TSMC's Capacity Conundrum: Record Earnings Mask the CoWoS Squeeze Forcing Clients to Samsung

Despite 58% profit surge, TSMC's advanced packaging capacity is fully booked through 2026, forcing Google, BYD, AMD, and Tesla to turn to Samsung. TSMC partners Amkor for US expansion; stock near all-time high.

Taiwan Semiconductor Manufacturing Co. finds itself in a peculiar bind: its own success has become a bottleneck. The world's largest chip foundry is minting money — net profit surged 58% to roughly $18 billion in the first quarter on revenue that climbed more than 35% year-over-year — yet its production lines are so stretched that marquee clients are being forced to shop elsewhere.

The culprit is advanced packaging. Chief executive C.C. Wei revealed at the company's annual shareholder meeting that capacity for CoWoS (chip-on-wafer-on-substrate) is fully booked through the end of 2026. According to market researcher TrendForce, TSMC can boost monthly CoWoS output to between 120,000 and 140,000 wafers by next year, with an additional 50,000 to 60,000 wafers from external packaging partners. That still leaves a supply-demand gap of roughly 20% today, expected to narrow to about 10% by late 2026. To address the crunch, TSMC is already developing its next-generation packaging technology, CoPoS, with pilot production slated for mid-2027. Nvidia's Feynman platform is poised to be the debut customer.

Clients Hedge Their Bets

The capacity squeeze has nothing to do with wafers themselves — it is the packaging bottleneck that is forcing customers to look for alternatives. Apple, Nvidia, AMD, Broadcom, Marvell and MediaTek have locked up most of the available slots, leaving little room for newcomers. As a result, Google, BYD, AMD and Tesla have expanded their ties with Samsung Electronics. BYD is in talks over AI chips for autonomous driving, Google is eyeing Samsung for processors from 2028 onward, and Tesla already farms out some of its AI chip production to the South Korean rival. Analysts stress this is not a vote of no confidence in TSMC's technology — it remains the leader in process quality, yield and customer relationships — but a purely logistical shift born of insufficient capacity.

Betting Big on America

To shore up its own supply chain, TSMC signed a ten-year agreement with Amkor Technology on Friday. The two companies will expand chip packaging and testing operations in Arizona, creating a fully integrated fabrication ecosystem on U.S. soil. Amkor is building a large campus in Peoria to complement TSMC's three chip fabs and two packaging plants under construction in the same region.

Washington is adding its own pressure. President Trump announced a new alliance on Thursday under which Apple will work with Intel on chip design and production. The U.S. government, which holds roughly 10% of Intel, has poured billions into domestic factories to reduce reliance on Taiwan, framing the push as both a national security imperative and a supply-chain safeguard.

Shares Near Record Territory

Investors are shrugging off the political and competitive noise. TSMC's stock rose nearly 2% on Friday to €411.50, just a hair below its all-time high. The shares have more than doubled over the past 12 months, gaining about 123%, and are up roughly 51% since the start of the year.

The financials continue to bear out the structural demand. In May, TSMC posted consolidated net revenue of approximately NT$416.98 billion ($12.9 billion), a 30.1% year-on-year increase. The first five months of 2026 show a cumulative growth rate of 30.0%. Management has raised its full-year revenue forecast to above 30%, driven by AI and high-performance computing. Capital expenditure for 2026 is pegged at the upper end of the $52 billion to $56 billion range.

Wei expects the AI chip shortage to persist for years. Global production simply cannot keep up with demand, making TSMC the biggest — and most constrained — beneficiary. The diversification efforts of Apple, Google and others will only begin to nibble at its market share in the medium term. Until then, the sheer lack of capacity keeps the Taiwanese giant firmly in the driver's seat.