TSMC Eyes Expansion for Advanced Packaging Amid AI Boom, Chiayi Favored

Taiwan Semiconductor Manufacturing Company (TSMC) is aggressively searching for new sites to bolster its advanced packaging capabilities, a critical component in the production of AI chips. The company's CoWoS (Chip-on-Wafer-on-Substrate) advanced packaging capacity is currently unable to meet the explosive demand fueled by the artificial intelligence revolution.

Industry sources indicate that TSMC is evaluating two primary locations for expansion: the Erlin Industrial Park in Changhua County and a potential third phase development within the existing Chiayi Science Park. This strategic move underscores the immense pressure on TSMC to scale up production to support the global AI hardware supply chain.

However, the potential expansion into the Erlin Industrial Park faces significant hurdles. Supply chain insiders point to concerns regarding water and electricity supply, as well as wastewater discharge regulations. Environmental groups also maintain a strong stance on these issues, introducing considerable uncertainty into the feasibility of building a new plant in Erlin. The park is currently about 50% developed, with major tenants like Siliconware Precision Industries already occupying significant space.

In contrast, the Chiayi Science Park is viewed as a more straightforward option. Having already established initial and second phases, the potential for a third phase offers synergistic advantages. The concentration of related industries and infrastructure in Chiayi could facilitate a smoother expansion process, making it the favored choice among supply chain partners for TSMC's next major investment in advanced packaging.

TSMC has not yet formally submitted applications for either site. Any investment in the Erlin Industrial Park would require rigorous environmental impact assessments and approval from the Central Taiwan Science Park Bureau, which manages the park. The bureau confirmed that while the park can accommodate packaging plants, strict controls on water, electricity, and environmental impact must be addressed.