UBS: TSMC's CoWoS expansion slows down, NVIDIA's B300 accelerates mass production, which may reshape the supply chain landscape

According to the Zhitong Finance APP, UBS released a research report on March 17, stating that the semiconductor industry is facing dual challenges of technological upgrades and supply chain adjustments. TSMC's CoWoS advanced packaging capacity expansion may slow down, while NVIDIA's (NVDA.US) Blackwell 300 (B300) accelerated mass production may reshape the relevant supply chain landscape. UBS maintains a "Buy" rating for TSMC, ASE, KYEC, and Chroma listed stocks in Taiwan Province, and gives a "Neutral" rating to GPTC listed stocks in Taiwan Province, while assigning a "Buy" rating to Gudeng listed stocks in Taiwan Province.

UBS believes that TSMC may slow down its CoWoS advanced packaging capacity expansion due to improvements in CoWoS-L technology yield and mismatches in downstream equipment assembly and packaging capacity. UBS has lowered its expectations for TSMC's CoWoS capacity, now forecasting that CoWoS capacity will increase from 35-40 thousand wafers/month at the end of 2024 to 70 thousand wafers/month at the end of 2025 (previously expected to be 80 thousand wafers/month), reaching 110 thousand wafers/month by the end of 2026 (previously expected to be 120 thousand wafers/month).

UBS stated that industry feedback indicates that TSMC will maintain the delivery of most CoWoS equipment in 2025, but the firm believes TSMC may be more cautious in increasing CoWoS capacity, especially in 2026.

UBS pointed out that NVIDIA seems to have initiated the production plan for the Blackwell 300 (B300) using TSMC's N4 and CoWoS technology ahead of schedule, with mass shipments expected to begin in the second quarter of 2025. NVIDIA's rapid shift from B200 to B300 may be to meet the demand for stronger inference computing capabilities from hyperscale cloud computing companies and to reduce the risk of potential inventory surplus for B200. However, given the improvement in CoWoS-L technology yield and the normalization of overall demand, the firm has lowered its forecast for NVIDIA's CoWoS demand in 2025 by 5%.

UBS stated that KYEC is currently the only final testing supplier for NVIDIA's AI accelerators, with a professional advantage in Burn-in Testing, and it is expected that KYEC will remain the main testing supplier for Blackwell, although ASE may gain a small share of testing in the second half of 2025.

UBS mentioned that in the coming years, Burn-in Testing may undergo fundamental changes. As the new generation of AI accelerators generates a large amount of heat, Burn-in Testing may shift to running chips at Over Spec Speed, while the equipment needs to cool the chips instead of the traditional heating method. This technological shift may allow ASE to gain a certain market share in Rubin platform testing with Advantest equipment in 2026, but KYEC will still serve as the core supplier UBS stated that it is optimistic about ASE Technology's structural upside potential in the advanced packaging field. The recovery of non-AI demand and the accelerated upgrade of Apple's iPhone specifications will also bring benefits, although there are some short-term risks from TSMC's outsourcing of CoWoS capacity. Due to the expectation that TSMC will slow down CoWoS investment in the next 12 months, which may suppress equipment demand, UBS has given a "Neutral" rating to Hongshuo Technology. UBS also expressed a preference for HwaCom Precision, as its N3/N2 business growth is more resilient