TSMC Q3 Profit May Hit Record, Teams Up With GlobalFoundries to Expand CoWoS Silicon Interposer Supply

TradingKey - Investments in AI infrastructure continue to grow, with demand for advanced nodes and advanced packaging rising in tandem. On October 14 Eastern Time, Reuters reported that TSMC (TSM) is expected to set a record quarterly profit for the sixth consecutive quarter, with market consensus estimating third-quarter net profit to rise by approximately 65% year-over-year to NT$746.3 billion (equivalent to $23.4 billion). Robust AI chip demand and CoWoS advanced packaging orders are the primary drivers of profit growth.

TSMC previously reported third-quarter revenue of approximately NT$1.49 trillion, up about 51% year-over-year, hitting a record single-quarter high. The company's capital expenditure guidance for this year has been raised to between $60 billion and $64 billion, indicating that it is expanding investments in advanced nodes, packaging, and related infrastructure.

Reuters pointed out that the market is focused on whether TSMC can continue to meet the growing chip demand from customers such as Nvidia (NVDA), Apple (AAPL), and AMD (AMD), as well as whether CoWoS capacity remains tight.

As of press time, TSMC fell 1.81% in Taiwan trading to NT$2,445.

[Source: TradingView]

TSMC and GlobalFoundries Reach $2 Billion Deal

On October 8, GlobalFoundries (GFS) announced a multi-year manufacturing agreement with TSMC. Multiple media outlets reported that the five-year deal is valued at approximately $2 billion. GlobalFoundries will expand manufacturing capacity at its facility in Malta, New York, to produce silicon interposers for TSMC's CoWoS advanced packaging supply chain, with volume production expected to gradually ramp up in the first half of 2028.

Silicon interposers are a critical component in CoWoS packaging, used to connect logic chips with High Bandwidth Memory (HBM). This partnership will help expand domestic U.S. supply sources and absorb part of the silicon interposer manufacturing demand.

However, the agreement primarily covers silicon interposer manufacturing and does not include full chip assembly and testing. Overall CoWoS capacity remains constrained by processes such as chip placement, HBM integration, substrates, and testing; therefore, the collaboration will not immediately eliminate advanced packaging supply bottlenecks.

What Does It Mean for TSM and GFS?

For TSMC, collaborating with GlobalFoundries helps expand its supply sources of CoWoS silicon interposers and complements its U.S. wafer fabrication and advanced packaging footprint. If AI chip demand continues to grow, TSMC is expected to benefit simultaneously from increased orders for advanced-process wafers and packaging.

For GlobalFoundries, the agreement enables the company to enter the AI and high-performance computing supply chain through silicon interposer manufacturing. GlobalFoundries can share in the growing demand for AI chip packaging without needing to produce GPU or CPU core dies.

The company separately announced that it will build a new fab in New York State and increase investments in silicon photonics, silicon-germanium, and advanced packaging.

GlobalFoundries' silicon interposer project is expected to gradually ramp up in the first half of 2028, with revenue and profit contributions still pending equipment installation, process qualification, and mass-production ramp-up. Short-term stock performance will also depend on order confirmations, the scale of capital expenditures, and earnings guidance.

Advanced Packaging Capacity Expansion Still Faces Constraints

The complete CoWoS packaging process requires not only silicon interposers, but also logic die mounting, HBM integration, substrate assembly, and final testing. A capacity shortage at any single stage could impact the final delivery of AI chips.

Reuters cited analyst views stating that TSMC's AI chip manufacturing and CoWoS demand remain strong. However, investors are also watching the sustainability of AI capital expenditures, U.S. expansion costs, and potential margin pressures from supply chain shifts.

For TSM, key focus areas going forward include CoWoS capacity release, advanced process utilization rates, return on capital expenditures, and customer order growth. For GFS, attention should be paid to the fulfillment of orders under the $2 billion agreement, the timeline for silicon interposer mass production, revenue recognition schedules, and the scale of subsequent expansion.