Taiwan Semiconductor (NYSE:TSM) is reportedly considering expanding its advanced chip packaging capacity in Japan, which could significantly impact the global semiconductor industry.
What Happened: TSMC is exploring the possibility of establishing advanced packaging facilities in Japan, sources familiar with the matter informed Reuters. The discussions are preliminary, and no official decisions have been made.
The company is contemplating introducing its chip-on-wafer-on-substrate (CoWoS) packaging technology in Japan. This technology involves stacking chips on top of each other, which enhances processing power, saves space, and reduces power consumption.
The demand for advanced semiconductor packaging has surged globally, driven by the artificial intelligence boom. This has prompted major chipmakers, including TSMC, Samsung Electronics, and Intel, to increase their packaging capacity.
In January, TSMC’s CEO C.C. Wei announced the company’s intention to double CoWos output this year, with additional expansions planned for 2025.
Should TSMC proceed with this expansion, it would further solidify its presence in Japan, where it recently established a plant and announced another. The company has also set up an advanced packaging research and development center in Ibaraki prefecture, northeast of Tokyo, in 2021.
However, TrendForce analyst Joanne Chiao mentioned that she anticipated a limited scale for TSMC’s advanced packaging capacity if it were to be built in Japan.
TSMC did not immediately respond to Benzinga's request for comment.
Why It Matters: The potential expansion in Japan comes at a time when TSMC’s stock has been performing well. The company’s shares have soared over 110% since October 2022, mirroring gains of its key client, NVIDIA Corp (NASDAQ:NVDA). The rise of TSMC has brought its risks into sharper focus despite the enthusiasm surrounding its role in the AI boom.
Earlier in March, TSMC’s global expansion and AI revenue growth were in focus despite overbought signals. TSMC’s remarkable rise brought its risks into sharper focus despite the enthusiasm surrounding its role in the AI boom. AI’s contribution to TSMC’s total revenue was only 6% in 2023, sparking speculation about future demand and its impact on TSMC’s valuation.
Meanwhile, TSMC’s potential expansion in Japan comes at a time when the AI sector is the hottest in the market, and Fidelity International is advising investors to consider indirect plays in addition to the obvious choices, such as Nvidia.
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