Strong demand for ASICs and CPUs! UBS raises its CoWoS industry capacity forecast, expecting significant growth compared to this year.

Demand for cloud-based AI chips continues to exceed expectations, driving the advanced packaging industry into a new expansion cycle.

According to TrendFocus, UBS, in its latest research report, has revised its global CoWoS industry capacity forecast for the end of 2027 upward to 270,000 wafers per month, a significant increase of approximately 69% compared to the 160,000 wafers per month estimated for the end of 2026. The core driver behind this upward revision is the robust surge in demand for ASICs and CPUs.

UBS believes that these two types of chips will continue to rely primarily on the CoWoS packaging process in 2028-2029, rather than migrating to emerging solutions such as Intel's EMIB-T or TSMC's CoPoS. Meanwhile, the technological evolution towards larger package sizes and heterogeneous integration will itself consume a significant amount of additional production capacity.

CoWoS has revised its production capacity forecast upwards again, with demand expected to nearly double by 2027.

Following its participation in the Taiwan Summit and completion of an in-depth survey of the CoWoS industry, UBS has further raised its forecast for industry capacity. According to the latest estimates, global demand for CoWoS will reach approximately 2.63 million wafer equivalents in 2027, nearly double the 1.321 million wafer equivalent projected for 2026.

In terms of demand structure, Nvidia remains the largest single customer, with CoWoS wafer demand projected to reach 1.29 million units in 2027. However, its share will decrease from 60% in 2026 to 49%, reflecting a trend towards diversified demand sources. The share of ASIC chips will increase from 30% in 2026 to 33% in 2027, while AMD's share will also jump from 10% to 18%, mainly driven by increased production of Venice server CPUs.

UBS points out that even though Intel's EMIB-T and TSMC's CoPoS will begin providing capacity for large AI accelerator packaging in 2028-2029, current visibility still indicates that CoWoS capacity needs to be further expanded in 2028, highlighting the continued strong demand.

ASIC projects are accelerating their implementation, and several hyperscale cloud vendors are making progress beyond expectations.

After several years of investment, the customized chip projects of major hyperscale cloud vendors and AI-native companies are accelerating their realization.

In the accelerator chip sector, Microsoft's Maia 300 boasts competitive performance, and UBS projects shipments of 50,000/350,000 Maia 200/300 chips respectively in 2027, a significant increase from the approximately 100,000 Maia chips shipped in 2026. OpenAI's Jalapeño chip shipments are expected to increase to 600,000-700,000 chips in 2027, up from 150,000 in 2026. Meta's MTIA targets shipments of approximately 450,000 chips, but visibility is relatively low. Google's TPU and Amazon's Trainium are progressing as planned, with UBS projecting package volumes of 9 million/3.2 million chips respectively in 2027, a significant increase from 4.1 million/2.5 million chips in 2026.

On the CPU front, the increased production of AMD Venice server CPUs is a key driver of this upward revision. UBS has raised its 2027 CoWoS demand forecast for AMD by 11%, expecting Venice CPU shipments to reach 5 million units, up from its previous estimate of 4 million units. Regarding Nvidia, UBS has raised its 2027 AI GPU production forecast from 8.2 million units to 8.8 million units, incorporating an additional forecast of approximately 200,000 Rubin CPX units; Rubin Ultra, due to its similar packaging architecture and HBM specification adjustments, is expected to ramp up production more smoothly from mid-2027.

Supply-side diversification is accelerating, with non-TSMC capacity expanding rapidly.

The CoWoS supply structure is rapidly becoming more diversified. UBS predicts that ASE's CoW capacity will expand significantly from 20,000 wafers/month at the end of 2026 to 70,000 wafers/month at the end of 2027, a much larger expansion than previously expected; TSMC and Amkor's CoW capacity is expected to reach 180,000 wafers/month and 20,000 wafers/month respectively by then.

In the WoS (Work of System) segment, UBS recently pointed out that TSMC may introduce a new OSAT partner to participate in mass production in 2028, based on its existing cooperation with ASE (System of Applications), to further broaden its supply sources.

TSMC's back-end business growth momentum is also noteworthy. UBS predicts that TSMC's advanced packaging sales will maintain a compound annual growth rate of approximately 50% from 2026 to 2030, even in the face of competitive pressure from Intel's EMIB. Specifically, the proportion of back-end business (including advanced packaging) in TSMC's total revenue is expected to increase from approximately 12% in 2026 to approximately 16% in 2027.

UBS believes that the rapid expansion of advanced packaging capacity and the increasing complexity of packaging structures will bring direct benefits to key equipment suppliers.

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