TSMC accelerates advanced packaging push in Arizona amid AI boom

TSMC is accelerating its plans to bring advanced chip packaging to the United States, racing to convert part of its Arizona complex into a high-end backend facility as demand for AI hardware explodes. For years, the world’s largest contract chipmaker has dominated cutting-edge manufacturing from Taiwan, but a lack of local advanced packaging in the US has become a painful bottleneck for key customers building GPUs and custom AI accelerators. Now, with CoWoS and other 2.5D and 3D packaging technologies in brutally short supply, TSMC is preparing to shift more of that value-added work to American soil.

Advanced packaging may sound like a finishing step, yet for modern AI chips it is where much of the performance magic happens.

Technologies such as TSMC’s CoWoS allow massive GPU dies and stacks of high-bandwidth memory to be integrated on an interposer with ultra-dense connections, dramatically increasing bandwidth while keeping power in check. This is the foundation of today’s leading AI platforms from companies like NVIDIA and AMD. Without sufficient CoWoS capacity, even if wafer production is healthy, customers cannot ship finished accelerators at the scale hyperscalers now demand.

That imbalance has been especially visible in the United States. Flagship AI and cloud players, including NVIDIA and other US-based chip designers, have pushed to manufacture more silicon locally while still relying on packaging lines in Taiwan. In some cases, wafers produced in the US have had to be shipped back across the Pacific for advanced packaging, adding logistics friction, geopolitical risk, and precious weeks of delay. TSMC previously leaned on partners such as Amkor in the US for some of this work, but soaring AI demand and a desire for tighter control over quality and capacity appear to be forcing a reset.

According to local reporting in Taiwan, TSMC is now prioritizing the introduction of advanced packaging lines at its Arizona site, repurposing space that had originally been earmarked for a conventional fab. The goal is to stand up an advanced packaging plant around the end of 2027, aligning it with the broader ramp of the Arizona wafer fabs. Once operational, the facility is expected to handle a meaningful slice of the packaging needs for US AI, data center, and high-performance computing customers, reducing reliance on Asian sites and smoothing out some of the worst capacity crunches seen over the last two years.

Competitive pressure is clearly part of the story. While TSMC has struggled to keep up with CoWoS demand, rival foundries have aggressively marketed their own advanced packaging portfolios. Intel, in particular, has positioned EMIB and Foveros as alternatives for customers frustrated by TSMC’s long lead times. Major US tech companies such as Microsoft, Qualcomm, Apple, and Tesla are reported to be exploring or adopting Intel’s packaging to secure additional headroom for future AI and custom silicon projects. Their willingness to diversify suppliers sends a powerful signal: advanced packaging is no longer a niche add-on but a strategic capability that can determine which foundry wins the next generation of AI designs.

By bringing a state-of-the-art packaging hub to Arizona, TSMC hopes to shore up those relationships and blunt Intel’s momentum on its home turf. Locating packaging next to front-end wafer fabs also promises engineering and logistical advantages, from shorter cycle times to faster debug loops between process and packaging teams. For the US government, which has poured billions into reshoring critical semiconductor capacity, a local CoWoS-class facility helps close a glaring gap in the domestic supply chain, supporting national security and industrial policy goals at the same time.

Much still depends on execution. Building an advanced packaging ecosystem in the desert – workforce, suppliers, tooling, and yield learning – will not be trivial, and the 2027 timeline leaves little room for error given how fast the AI market is moving. Yet if TSMC can ramp Arizona packaging on schedule, the project could become a cornerstone of the US AI hardware stack, allowing companies like NVIDIA and AMD to keep scaling their flagship GPU and accelerator platforms without being forced wholesale into rival foundries’ arms. In an era where packaging is becoming as strategically important as the process node itself, Arizona is shaping up to be one of the most closely watched battlegrounds in the global chip industry.