Why AI Chips Made In The U.S. Are Being Sent To Taiwan — Creating A Major Bottleneck

TL;DR

US-made AI chips ship back to Taiwan for advanced packaging because nearly all high-density chip assembly capacity remains concentrated in Asia.

Key Points

• 1.Advanced packaging is the critical bottleneck in AI chip supply. TSMC sends 100% of chips — including those made at its new Arizona fab — back to Taiwan for packaging, creating supply chain delays and geopolitical risk from potential Taiwan blockades.
• 2.Packaging evolved from afterthought to core technology as chiplets replaced monolithic chips. About five to six years ago, no one was combining multiple chips inside one package; now 2.5D CoWoS interposer technology, pioneered by TSMC in 2012, is essential for mounting high-bandwidth memory alongside GPUs.
• 3.Nvidia has reserved the majority of TSMC's CoWoS-L capacity, squeezing competitors. CoWoS-L — first used in Nvidia Blackwell GPUs shipping in 2024 — supports configurations like two large silicon dies surrounded by 12 HBM stacks, and TSMC is expanding CoWoS at 80% CAGR to meet demand.
• 4.Intel's competing E-IB packaging uses embedded silicon bridges instead of a full interposer, offering cost advantages. Done in New Mexico, Oregon, and Chandler, Arizona near Intel's 18A fab, it already serves Amazon and Cisco, and Elon Musk has tapped Intel to package chips for SpaceX, xAI, and Tesla.
• 5.TSMC is breaking ground on two new US advanced packaging facilities in Arizona to reduce the bottleneck. Intel also completes certain packaging steps entirely in the US, and OSAT Amkor is building a packaging site in Arizona, while the world's largest OSAT ASE expects advanced packaging sales to double in 2026.
• 6.3D stacking and hybrid bonding represent the next packaging frontier, replacing bumped connections with flat copper pads. TSMC's SOIC, Intel's Foveros Direct, and Samsung's X-Cube all stack chips vertically to cut power consumption — critical as data centers hit power limits — though TSMC says SOIC products are still a couple of years away.