After Jensen Huang's visit to Taiwan, Morgan Stanley raised TSMC's CoWoS capacity forecast: Expansion must exceed 20% by 2026 to keep up with 3nm capacity growth.

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Morgan Stanley has raised its expectations for TSMC's advanced packaging (CoWoS) capacity, forecasting that to match the growth in 3nm chip production, CoWoS capacity will need to expand by more than 20% by the end of 2026. This adjustment highlights the tremendous supply chain pressure brought about by AI demand.

According to news from the Trend Trading Desk, based on a report released by Morgan Stanley analysts Tiffany Yeh and others on the 17th, the bank now expects TSMC's monthly CoWoS capacity to reach at least 120,000 to 130,000 wafers, up from the previous estimate of 100,000 wafers. This significant upward revision is based on the bank's latest industry survey.

The report's survey shows that after Jensen Huang visited Taiwan to secure capacity for his next-generation "Rubin" platform, TSMC has decided to add 20,000 wafers per month in 3nm frontend wafer capacity. To support the expansion of frontend process, synchronously increasing backend advanced packaging capacity has become inevitable.

The additional capacity will be deployed in the AP8 P1 and P2 plants, with the specific timing depending on the progress of plant construction and equipment installation. Morgan Stanley believes that this capacity expansion is positive for the CoWoS supply chain and AI semiconductor customers. The firm points out that this expansion decision is especially positive for CoWoS equipment suppliers who underperformed in 2025, and it is optimistic that AI ASIC customers requiring 3nm capacity will receive support through design service companies like Alchip and GUC.

CoWoS Capacity Catching Up with 3nm

According to Morgan Stanley's AI tracking report, TSMC's decision to add 20,000 pieces of 3nm frontend wafer capacity has prompted the company to simultaneously plan for a significant expansion of CoWoS capacity. This decision was made after Jensen Huang's visit to Taiwan to seek Rubin capacity.

The firm's analysis shows that by the end of 2026, CoWoS capacity will reach at least 120,000 to 130,000 wafers per month, a significant increase from the previous expectation of 100,000 wafers per month. This expansion exceeds 20%, aiming to match the growth demand of 3nm process capacity.

Morgan Stanley points out that as an advanced packaging technology, CoWoS is a key link in supporting high-performance AI chips. As 3nm process enters mass production, the associated packaging capacity must be expanded in tandem to meet AI customers' delivery needs.

The report states that the new CoWoS capacity will be deployed in phases P1 and P2 of the AP8 fab. However, the final production ramp-up will depend on the speed of plant construction and equipment installation, which adds certain variables to whether capacity can go online as scheduled.

Equipment and Service Providers Fully Benefiting

TSMC's expansion plan is expected to bring new growth momentum to the entire semiconductor supply chain, with equipment and service providers being the first to benefit.

Morgan Stanley believes that this capacity upgrade is "very positive" for CoWoS equipment suppliers, especially noting that these suppliers' stock prices have consistently lagged in 2025. The bank reiterates its "overweight" rating for AllRing and ASMPT. The report notes AllRing is TSMC's main OS (osmium) supplier, while ASMPT remains the exclusive supplier of TCB (thermal compression bonding) equipment for CoWoS-L substrates at TSMC.

In terms of service providers, Morgan Stanley also maintains an "overweight" rating for ASE Technology and KYEC. Additionally, AI ASIC (application-specific integrated circuit) customers requiring 3nm capacity through design services from Alchip and GUC are also listed as beneficiaries by the firm.

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