TSMC to Bolster CoWoS Capacity with Five New Plants in Chiayi
Persistent demand for high-performance AI semiconductors is compelling foundry leaders to aggressively expand advanced packaging and next-generation lithography capabilities.
Tradesnaut Quant Research Desk · September 29, 2026 · 6 min read · Semiconductors
Key takeaways
- TSMC is massively expanding its advanced packaging CoWoS capacity with five new plants planned in Chiayi, Taiwan, in response to surging AI chip demand.
- The core mechanism is an acute bottleneck in advanced packaging and critical substrate materials, exacerbated by intense competition for leading-edge process and packaging slots.
- Watch for sustained capital expenditure commitments from major foundries and equipment suppliers, along with further details on High-NA EUV adoption timelines, as indicators of continued sector momentum.
What changed
Taiwan Semiconductor Manufacturing Company (TSM) is accelerating its advanced packaging expansion, with recent reports indicating plans to construct five additional advanced packaging plants in Chiayi, Taiwan. This move, reported by Businesskorea and other Taiwanese media on September 28, 2026, aims to establish Chiayi as the world's largest advanced packaging production hub, bringing TSMC's total facilities in the park to ten. This aggressive push directly addresses the explosive growth in demand for TSMC's CoWoS (Chip-on-Wafer-on-Substrate) technology, driven by major AI semiconductor customers including Nvidia, AMD, and Apple. Separately, ASML Holding N.V. (ASML) continues to advance its Extreme Ultraviolet (EUV) lithography technology. Intel Foundry and ASML (ASML) highlighted progress in bringing High-NA EUV into production at the SPIE Photomask Technology + Extreme Ultraviolet Lithography conference in September 2026, with Intel (INTC) already processing over one million wafers with High-NA EUV for certification, R&D, and some production layers. ASML (ASML) anticipates its High-NA EUV systems will achieve 90% availability for high-volume manufacturing by the end of 2026, targeting 93% in the longer term, as ten systems are now operational at four customers. ASML (ASML) shares closed at 1,771.41, up 1.58% today, while TSMC (TSM) saw a 0.50% gain, closing at 452.88.
The mechanism
The underlying driver for these developments is the relentless demand for AI accelerators, which rely heavily on advanced packaging techniques like CoWoS to integrate high-bandwidth memory (HBM) and complex logic dies. As of late 2025, TSMC's (TSM) CoWoS capacity was fully booked, with lead times stretching up to 78 weeks for AI packaging orders, indicating a structural under-investment in backend capacity relative to front-end wafer output. While TSMC (TSM) is ramping monthly CoWoS capacity significantly, aiming for 120,000 to 140,000 wafers per month in 2026, total demand has roughly tripled between 2024 and 2026. This persistent supply-demand imbalance, which saw a 20% gap recently, is projected to narrow to about 10% by the end of 2026 as capacity comes online. However, some estimates suggest the capacity shortfall could widen again in 2027 to over 30%. Furthermore, the broader silicon wafer supply-demand gap is expected to expand from roughly 8% by the end of 2026 to 24% by 2028, with GlobalWafers acknowledging growing shortages and rising spot prices for 12-inch wafers in August 2026. The increasing complexity of advanced packages also means that substrate value is rising faster than shipment volume due to higher layer counts and larger body sizes, intensifying material consumption, particularly for server and AI applications. This confluence of factors creates a fiercely competitive environment for securing leading-edge manufacturing and packaging slots.
Who is exposed
Leading foundries and equipment manufacturers are directly exposed to both the immense opportunity and the operational challenges presented by this market dynamic. TSMC (TSM), as the dominant player in advanced packaging, is a primary beneficiary of surging CoWoS demand, but also faces the pressure to scale rapidly to meet customer needs and prevent churn. Its decision to increase 2026 capital expenditure to between $60 billion and $64 billion, with a significant portion allocated to advanced process technologies, reflects this commitment. ASML (ASML) stands to benefit from the ongoing demand for its EUV and High-NA EUV lithography systems. Its stock has seen an impressive 87.78% increase over the past year, reflecting its critical role in enabling advanced chip manufacturing. Applied Materials, Inc. (AMAT), a key supplier of semiconductor manufacturing equipment, also posted a substantial 145.22% gain over the last year, underscoring the broader tailwinds for the equipment sector. However, the concentration of CoWoS capacity, with Nvidia alone estimated to hold approximately 60% and having booked over half of TSMC's (TSM) 2026-2027 expansion, highlights the significant leverage held by a few major chip designers. This also suggests that smaller players or those without long-term agreements may struggle to secure adequate advanced packaging capacity, potentially limiting their ability to bring competitive AI products to market.
Quantitative Outlook
The market data presented in the table below illustrates the positive sentiment surrounding key players in the semiconductor equipment and foundry space. ASML (ASML) shares trade at 1,771.41, up 1.58% today and 87.78% over the past year, indicating strong investor confidence in its technological leadership. TSMC (TSM) closed at 452.88, a 0.50% increase, with a 65.43% rise over the last year, reflecting its central role in advanced chip manufacturing. Applied Materials (AMAT) also saw a 0.36% gain today, reaching 486.76, and a remarkable 145.22% increase over the past year. These gains occur against a backdrop where the NASDAQ is down 0.92% today and the S&P 500 is down 0.77%, highlighting the sector's relative strength. The aggressive capacity expansions, particularly TSMC's (TSM) doubling of CoWoS capacity by 2028 and ASML's (ASML) progress with High-NA EUV, suggest sustained growth for the advanced packaging and lithography markets. Investors should monitor quarterly earnings and guidance from these companies for further insights into capacity utilization rates, order backlogs, and any shifts in capital expenditure plans. Additionally, tracking the narrowing or widening of the advanced packaging supply-demand gap, as well as developments in silicon wafer pricing and availability, will be crucial for assessing the sector's trajectory. Continued robust demand for AI infrastructure, coupled with the ongoing technological advancements, points to a period of significant investment and expansion in these critical segments of the semiconductor industry.
Tags: TSMC, ASML, Advanced Packaging, CoWoS, EUV Lithography