September 9, 2024 /SemiMedia/ — TSMC is experiencing strong demand for its 3nm process, leading to tight production capacity and plans for expansion both domestically and internationally. By the end of this year, TSMC's monthly 3nm capacity is expected to reach 80,000 wafers, with a further increase to 100,000 wafers. Additionally, TSMC plans to build new facilities in the U.S. and Japan, each adding 15,000 wafers per month, bringing the future global 3nm capacity to approximately 130,000 wafers per month.

TSMC declined to comment on market rumors regarding the 3nm expansion plans, stating that all relevant capacity details should be referred to official disclosures. The company noted in its July earnings call that demand for AI and high-end smartphones was stronger in Q2 than Q1, boosting the utilization rate of its leading-edge 3nm and 5nm process technologies in the second half of the year. To support the growth in 3nm demand, TSMC has repurposed some of its 5nm equipment for 3nm production, though the overall supply remains tight.

Apple is currently TSMC's largest 3nm customer, utilizing the process for its A18 processors in the upcoming iPhone 16 series. Following Apple's lead, MediaTek, Qualcomm, NVIDIA, and AMD are set to adopt TSMC’s 3nm process for their latest chips, driving a significant surge in outsourced testing and packaging demand. Major beneficiaries include ASE Technology Holding and King Yuan Electronics, with ASE expecting a steady increase in packaging and testing capacity utilization throughout the year.

With MediaTek and Qualcomm set to launch their latest 5G flagship chips in October, demand for TSMC’s 3nm process is expected to continue growing, leading to a notable increase in orders for testing firms. These new chips emphasize enhanced AI performance and energy efficiency, necessitating more stringent testing protocols, which in turn boost the utilization rates and profitability of test houses.

NVIDIA's AI chips, based on its new architecture, have seen robust market uptake, prompting significant capacity increases at TSMC. Due to tight advanced packaging capacity at TSMC, NVIDIA is expected to outsource some orders to ASE Technology and King Yuan Electronics, enhancing their operational performance.

Other testing companies like King Yuan Electronics and Winstek Semiconductor are also expanding their high-end testing capabilities to seize the growing AI chip testing opportunities. Overall, the surging demand for TSMC’s 3nm process is fueling a boom in the outsourced testing sector, with order volumes expected to rise significantly in the fourth quarter, marking a key trend to watch in the semiconductor industry.