TSMC reportedly weighs 20% CoWoS price increase as Nvidia Blackwell and Rubin chips put pressure on packaging capacity

TSMC is considering raising prices by up to 20% for its Chip on Wafer on Substrate (CoWoS) technology, according to reports from Trendforce citing supply chain sources and local media. This potential increase is attributed to the strained capacity due to the surge in AI demand and longer delivery times for chipmaking tools. CoWoS is already a critical part of the AI supply chain, and a 20% price hike would significantly impact the industry. TSMC has not yet confirmed the report.

CoWoS combines logic dies and high-bandwidth memory (HBM) stacks within a single package, which enables AI accelerators to obtain the data bandwidth required for demanding workloads. As chip designers pack more compute and memory into these packages, building them becomes increasingly challenging. The launch of Nvidia's Blackwell GPUs, which pair two large GPU dies with eight HBM3E stacks, and the upcoming Rubin and Rubin Ultra chips, which may further integrate components, are expected to put additional pressure on packaging and the supply chain supporting it.

Longer testing times for Blackwell, which reportedly takes three to four times longer than Nvidia's previous-generation Hopper, and potential testing durations of up to seven times longer for Rubin, exacerbate the issue. Moreover, extended test cycles keep equipment occupied for longer periods, making it harder to increase output as demand grows.

The packaging strain is not limited to GPUs, as server CPUs and custom ASICs also require advanced packaging, further burdening the already crowded supply chain. TSMC has reportedly maintained its 2026 equipment orders at the current prices, rather than seeking discounts or additional features, unlike its usual practice of leveraging purchasing power to secure better terms.

This change indicates that getting the tools on time is now more crucial than obtaining them at a lower cost. The pressure on TSMC's equipment availability aligns with a September report stating that the company's semiconductor equipment requirements had nearly doubled in six months as it expanded production to meet AI demand. Cliff Hou, TSMC's deputy co-COO, revealed that by July, the company's expected equipment needs had surged to 1.9 times its original estimate due to accelerated AI demand.

Hou highlighted that TSMC has never witnessed such a rapid and substantial increase in demand compared to the last 30 years.

TSMC is also attempting to diversify its packaging supply chain. Earlier this month, GlobalFoundries signed a five-year contract worth $2 billion to produce silicon interposers for TSMC's CoWoS packages. Production is set to begin in the first half of 2028. However, interposers form only a portion of the packaging process, and the agreement alone will not resolve the shortages.

Besides, TSMC is contemplating broader price hikes for 2027, with wafer prices for advanced process technologies projected to climb by 5% to 10%. Customers utilizing 2nm and 3nm-class nodes might experience the most significant increases, while those requiring additional capacity could face additional premiums of up to 25%. Trendforce's industry estimates suggest TSMC's monthly wafer capacity reached over 106,000 units in 2026, with a target of 227,000 units in 2027 as the foundry strives to keep up with the surging demand for advanced AI processors.

Should both the packaging price increase and wafer price hikes materialize, AI hardware costs are likely to escalate further, with some of the additional expenses potentially passed on to customers.