Taiwan Semiconductor Manufacturing Company’s slower growth rate does not indicate fading AI demand, as revenue exceeding $30 billion makes percentage growth less significant. Analysts project continued mid-teens to 20-plus-percent growth through 2026, highlighting strong demand. The bottleneck in the industry is packaging, not demand, with limited advanced packaging capacity driving scarcity.

Advanced packaging is crucial for TSMC’s economics, with CoWoS and 3DFabric offering higher margins. Scarcity in advanced packaging gives TSMC pricing power and leverage, as customers compete for priority and faster turnaround. TSMC’s long-term strategy involves expanding advanced packaging facilities globally to meet rising AI demand.

Powertech in Taiwan offers CoWoS-adjacent packaging to handle overflow demand when TSMC’s capacity is maxed. Similarly, Advanced Semiconductor Engineering is expanding its packaging capabilities to support TSMC’s ecosystem. Intel prioritizes advanced packaging but faces practical barriers in fitting into the AI chip workflow, leading customers to seek alternative packaging solutions.

Despite AI growth signals like GPU shortages and expanding training clusters, TSMC’s packaging capacity constraint creates an illusion of slowing demand. TSMC’s strategic positioning and control over the bottleneck in packaging highlight its importance in the industry. Long-term investors recognize the value in companies that control key bottlenecks, like TSMC in the foundry market.

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Read more at Nasdaq: AI Isn’t Slowing — It’s Bottlenecked. TSMC Just Told Us Where.