Taiwan Semiconductor CoWoS "order cuts" doubts? JP Morgan: Don't panic, AI demand remains strong!

TSMC CoWoS order reduction doubts: Is it a demand collapse or just a false alarm? Recently, there have been rampant reports about TSMC's CoWoS orders being significantly cut, with major clients like NVIDIA, Marvell, and Amazon all "cutting orders." Does this indicate a cooling demand for AI chips?

JP Morgan provided an interpretation of this situation in its latest research report:

The reduction in CoWoS orders is not a demand issue, but rather a return to rationality from clients' previously overly optimistic expectations. CoWoS capacity will still be in short supply in 2025, and NVIDIA's Blackwell chip shipments are expected to reach 6 million units.

"Order Cuts" Doubts: Expectation Adjustment, Not Demand Shrinkage

Why is there talk of "order cuts"? JP Morgan's supply chain survey shows:

Clients like NVIDIA, Marvell, and Amazon have indeed lowered their CoWoS order expectations for 2025 by about 8-10%. Among them, NVIDIA's capacity expectation has been reduced by about 40,000 to 45,000 wafers.

However, this does not mean there is a problem with demand. These adjustments are more due to clients' initial expectations being overly optimistic, far exceeding TSMC and the entire ecosystem's supply capabilities. As the delivery time for 2025 approaches, TSMC has begun to require clients to provide more accurate forecasts, prompting clients to correct their previous overbookings.

JP Morgan also pointed out that product changes and order priorities may have led to adjustments in supply chain expectations: NVIDIA has multiple product changes, and there is uncertainty regarding product release times and demand, which may have led to overall supply chain expectations being too high; TSMC prioritizes CoWoS-L and has shifted NVIDIA's CoWoS-S orders to OSAT (Outsourced Semiconductor Assembly and Test), while the CoWoS-R orders for Trainium 2 may also be transferred to Amkor in the second half of 2025.

JP Morgan mentioned that the supply chain's previous expectations for CoWoS capacity were once very aggressive, believing that TSMC's monthly capacity by the end of 2025 would reach 85,000 to 90,000 wafers, with an annual capacity exceeding 800,000 wafers. However, JP Morgan's expectations have always been more realistic: a monthly capacity of 75,000 wafers by the end of 2025, with an annual capacity of 725,000 wafers (not considering yield losses, especially for CoWoS-L).

Supply Shortage: CoWoS Capacity Will Still Be Tight in 2025

Despite some order expectations being lowered, JP Morgan believes that the demand from NVIDIA and ASIC manufacturers has not encountered issues. In fact, the overall demand trend is better than expected:

Demand for NVIDIA's B200/B300 series chips is strong, and demand for H200s and H20 has surged following the release of Deepseek, while Amazon's Trainium 2 and other ASIC projects are progressing smoothly.

Even if TSMC's CoWoS capacity expands more than twofold, there will still be a supply shortage in 2025.

Additionally, supply chain research shows that front-end wafer orders (N4/N5) from AI accelerator manufacturers remain strong throughout 2025, and there are no signs of a slowdown in demand for key components like HBM JP Morgan maintains its expectations for CoWoS largely unchanged:

NVIDIA's demand for TSMC's CoWoS-L wafers is expected to reach 390,000 wafers in 2025 (due to lower yields in the first half of 2025, actual output may be lower), sufficient to produce approximately 6 million Blackwell chips and less than 1 million Hopper GPUs. It is expected that in 2026, NVIDIA's demand for TSMC's CoWoS wafers will grow by about 20%, enough to produce 7.5 million Blackwell and Rubin chips.

Amazon's Trainium 2 will become the main growth point for AI ASICs in 2025, with demand expected to exceed 1.5 million units