JPMorgan Raises TSMC's CoWoS Forecast, Bullish on Structural Storage Shortage

Overview

This JPMorgan Asia-Pacific technology sector report focuses on three core companies—Japan’s Kioxia Holdings, Korea’s Samsung Electronics, and Taiwan’s TSMC—while also covering supply chain participants such as ISU Petasys, Hanmi Semi, and Silergy. The central thesis is that AI compute demand is transforming the semiconductor industry from cyclical volatility toward structural growth, with long-term agreements (LTAs) in memory and advanced packaging capacity expansion serving as key focal points. The report upgrades earnings forecasts and target prices for multiple companies.

Core views

Memory Sector: The report argues Kioxia stands at a pivotal structural inflection point. Kioxia reported Q4 FY26 operating profit of JPY 596.8 billion, surpassing buy-side expectations of JPY 579.2 billion, and guided F1Q27 operating profit at JPY 1.3 trillion—significantly above investor survey expectations. The company demonstrates the industry’s highest margins, technical execution capability, and supply discipline. Its FY3/27 capex guidance of JPY 450 billion is higher than the buy-side expectation of JPY 425 billion (note: this reflects disciplined expansion rather than aggressive scaling). Analysts Mio Shikanai and Jay Kwon believe the memory sector is heading toward a structural shortage, based on two key factors: strong demand for enterprise SSDs (eSSDs) driven by agentic AI, and industry-wide capital expenditure discipline limiting supply. They expect Kioxia’s ongoing LTA negotiations with major customers to yield favorable outcomes—specifically variable pricing and volume contracts designed to capture upside potential, a model already adopted by peers. Samsung Electronics, as the world’s largest NAND supplier, will similarly benefit from this structural trend. The report raises Samsung’s FY26–28 EPS estimates by 1–5% and lifts its target price to ₩480,000. However, a potential labor strike on May 21—expected to last 18 days—could temporarily reduce operating profit by 6–10%. Advanced Packaging: On TSMC, Gokul Hariharan significantly raises FY26/27 CoWoS capacity forecasts. The latest projections are 115k wpm by end-2026, 175k wpm by end-2027, and 220k wpm by end-2028. This revision stems from two factors: accelerated internal capacity ramp-up at TSMC and greater utilization of OSAT (outsourced assembly and test) partners like ASE (Advanced Semiconductor Engineering) and VIS (Vanguard International Semiconductor). SoIC (System-on-Integrated-Chips) packaging is expected to ramp strongly from H2 2027, reaching 40k wpm by end-2027 and 65k wpm by end-2028, primarily driven by ASIC, NVIDIA, and CPO (co-packaged optics) projects. The report specifically notes Vanguard Semi (VIS) as an overlooked CoWoS interposer supplier. Demand Side: AMD represents a significant incremental driver for CoWoS, utilizing N4 CPU and N2 GPU capacity. AWS/Alchip could see substantial upside if granted additional N3 capacity. Broadcom and MediaTek benefit from TPU (Tensor Processing Unit) ramps. NVIDIA’s Blackwell Spectrum X and Vera CPU contribute modest incremental demand. Additionally, Groq is expected to enter TSMC’s N3 node by end-2027, with its CPU and LPU (Learning Processing Unit) becoming new CoWoS demand drivers.

Analysis framework

The report employs a 'top-down validation + bottom-up fine-tuning' analytical framework. It begins with the macro trend of surging AI compute demand to validate its impact on memory and advanced packaging, then uses supply chain checks and earnings data to verify specific companies’ capacity, pricing, and order dynamics. In memory analysis, the team applies a 'cyclical vs. structural' comparison framework—contrasting historical memory cycles characterized by high volatility against today’s AI-driven demand structure—to assess whether the industry is undergoing a paradigm shift. Key validation points include LTA negotiation progress, capex discipline, and eSSD adoption in AI workloads. For advanced packaging, the team uses a 'capacity-demand matching' model: first estimating CoWoS/SoIC demand curves based on product roadmaps and order forecasts from downstream clients (AMD, NVIDIA, AWS, Broadcom, etc.), then comparing these against TSMC’s and its OSAT partners’ capacity plans to identify timing of supply-demand gaps or surpluses, thereby pinpointing investment opportunities in equipment and materials suppliers.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report centers on matching supply-side factors (capacity, capex, technology roadmap) with demand-side drivers (AI servers, cloud computing, enterprise SSDs) in memory and advanced packaging. By assessing the direction and magnitude of supply-demand gaps, it forecasts pricing trends and earnings elasticity.

• Cycle and Sentiment FrameworkInflection Point Analysis

  Cyclical vs. Structural Inflection Assessment

  The report explicitly evaluates whether the memory industry is transitioning from 'cyclical' to 'structural' growth—a classic semiconductor framework. Cyclical implies high price volatility and short investment windows; structural suggests elevated demand ceilings and improved long-term returns. The firm validates this shift through LTA progress and AI demand sustainability.

• Valuation MethodPE/PEG valuation

  Target Price and EPS Co-Adjustment

  When raising target prices, the report simultaneously revises EPS forecasts for the next 2–3 years, reflecting how improved earnings expectations drive valuation under a PE framework—as seen with Samsung Electronics’ 1–5% EPS upgrade leading to a higher target price.

Asset mapping & comparison

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

• Kioxia Holdings (285A.T)

  NAND leader; direct beneficiary of AI eSSD demand; likely to secure favorable LTA terms

  Strengths

  Highest industry margins, strong technical execution, strict supply discipline

  Comparison

  Samsung is also a NAND giant, but Kioxia leads in eSSD technology

  Risks

  LTA outcomes below expectations, AI demand slowdown

• Samsung Electronics (005930.KS)

  World’s largest NAND supplier; benefits from structural memory shortage

  Strengths

  Scale advantage, strong vertical integration

  Weaknesses

  Near-term labor strike risk (May 21, expected 18 days)

  Comparison

  Compared to Kioxia, Samsung has higher DRAM exposure and leads in NAND market share

  Risks

  6–10% operating profit impact from strike, prolonged labor negotiations

• TSMC (TSM)

  Core supplier of advanced packaging (CoWoS/SoIC); irreplaceable in AI chip manufacturing

  Strengths

  Technology leadership, aggressive capacity expansion (>80% CAGR), comprehensive client coverage

  Comparison

  Faces virtually no peer-scale competition in CoWoS; OSAT partners supplement capacity

  Risks

  Capacity ramp delays, fluctuations in downstream AI chip demand

• AMD

  Significant incremental CoWoS demand driver via N4 CPU and N2 GPU capacity

  Strengths

  Strong MI450 and Venice product pipelines

  Comparison

  Differentiated vs. NVIDIA with combined CPU+GPU solutions

  Risks

  Production ramp delays, market share competition

• Vanguard Semi (VIS)

  Overlooked CoWoS interposer supplier

  Strengths

  Interposer supply opportunity; low market attention

  Weaknesses

  Small scale, limited capacity

  Comparison

  Plays a supplementary role vs. TSMC’s in-house interposer production

  Risks

  Technical certification delays, capacity expansion constraints

• ISU Petasys

  Multilayer PCB supplier benefiting from AI server and TPU demand

  Strengths

  20% capacity increase, smooth TPUv8 certification, rising ASPs

  Weaknesses

  FY26/27 market share expected to decline to 21–23%

  Comparison

  Holds technological and customer advantages in multilayer PCB segment

  Risks

  Market share erosion, customer concentration

• Hanmi Semi

  TCB (Thermo-Compression Bonding) equipment supplier; short-term impact from HBM4 delay

  Strengths

  Order backlog rebounded in January; expected revenue conversion in Q2–Q3

  Weaknesses

  Q1 results below expectations; FY26 orders cut

  Comparison

  More severely impacted by HBM4 certification delays than peers

  Risks

  HBM4 certification delays, further order reductions

• Silergy (6415.TT)

  PMIC supplier benefiting from server and automotive demand

  Strengths

  Successful price increases, data center revenue share rapidly rising to 15%, FY26 growth of 20–30%

  Comparison

  Dual drivers of pricing power and demand growth in PMIC segment

  Risks

  Gross margin improvement below expectations, inventory write-downs

Key data

• Kioxia Q4 FY26 Operating ProfitJPY 596.8 billionExceeded buy-side expectation of JPY 579.2 billion
• Kioxia F1Q27 Operating Profit GuidanceJPY 1.3 trillionAbove investor survey expectations
• Kioxia FY3/27 Capex GuidanceJPY 450 billionHigher than buy-side expectation of JPY 425 billion, indicating disciplined expansion
• Samsung Electronics FY26–28 EPS RevisionRaised by 1–5%Reflects improved memory pricing outlook
• TSMC CoWoS Capacity Forecast (End-2026/27/28)115k/175k/220k wpmSignificantly raised from prior estimates, implying >80% CAGR
• TSMC SoIC Capacity Forecast (End-2027/28)40k/65k wpm3D packaging accelerates in H2 2027
• Impact of Samsung Labor Strike-6% to -10% Operating ProfitIf 18-day strike begins May 21
• ISU Petasys Multilayer Board Capacity Increase~20%Achieved by converting existing VIPPO capacity
• ISU Petasys FY27–28 EPS RevisionRaised by 9%Driven by multilayer board expansion and ASP improvement
• Silergy Data Center Revenue Share15%Q1 figure; was single-digit in FY25

Impact & implications

The report contends that AI compute demand is moving from 'thematic hype' to 'earnings realization,' with memory and advanced packaging as the most direct beneficiaries. Kioxia’s earnings beat and supply discipline, along with TSMC’s aggressive CoWoS capacity upgrades, confirm this trend. Investors should watch two key validation points: Kioxia’s analyst day in June for details on shareholder returns and LTA terms, and actual capacity ramp progress at TSMC and its OSAT partners. While Samsung’s labor dispute poses a near-term disruption, its resolution could act as a 'market-clearing event,' ultimately reducing uncertainty.

Risks

• Samsung Electronics’ May 21 labor strike may last 18 days, potentially reducing operating profit by 6–10%
• Long-term memory agreement (LTA) negotiations yield subpar outcomes
• AI compute demand growth slows or falls short of expectations
• TSMC’s CoWoS/SoIC capacity ramp lags schedule
• Hanmi Semi faces order cuts due to HBM4 certification delays
• Geopolitical risks disrupting semiconductor supply chains

What to watch

• Kioxia Analyst Day in June: shareholder return plans and LTA details
• Samsung Electronics labor negotiations and potential strike impact
• TSMC’s actual CoWoS capacity build-out and customer qualification progress
• SoIC packaging ramp acceleration in H2 2027
• AMD MI450 and Venice product mass production timeline
• AWS/Alchip progress in securing additional N3 capacity