TSMC’s CoWoS Packaging Crunch Could Open the Door for Intel in the AI Chip Race
The explosive demand for AI hardware is reshaping the semiconductor supply chain, and one of the biggest pressure points is advanced chip packaging. TSMC has long been the dominant force in this area with its CoWoS technology, but new trade data suggests Intel may be gaining ground as customers look for additional packaging capacity.
CoWoS, short for chip-on-wafer-on-substrate, is a critical technology used in advanced AI processors. It allows multiple components, such as GPUs and high-bandwidth memory, to be integrated into a single package. This is especially important for data center AI chips, where performance, bandwidth, and power efficiency all matter.
As demand for AI accelerators continues to surge, chip manufacturing itself has not been the only challenge. TSMC has managed to keep leading-edge chip production running at massive scale, helping prevent a major shortage of AI GPUs. However, the broader semiconductor ecosystem has faced bottlenecks in two key areas: advanced packaging and high-bandwidth memory, commonly known as HBM.
Advanced packaging is essential because it connects computing chips with memory chips in a compact and efficient design. HBM is equally important because it stores and quickly feeds data to the processor during AI workloads. Without enough packaging capacity and memory supply, even the most advanced AI chips cannot be completed at the pace customers want.
The HBM boom has already transformed the fortunes of major memory suppliers, especially in South Korea. SK hynix has benefited significantly from the rapid increase in AI-related orders, while Samsung has faced internal pressure as workers pushed for better bonuses tied to rising chip profits.
TSMC identified advanced packaging as a potential bottleneck early in the AI boom. In 2023, the company had already increased CoWoS capacity to around 15,000 wafers per month. Since then, it has continued expanding production to meet demand from high-performance computing, cloud infrastructure, and AI data center customers.
Even with those expansions, demand appears to be outpacing supply. Earlier industry reports suggested that some packaging orders were shifting away from TSMC because the company could not fully meet customer needs. Intel and other semiconductor firms were mentioned as possible beneficiaries of this overflow.
Fresh export data now appears to support that idea. According to semiconductor trade analysis, South Korean chip shipments show a significant amount of high-bandwidth memory moving to Malaysia, while shipments to Taiwan have fallen below the $3 billion level. Around $1.3 billion worth of chips is reportedly heading to Malaysia.
This detail matters because HBM is commonly used in AI chip packages, and Intel is one of the only major semiconductor manufacturers with significant chip operations in Malaysia. That raises the possibility that some of this memory is being sent to Intel facilities for advanced packaging work.
Intel’s advanced packaging portfolio includes technologies such as EMIB and EMIB-T. These solutions are often used to connect multiple chip components efficiently and are particularly useful in power-conscious designs. TSMC’s CoWoS, on the other hand, is widely seen as the preferred choice for extremely high-performance AI chips due to its higher interconnect density.
That distinction is important. TSMC’s CoWoS remains the leading packaging option for top-tier AI accelerators, including high-power processors used in data centers. However, when demand is far greater than available capacity, customers may turn to alternative packaging providers to keep product launches and AI infrastructure buildouts on schedule.
For Intel, this could become a strategic opening. The company has been investing heavily in its foundry and packaging ambitions, aiming to become a stronger manufacturing partner for global chip designers. If AI chip customers increasingly need backup or supplemental packaging capacity, Intel could benefit from the industry’s current supply imbalance.
For TSMC, the situation is not necessarily a sign of weakness. In fact, it highlights how strong demand for its advanced packaging technology has become. The company remains central to the AI semiconductor supply chain, but the market is growing so quickly that even aggressive capacity expansions may not be enough in the short term.
The broader takeaway is clear: the AI chip race is no longer just about who can manufacture the most advanced processors. It is also about who can package them, supply enough HBM, and deliver complete products at massive scale. As AI data centers continue to expand worldwide, advanced packaging capacity could become one of the most valuable resources in the semiconductor industry.
If export trends continue, Intel may gain a larger role in AI chip packaging while TSMC works to expand CoWoS output. The competition could ultimately benefit the entire market by easing bottlenecks and helping meet the relentless demand for next-generation AI computing hardware.
