US AI Chips Depend on Taiwan's Advanced Packaging Technology

AI chips require GPUs to be integrated with high-bandwidth memory. TSMC's CoWoS advanced packaging technology shortens data-transfer distances and improves computing performance. Because the relevant capacity and expertise are concentrated in Taiwan, wafers produced in the United States may still cross the Pacific for back-end processing, creating a geopolitical vulnerability in the US AI supply chain.

On March 3, 2025, TSMC announced an additional $100 billion investment in the United States, bringing its total planned investment there to $165 billion. The plan includes three more wafer fabrication plants, two advanced packaging facilities and a research and development center. Until US packaging capacity is fully operational, however, AI chips manufactured there will still need to be shipped to Taiwan for processing.