TSMC expands Arizona operations to boost AI chip packaging capacity

The Taiwan Semiconductor Manufacturing Company (TSMC) has officially announced a strategic partnership with Amkor, a chip packaging testing and services provider based in Arizona, to enhance the packaging capabilities of its Arizona fabrication plant.

TSMC’s Arizona facility is set to commence mass production next year, and as the fourth quarter of 2024 approaches, the company is making final preparations to establish a robust semiconductor supply chain in the U.S. This collaboration will focus on TSMC’s Integrated Fan Out (InFO) and Chip-on-Wafer-on-Substrate (CoWoS) packaging technologies, catering to the growing needs of clients relying on TSMC’s Arizona facility for their semiconductor products.

As artificial intelligence (AI) technologies proliferate, the importance of advanced packaging technologies has surged. The increasing need for advanced GPUs has pushed the boundaries of current packaging capacity. In response, TSMC has allocated approximately $30 billion for capital expenditures in 2025 to enhance chip production and packaging capabilities. The company also acquired a factory last year, which has reportedly enabled it to meet its packaging capacity objectives ahead of schedule.

While TSMC has primarily invested in packaging operations in Taiwan—home to its leading-edge chip fabrication capacity—the new agreement with Amkor marks a significant expansion of TSMC’s packaging operations in the United States. By leveraging the proximity of their respective operations in Arizona, both companies aim to boost output.

Arizona is emerging as a key center for the semiconductor sector, significantly supported by the presence of Intel. TSMC’s Arizona fabrication plant has attracted additional suppliers, and the company has secured billions in funding from the Biden Administration’s CHIPS and Science Act, aimed at developing advanced chip manufacturing facilities across America.

Under the terms of the agreement with Amkor, TSMC will source chip packaging and testing services from Amkor’s newly established $2 billion facility in Peoria, Arizona. This site has also benefited from CHIPS funding, with the U.S. Commerce Department announcing $400 million in grants and $200 million in loans for its development. The project is projected to generate around 2,000 new jobs, reflecting a broader trend of semiconductor capacity expansion in Arizona fueled by government incentives.

The partnership aims to accelerate product cycle times by capitalizing on the proximity of TSMC’s Arizona plant and Amkor’s Peoria facility. The focus will be on TSMC’s InFO and CoWoS chip packaging technologies, with InFO predominantly serving the smartphone and mobile applications market, while CoWoS is the preferred choice for AI GPUs.

This agreement follows a recent decision by the government to exempt semiconductor facilities receiving federal subsidies from environmental impact assessments, facilitating the establishment of semiconductor fabrication plants, which are resource-intensive and require significant chemical usage to achieve high product purity.