Nvidia Shifts to Advanced CoWoS-L Packaging for Next-Gen AI Chips, Impacting TSMC and Supply Chain

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On Thu, 16 Jan, 4:04 PM UTC

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Nvidia CEO Jensen Huang announces a transition from CoWoS-S to CoWoS-L advanced packaging technology for their upcoming Blackwell AI GPUs, signaling increased demand for TSMC's advanced manufacturing capabilities and potential impacts on the semiconductor supply chain.

Nvidia's Shift to Advanced Packaging Technology

Nvidia, the leading AI chip manufacturer, is transitioning to a more advanced packaging technology for its next-generation AI GPUs. CEO Jensen Huang announced that the company will primarily use CoWoS-L (Chip-on-Wafer-on-Substrate with Local Silicon Interconnect) for its upcoming Blackwell architecture, moving away from the current CoWoS-S technology used in its Hopper GPUs 12.

Understanding CoWoS-L Technology

CoWoS-L represents a significant advancement over CoWoS-S in terms of performance and efficiency for high-end computing applications like AI and HPC. The main difference lies in the incorporation of Local Silicon Interconnect (LSI) chips for die-to-die connections, enabling a dramatic increase in interconnect density and improved bandwidth capabilities 1.

Impact on TSMC and Supply Chain

This transition has implications for Taiwan Semiconductor Manufacturing Co (TSMC), Nvidia's primary contract chipmaker, and the broader semiconductor supply chain:

  1. Increased Demand: Nvidia's demand for advanced packaging from TSMC remains strong, with Huang stating that the amount of advanced packaging capacity is "probably 4 times" what was available less than two years ago 34.

  2. Production Shift: TSMC will need to adapt its production capabilities to meet the demand for CoWoS-L technology 1.

  3. Potential Revenue Impact: Some analysts project that Nvidia's reduction in CoWoS-S orders could lead to a 1% to 2% decrease in TSMC's revenue 1.

  4. Supply Chain Adjustments: Other players in Nvidia's supply chain may feel the effects as demand for CoWoS-S packaging decreases 1.

Nvidia's Strategy and Market Position

Nvidia's move to CoWoS-L is part of its strategy to maintain its dominance in the AI chip market:

  1. Capacity Increase: Huang emphasized that this shift is not about reducing capacity but increasing capacity for CoWoS-L technology 23.

  2. Meeting Demand: Nvidia has been selling its Blackwell chips as quickly as TSMC can make them, although packaging has remained a bottleneck due to capacity constraints 4.

  3. Future Projections: TSMC is expected to double its CoWoS production capacity by 2025, with Nvidia projected to occupy more than half of this capacity 1.

Industry Implications

The shift to CoWoS-L is likely to have broader implications for the semiconductor industry:

  1. Technology Adoption: Nvidia's move may accelerate the adoption of advanced packaging technologies across the industry, setting new benchmarks for high-performance AI chips 1.

  2. Competition: Other chip manufacturers may need to follow suit to remain competitive in the high-performance computing and AI markets.

  3. Export Restrictions: The transition comes amid new U.S. export restrictions limiting AI chip exports to most countries except for a select group of close U.S. allies, including Taiwan 45.

As Nvidia continues to push the boundaries of AI chip technology, its strategic decisions, like the shift to CoWoS-L, will likely have far-reaching effects on the global semiconductor industry and the future of AI computing.

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