Demand for AI computing power is overwhelming advanced packaging production capacity! According to reports, TSM.US plans to increase the price by 10-20%, Nvidia and Apple's costs are under pressure

The Zhitong Finance App learned that according to supply chain sources, TSM.US is preparing to raise the price of advanced packaging processes by 10% to 20% due to a surge in demand for AI chips squeezing production capacity. If this solution is implemented, the cost of chip manufacturers such as NVDA.US (NVDA.US) and AMD (AMD.US) will be boosted, and Apple (AAPL.US) iPhones and MacBooks may also be pressured by a new round of price increases — the sales prices of these two product lines have previously been raised due to the increase in the price of memory chips.

The target of the price increase is CoWoS (chip on wafer on substrate, substrate wafer-level packaging), a technology that integrates logic chips and high-bandwidth memory (HBM) into a single package. According to the report, demand for advanced packaging is spilling over from GPUs to server CPUs and custom ASICs, causing production capacity to be tight; TSMC's CoWoS monthly production capacity is expected to exceed 130,000 units in 2026 and further rise to more than 200,000 units in 2027. TSMC is the world's largest foundry, and its major customers include Broadcom (AVGO.US), Qualcomm (QCOM.US), and MediaTek.

Where does pricing power come from: a curve where production capacity can't keep up with demand

The reason why advanced packaging can increase in price is because it is currently the hardest physical constraint for AI chips. The monthly production capacity of CoWoS will expand from about 13,000-16,000 tablets in 2023 to about 70,000 tablets by the end of 2025, which is expected to exceed 130,000 tablets by the end of 2026, and the market is expected to reach 200,000 tablets in 2027. Wei Zhejia, chairman of TSMC, stated bluntly at a French conference earlier that packaging production capacity was “tight enough to limit customer growth.”

The slope on the demand side is steeper. Morgan Stanley's industrial chain survey is that global CoWOS demand is about 1.394 million units/year in 2026 and 2.694 million in 2027, with Nvidia accounting for about 60% in 2026 and falling to about 45% in 2027, mainly due to the increase in the share of ASICs developed by cloud vendors; UBS estimates about 1.37 million tablets in 2026 and 2.475,000 in 2027. The two sets of numbers are different in caliber, but they all point to the same conclusion: the pace of production expansion cannot keep up with demand.

The rapid expansion of the market itself also supports price increases: according to Yole Group's 2025 report, the global advanced packaging market was US$46 billion in 2024, up 19% year on year, and is expected to exceed US$79.4 billion in 2030; DIGITIMES Research predicts that the global data center AI chip packaging market will increase from US$5.6 billion in 2024 to US$53.1 billion in 2030, with a compound growth rate of about 45.5%.

Currently, the AI chip testing cycle is longer, further increasing the pressure on sealed production capacity. The delivery period of chip equipment has been extended from the previous 3-6 months to 6-8 months; TSMC's downstream customers “place orders as long as they can promise delivery” and have no time to bargain. The same report also mentioned that in previous years, TSMC, which usually required suppliers to cut prices in annual equipment purchases, did not renegotiate the price this year, but placed an order at the original price.

Who will pay this money: Nvidia's gross profit, Apple's second price increase

For Nvidia, the impact is most direct — its data center GPUs are highly dependent on CoOS, and package price increases either reduce its gross profit margin or pass it on to downstream cloud vendors and end customers. On Apple, the pressure is superimposed rather than new: TrendForce estimated in September that the material cost of the 256GB iPhone 18 Pro increased by about 38% year on year, of which the share of memory chips has risen from about 10% a year ago to 34%, the purchase price of 12GB DRAM has risen from $39 to $145, and the 256GB NAND has risen from $13 to $51, and the storage share is expected to exceed 40% in the first half of 2027; the agency determined that the price of the new model will rise Adjust 10% — 20%. Cook described this round of memory price increases as a “once-in-a-century flood” during the July earnings call. Price increases are already taking place: According to official price comparisons compiled by Surge News, the starting price of the 256GB version of the iPhone 18 Pro series was 1,000 yuan higher than the previous generation, and the 2TB iPhone 18 Pro Max was 3,500 yuan higher; the Mac and iPad completed a round of price increases in June.

Broadcom, Qualcomm, and MediaTek are on the same customer list, with the same pressure direction but different levels — their package size and number of HBM stacks are generally smaller than the top AI accelerators.

This forms a remarkable transmission chain: AI data centers first absorb storage capacity, and consumer electronics are forced to bear price increases; now packaging, a process closer to AI, also has to increase prices, and the same cost sheet for consumer electronics has been added one more time.

Alternative routes are taking shape

The historical rule of the semiconductor industry is that whether the price increase in foundries can stand depends on whether the utilization rate of production capacity is high enough and whether the replacement capacity is long ago — CoWoS is currently in this position, but there are still long customer order negotiations between “release” and “landing.”

Alternative production capacity is not empty either. Intel's EMIB-T and Samsung's I-Cube/X-Cube are taking orders from some ASIC camps, and sealing and testing plants such as Sun Moon Light and Amkor are taking over the overflow; however, most of the undertakers received relatively mature categories such as CoWos-S/r, and the highest-end CoWoS-L is still locked down by TSMC. What is also important to distinguish is that this price increase targets high-end AI-oriented heterogeneous packaging such as CoWOS, which does not cover TSMC's entire packaging product line. Other mature solutions such as InFO have not yet reported simultaneous price increases.

Industry observers judge that “where does the foundry end up” is the key — if it is absorbed by TSMC itself into the mixed average price and gross profit margin, this is its profit improvement; if it is only transmitted downward along the chain, it is just an inflation for the entire AI ecosystem.

Putting in TSMC's three-quarter report, the extent of the price increase is more clear. According to the three-quarter report released on October 15, revenue for the third quarter was 46.72 billion US dollars, up 41.2% year on year, gross profit margin 66.4%, operating profit margin 58.7%, and net profit margin 51.1%; the fourth quarter guided revenue of $52.3-54.3 billion and gross profit margin of 65% to 67%. The annual dollar revenue growth guide was raised to about 44%, and capital expenditure was maintained at 60 billion to 64 billion US dollars. On October 20, Deutsche Bank maintained a “purchase” with a target price of NT$3,000, and raised its capital expenditure forecast for 2027 and 2028 to 84 billion and 100 billion US dollars. The reason was Wei Zhe's statement, “We have no intention of handing over the benefits; we want to take over all possible businesses.” At the same legal conference, the company said that the five-fold mask package has been mass-produced and has good yield. It is promoting the 9x and 14x solutions, and is responding to the demand for larger size and cost reduction with CoPos panel-level packages. High-performance computing (HPC) platforms accounted for 68% of revenue during the quarter, and advanced manufacturing processes at 7nm and below accounted for 79% of wafer sales.

The price increase is not only a fulfillment of pricing rights, but also an advance payment for production expansion bills. What really determines the nature of this news is whether it ends up falling on TSMC's gross margin or on Nvidia's and Apple's cost sheets — and the answer will have to wait for the customer to negotiate with TSMC's official line.