A major roadblock holding back the AI boom right now isn’t just chipmaking capacity. It’s advanced packaging, the crucial step that turns leading-edge silicon into the high-performance chips powering modern AI servers. With so much of the industry depending on TSMC for these services, the company is now moving aggressively to expand advanced packaging capacity to keep pace with surging demand.
According to a report from Taiwan’s CNA, TSMC is preparing to significantly ramp up its advanced packaging footprint by building new facilities and even upgrading older 8-inch fabs in Taiwan to support advanced packaging production. This strategy highlights how severe the bottleneck has become: without meaningful new capacity, the supply constraints won’t ease, and customers looking to scale AI deployments could be forced to seek alternatives.
In Taiwan, TSMC reportedly plans to equip seven fabs with advanced packaging technologies such as CoWoS, WMCM, and SoIC. These packaging approaches serve different parts of the market, including mobile devices and high-performance computing (HPC). But it’s HPC—especially AI accelerators and the massive compute platforms behind them—that’s driving the biggest wave of demand. As AI chip packages grow larger and more complex with each new generation, the packaging step has become just as vital as the wafers themselves.
The report indicates that by 2027, TSMC could increase output to as much as 2 million wafers, up from 1.3 million. If achieved, that would represent a significant push to relieve the advanced packaging crunch and support the continued expansion of AI infrastructure.
TSMC’s U.S. expansion also plays a key role, but advanced packaging has been a missing piece so far. While the company’s Arizona chip fabs represent a major investment in domestic semiconductor production, the lack of local advanced packaging has created its own bottleneck for the region. To address that gap, TSMC is investing in two advanced packaging facilities in Arizona, which are expected to reach mass production around 2030. Once online, these sites are expected to contribute a meaningful share of overall packaging output and strengthen the U.S.-based AI supply chain.
All of this underscores why advanced packaging has become one of the most important battlegrounds in the semiconductor industry. The supply-and-demand balance is under intense strain, and the constraints have also pushed more attention toward competing packaging solutions offered by other chipmakers. Still, with AI demand accelerating and customers needing reliable, scalable packaging capacity, TSMC’s expansion plans are shaping up to be one of the most consequential moves in the next phase of the AI hardware race.
