TSMC has commenced construction on more advanced packaging factories in Chiayi.

      TSMC will establish additional advanced packaging fabs during the second phase of the Chiayi Science Park in southern Taiwan, as announced by National Science and Technology Council minister Wu Cheng-wen at a groundbreaking event on Sunday.

      Currently, packaging poses a challenge within the AI supply chain, which is the same issue that Nvidia aimed to address with its multi-year HBM4 agreement with SK Hynix. Wu indicated that TSMC plans to create three advanced packaging facilities in Phase II on a site of approximately 90 hectares that will be developed into a packaging cluster led by TSMC. Two facilities in Phase I of the park commenced mass production in June. Once both phases are operational, companies within the Chiayi Science Park are projected to achieve over NT$300 billion ($9.35 billion) in annual output and support about 9,000 jobs, according to Wu.

      This expansion specifically targets the demand for high-performance computing chips, where TSMC’s CoWoS process, which integrates logic dies and stacked memory into a single package, has been a limiting factor for the past two years. Every significant AI accelerator relies on this step, emphasizing why updates from this rice-farming region are influencing industry planning.

      The demand from this stage continues to emerge from various sources. Google’s four-partner inference chip supply chain, developed with Broadcom, MediaTek, and Marvell, runs through TSMC like others, meaning each new custom accelerator program represents an additional requirement for the same packaging lines. Wu described Chiayi as part of a larger network, stating that the park will link with sites in the Southern Taiwan Science Park located in Tainan, Kaohsiung, and Pingtung, as well as the Central Taiwan and Hsinchu parks, creating what he termed the world’s most extensive AI and semiconductor corridor. Over time, biotechnology, aerospace, and precision machinery companies are expected to establish themselves in the Chiayi area.

      The groundbreaking coincided with TSMC’s announcement of record second-quarter revenue of T$1.27 trillion ($39.62 billion), which marked a 36% year-on-year increase and slightly exceeded an LSEG SmartEstimate from 20 analysts. Revenue for June alone surged 67.9% year-over-year to T$442.68 billion. These numbers were initially set to be released last Friday but were postponed due to Typhoon Bavi, which halted financial markets in Taipei. TSMC did not provide any forward guidance in the announcement and will revise its outlook at its earnings conference on Thursday, where analysts anticipate a 58.8% increase in second-quarter net profit.

      The reported revenue slightly surpassed the upper range of the company’s April guidance of $39 billion to $40.2 billion, a range that TSMC expresses only in US dollars. Yuanta Securities had advised clients last week to expect a gross margin at the higher end of the 65.5% to 67.5% spectrum, with earnings per share around NT$24.1. Shares rose 1% in Taipei on Monday prior to the announcement, while the wider market remained stable.

      Currently, the company holds the title of Asia’s most valuable publicly listed entity, with a market capitalization of around $1.96 trillion, and its shares listed in Taipei have increased by 57% this year. This performance has sparked discussions domestically, with Taiwan’s central bank governor cautioning investors against leverage as the AI market rally continues.

      However, Wu did not provide a construction timeline, a cost estimate for the Phase II fabs, or a schedule for when the new capacity will be available. TSMC has not released a separate statement regarding the expansion, and the figures reported thus far are sourced from the government rather than the company itself.

      Chiayi County was predominantly recognized for agriculture until recently, and it is now being tasked with hosting the process step that determines the global shipment volume of AI accelerators.