Cloud AI demand is accelerating CoWoS expansion, benefiting TSMC, ASE and GPTC

Overview

This report focuses on the advanced packaging capacity expansion cycle driven by cloud AI. UBS believes CoWoS capacity expansion at TSMC and across the broader industry is faster than expected a month ago, reflecting stronger underlying cloud AI demand. Even if Intel EMIB-T and TSMC CoPoS enter mass production in 2028, a substantial portion of advanced packaging demand will remain within the CoWoS ecosystem in the next several years.

Core views

The core views are: first, CoWoS capacity expansion is a leading indicator of cloud AI demand; 2026-2027 expansion at TSMC and OSAT is accelerating; second, demand for server CPU, GPU and ASICs jointly supports advanced packaging demand, with AMD, Nvidia, Google TPU and Amazon Trainium all seeing upward revisions; third, the supplier landscape will become more diversified in 2027-2028, but TSMC should remain the largest participant due to market share, rising 3D-stacking contribution, and technology upgrades including CoPoS and co-packaged optics; fourth, GPTC, as an advanced packaging wet-process equipment supplier, should benefit from OSAT and TSMC expansion.

Analysis framework

The report centers on capacity and end customer chip shipments, cross-validating TSMC and ASE/OSAT CoWoS supply expansion against demand from major customers such as AMD, Nvidia, Google, and Amazon, and further mapping this to GPTC tool shipments, gross margin, PE valuation, and target price.

Methodology notes

• Supply-demand analysisCoWoS supply versus demand analysis

  Measure industry conditions by advanced packaging capacity and major customer chip demand.

  The report uses CoWoS capacity, interposer wafer demand, major customer shipments, and supply-chain build units to gauge cloud AI demand strength and sustainability of expansion.

• Valuation methodsPE methodology

  Value GPTC using an earnings multiple.

  UBS raised GPTC target price to NT$5,000 based on 33x 2027-28E PE and believes 36% long-term profit CAGR supports that valuation multiple.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD (TSMC, US.TSM)

  Leading cloud AI foundry and CoWoS capacity provider

  Strengths

  Leading market share, faster CoWoS expansion, increasing share of end-to-end advanced packaging sales, and benefiting from upgrades in 3D stacking, CoPoS, and co-packaged optics.

  Weaknesses

  Advanced packaging capacity expansion requires sustained capex and execution capability, and future supply is likely to be more diversified.

  Comparison

  Although Intel EMIB-T and TSMC CoPoS are entering mass production, the report still expects TSMC to remain the largest participant.

  Risks

  Cloud AI demand below expectations, technology substitution, geopolitical risks, and expansion of supply not meeting expectations.

• ASE

  OSAT advanced packaging and testing beneficiary

  Strengths

  Faster expansion of full-flow CoWoS capacity, supported by server CPU demand from AMD Venice and others.

  Weaknesses

  Execution risk in translating expansion and customer demand into actual shipments.

  Comparison

  Compared with TSMC, a rising OSAT share is making supply more diversified, but TSMC remains the largest player.

  Risks

  CoWoS demand below expectations, intensified competition, and gross-margin pressure.

• Grand Process Technology Corp. (GPTC)

  Advanced packaging wet-process equipment supplier

  Strengths

  High share in OSAT, strong technology capability, and leading share in SoIC, panel-level packaging, and CPO with a long-term profit CAGR expectation of 36%.

  Weaknesses

  In 2025-2026, subcontracting some module assembly to meet strong demand put slight pressure on gross margins.

  Comparison

  For more than 10 years, GPTC has maintained gross margins above 40% despite competition from Scientech in InFO and CoWoS.

  Risks

  CoWoS expansion slower than expected, competitors making technological progress, geopolitical uncertainty, and AI growth below expectations.

• ADVANCED MICRO DEVICES INC (US.AMD)

  Demand driver from server CPU and AI accelerator demand

  Strengths

  Venice server CPUs and MI450/455 are driving a sharp increase in CoWoS demand in 2027E.

  Weaknesses

  Demand realization depends on product ramp and supply-chain execution.

  Comparison

  Along with Nvidia, Google TPU, and Amazon Trainium, it forms a major source of CoWoS demand growth.

  Risks

  Product ramp delays, client demand volatility, and advanced packaging supply constraints.

Key data

• TSMC CoWoS capacity70 kwpm by end-2025; 130 kwpm by end-2026; 180 kwpm by end-2027Forecasts for 2026/2027 are higher than the previous 120/150 kwpm.
• Industry CoWoS capacity160 kwpm by end-2026; 250 kwpm by end-2027Reflects faster expansion from both TSMC and OSAT.
• ASE full-process CoWoS capacity20 kwpm by end-2026; about 50 kwpm by end-2027Previously forecast at 40 kwpm by end-2027.
• AMD Venice shipments1.3mn in 2026; 4mn in 2027Supports 232% growth in AMD CoWoS demand in 2027E.
• Nvidia Vera CPU shipments1.6mn in 2026; 5.5mn in 2027Corresponds to a 57% increase in Nvidia CoWoS demand in 2027.
• Google TPU chipsets shipments4.1mn in 2026; 9.0mn in 2027MediaTek expects to support 4mn TPU v8t capacity.
• Amazon Trainium 3 demand1.8mn in 2026 / 2.8mn in 2027ERaised from the prior 1.7mn/2.3mn.
• GPTC tool shipments220 units in 2026; about 330 units in 2027Tool shipments expected to grow 22% in 2026 and 50% in 2027.
• GPTC target priceNT$5,000Raised from NT$4,000 based on 33x 2027-28E PE.
• ASE target priceNT$835Raised from NT$660.

Impact & implications

The report’s tone is constructive: higher cloud AI capex and chip demand not only benefit TSMC’s advanced packaging revenue but also expand opportunities for ASE, Amkor, and other OSATs, with further transmission to GPTC, Chroma, Hon Precision, ASMPT, KYEC, Aspeed, GUC, Alchip, and related equipment, testing, and design-service segments.

Risks

• CoWoS capacity expansion is slower than expected.
• Competitors achieve technological breakthroughs and erode GPTC or incumbent suppliers’ share.
• Geopolitical uncertainty affecting the semiconductor supply chain.
• AI and cloud capex growth is weaker than expected.
• Technology company operating models are highly volatile, making earnings forecasts and valuation more difficult.

What to watch

• Whether TSMC's CoWoS capacity in 2026-2027 follows the 130/180 kwpm path.
• Whether ASE full-process CoWoS capacity can reach around 50 kwpm by end-2027.
• Shipment ramp of AMD Venice, MI450/455, Nvidia Vera/Rubin, Google TPU, and Amazon Trainium 3.
• Mass-production progress of Intel EMIB-T, TSMC CoPoS, and co-packaged optics around 2028.
• Whether GPTC tool shipments and gross margin recover to the 40% range in mid-2027 to 2028 as expected.