TSMC plans to significantly increase prices for its advanced packaging services. The production capacity pressure caused by the continued strong demand for AI chips is being transmitted to the cost side of the supply chain.

According to a report by Taiwan's "Industri & Commerce Times" citing sources in the supply chain, TSMC is considering raising the prices of its advanced packaging processes by 10% to 20%. If this move goes through, it will directly increase the production costs for chip manufacturers such as NVIDIA and AMD. It may also further drive up the retail prices of Apple's iPhone and MacBook products – Apple's products have already been under certain pressure due to rising memory chip prices.

CoWoS Demand Surplus, Tight Production Capacity Triggers Price Hikes

TSMC's core products for which it plans to raise prices this time are CoWoS ( Chip on Wafer on Substrate ) packaging technologies.

This technology integrates the chip with high-bandwidth memory ( HBM ) within a single package, and it is an essential key process for current high-end AI acceleration chips.

According to a report by the Industrial and Commercial Times, in terms of capacity expansion, TSMC is continuously advancing with the CoWoS capacity ramp-up: it is expected that the monthly production capacity will exceed 130,000 units in 2026, and there is hope to further increase it to over 200,000 units in 2027.

Cost pressures are transmitted downstream along the supply chain.

As the world's largest wafer foundry, TSMC's pricing decisions have a significant impact on the entire semiconductor supply chain. Its main customers include not only NVIDIA and AMD, but also chip design giants such as Broadcom, Qualcomm, and MediaTek.

The increase in packaging costs has a particularly direct impact on NVIDIA. NVIDIA's data centers GPU rely heavily on CoWoS packaging technology, and the price hike will compress their product gross margins or force downstream customers to bear higher procurement costs. For Apple, if the increase in packaging costs is combined with the already rising prices of memory chips, the cost pressure on its hardware products may further intensify.

The recent trends in the stock prices of TSMC and NVIDIA have, to some extent, reflected the market's concerns regarding the sustainability of investments in the AI industry.

In addition to announcing price increases, SpaceX CEO Elon Musk has previously expressed bearish opinions on the emerging cloud services sector (neocloud), which also had a negative impact on multiple cloud computing and AI related stocks on Monday this week.