns to power, are influencing TSMC’s cautious approach.
- Facility Construction Progress: TSMC continues to build new facilities. Its acquisition of Innolux’s Tainan Fab 4 will be completed by March-April 2025. Production could start by the end of 2025.
- Chiayi Fab Expansion: TSMC plans to expand its Chiayi fab for System-on-Integrated-Chips (SoIC). Equipment delivery is expected by the end of 2025, with production starting by late 2026.
The Shift in 2026 Expansion Plans
Earlier in the year, TSMC had informed suppliers of plans for significant equipment orders in 2026. However, this has now changed.
The company is slowing down its expansion to reassess demand. The geopolitical uncertainties, particularly around the U.S. presidential election, are a major factor in this decision.
Impact on Equipment Suppliers
Several equipment suppliers have received notices to halt their 2026-related planning. TSMC has asked for a pause until further notice.
These suppliers are now awaiting updates from the company. Delays have already occurred in the construction and equipment delivery schedules.
While construction for the Innolux facility is on track, equipment delivery has been delayed by 2 to 3 months. The delay impacts TSMC’s original timelines for 2026 capacity.
Broader Implications for the Semiconductor Industry
TSMC’s decision could have wider implications for the semiconductor industry. The company is a major player in semiconductor packaging.
Any slowdown in its expansion could signal caution among other semiconductor firms. The rising geopolitical tensions may lead other companies to reassess their own expansion plans.
The AI sector’s demand for advanced chips is unlikely to diminish. But companies may hesitate to invest heavily in new facilities due to the volatile political landscape.
TSMC’s Strategy Going Forward
Despite the slowdown, TSMC is not abandoning its expansion plans. The company is moving ahead with its Innolux facility and the Chiayi fab.
These expansions are critical for maintaining TSMC’s leadership in the semiconductor packaging space. However, TSMC is becoming more cautious, prioritizing flexibility as it navigates uncertain geopolitical conditions.
TSMC’s decision shows a more measured approach to growth. The company is taking steps to mitigate risks while staying ahead of demand in AI and HPC markets. It will likely monitor the political situation closely before making any further large-scale investments.
Conclusion
TSMC’s slowdown in CoWoS capacity expansion for 2026 highlights the challenges semiconductor manufacturers face in today’s uncertain political climate.
Geopolitical risks, especially surrounding U.S. policies, are prompting TSMC to pause and reassess its growth plans. While the company continues with its construction projects, the delay in equipment orders shows the complexities of managing supply chains in an unpredictable global environment.
TSMC’s future strategy will depend on resolving these uncertainties and maintaining flexibility in a rapidly changing market.
Reference: Trendforce
