The "Bottleneck" in AI Chips Has Changed – What TSMC's Record Sales Tell Us
On July 13th, TSMC (Taiwan Semiconductor Manufacturing Company) announced its June monthly sales. It was up 67.9% year-on-year, reaching approximately 44.268 billion Taiwanese dollars (approximately 13.2 billion US dollars). This is a record high for a single month, and quarterly sales also exceeded the upper end of the company's guidance. While the numbers themselves are impactful, what we really want to focus on here is the shift in the location of the bottleneck that these results indicate.
The Seasonality of "June as a Usually Declining Month" Has Broken
Let's start with a subtle but important point. For the past four years, TSMC's monthly sales have followed a seasonal pattern of being down month-on-month in June. However, this year, sales increased 6.2% compared to May, breaking this seasonal pattern.
Analysts are calling this reversal "remarkable" not simply because the numbers were good. Monthly sales figures for foundries like TSMC actually reflect manufacturing reservations (wafer production slots) that were confirmed 12 to 18 months prior. Therefore, the record-breaking figures aren't simply due to a sudden surge in orders this month, but rather represent the culmination of demand that has been building up for over a year, finally manifesting in the numbers.
The Bottleneck Shifts from "Making" to "Filling"
This is the technically most interesting point. Until now, discussions about AI chip shortages have primarily focused on "manufacturing capacity for advanced processes (such as N3)." However, following the recent reports reveals that the situation has progressed to the next level.
Sravan Kundojjala, an analyst at SemiAnalysis, commented, "The tight supply-demand situation in the AI sector remains serious, and the N3 process, which will be used by major AI GPUs and CPUs this year, is virtually sold out for TSMC." However, some are pointing out that a more serious constraint is shifting from the wafer manufacturing capacity itself to the advanced packaging technology called CoWoS (Chip-on-Wafer-on-Substrate).
CoWoS is a technology that stacks and connects computing chips and high-bandwidth memory (HBM) on a single substrate, and is an essential process for NVIDIA's data center GPUs. According to reports, NVIDIA alone has reserved approximately 60% of TSMC's advanced packaging capacity for 2026. Even if the capacity to manufacture wafers is secured, the packaging process to assemble them into final products cannot keep up—this is the real bottleneck in the current AI chip supply chain.
Increased Production Investment Also Focused on "Packaging"
TSMC itself is showing moves in response to this situation. Construction of Phase II of its packaging facility at the Chiayi Science Park in southern Taiwan began on July 12th. Phase I (two facilities) already began mass production in June, and Phase II will add several more facilities, projected to reach an annual production value of 300 billion Taiwanese dollars and create over 9,000 new jobs.
This is a symbolic investment decision. It confirms that not only is increasing wafer manufacturing capacity important, but concentrated investment in the "back-end process" of packaging is now the top priority in the AI supply chain.
AI-related sales expected to reach "one-quarter of total"
Another figure worth noting is the proportion of AI-related sales in TSMC's revenue. Kundojjala estimates that TSMC is expected to record over $40 billion in AI chip-related sales for the full year 2026, representing approximately 25% of total sales. This means that a category that hardly appeared in TSMC's financial statements until a few years ago has now grown to account for a quarter of the company's total sales.
TSMC holds a dominant market share; according to Counterpoint Research data, it will account for 73% of the global semiconductor foundry market by the first quarter of 2026. Given that major customers for AI and consumer chips—NVIDIA, Apple, and AMD—all rely on TSMC for manufacturing, the company's financial results serve as a thermometer for the entire industry.
What Engineers Should Notice
This series of developments reveals a phenomenon where bottlenecks in AI infrastructure are not concentrated in a single process, but rather shift sequentially across the entire supply chain. From the period when GPU shortages were a major concern, the bottlenecks have gradually shifted: first to wafer manufacturing capacity, and now to the packaging process.
This is very similar to the "bottleneck shift" phenomenon in software development. Resolving one bottleneck reveals the next, previously hidden bottleneck. The AI chip supply chain operates on the same principle, and tracking the movement of these "blockages" will be crucial for understanding the realities of the industry. We can expect to see more detailed information regarding TSMC's plans to expand its advanced packaging capabilities and customer trends for next-generation 2-nanometer technology during its official quarterly earnings announcement scheduled for Thursday.