Key facts
- Demand for AI chips is outpacing the supply of advanced packaging services and substrates.
- The shortage impacts production equipment, substrates, and packaging materials.
- TSMC's 3nm advanced process capacity is highly constrained and fiercely contested.
- NVIDIA has secured significant capacity and key materials due to its supply chain control.
- TSMC plans a substantial expansion of its CoWoS capacity by 2027.
- The global shortage in 2.5D packaging capacity is expected to ease slightly by 2027.
The global artificial intelligence boom is creating a new bottleneck in semiconductor manufacturing, with demand for advanced chip packaging services and substrates outstripping supply, according to Michael Mertin, chief executive of Austrian supplier AT&S. Mertin stated that the increased complexity of AI chips necessitates closer cooperation and joint roadmaps between vendors and suppliers.
TrendForce's findings indicate that AI demand has surged since 2023, leading to capacity constraints in 3 nm-2 nm wafers and 2.5D/3D advanced packaging. The persistent shortage of CoWoS packaging has extended upstream to production equipment and downstream to substrates and other critical components. TSMC's 3nm advanced process capacity, currently a scarce resource, is dominated by the company and fiercely contested by global tech giants.
Industry leader NVIDIA, leveraging its supply chain control, preemptively secured large volumes of 4/3 nm wafer capacity, CoWoS packaging, and key materials. Other tech giants like Google also face material shortages due to delays in securing critical components, constraining product growth. The consumption of wafer and packaging resources per chip is increasing due to larger chip sizes driven by AI compute demand.
While TSMC is expanding its CoWoS capacity, it has remained in short supply since 2023. OSAT providers such as SPIL and Amkor are benefiting from this spillover demand, and alternative technologies like Intel's EMIB and FOEB are gaining traction. TrendForce expects the severe shortage in global 2.5D packaging capacity to ease slightly by 2027, aided by TSMC's planned expansion of CoWoS capacity by over 60% by that year.
On the front-end process side, AI compute chips are transitioning from 4 nm to 3 nm between late 2025 and 2026. This, combined with high-end smartphone and PC processors not yet migrating en masse to 2 nm, creates a short-term concentration of high-performance demand on 3 nm. Samsung and Intel are noted to be behind TSMC in 3 nm foundry progress, leading to a temporary single-supplier dynamic dominated by TSMC, which is accelerating fab construction to alleviate the imbalance.