Taiwan Semiconductor bets big on advanced packaging as AI demand surges, targeting faster growth and a bigger role in next-generation chip innovation.
Taiwan Semiconductor Manufacturing Company TSM, also known as TSMC $TSM, is expanding beyond wafer fabrication by investing heavily in advanced packaging technology. This segment is becoming critical as AI and high-performance computing chips require more complex integration. Technologies like 3D stacking and chiplet-based designs help improve performance and reduce power usage, making advanced packaging a key enabler of next-generation semiconductors.
Though the financial contribution of this business is still small, it is growing rapidly. Advanced packaging accounted for roughly 8% of Taiwan Semiconductor’s revenues in 2025 and is expected to exceed 10% in 2026. Management also expects this segment to grow faster than the overall company over the next few years. This indicates a clear shift in focus as customers demand complete solutions rather than just wafers.
Artificial intelligence (AI) demand is the main driver behind this push. AI accelerators require high-bandwidth memory and tight integration between components, which increases the need for advanced packaging. As a result, TSMC is allocating a larger share of its capital spending to this area, with packaging and related technologies now anticipated to receive up to 20% of the total planned capex of $52-$56 billion in 2026.
If execution remains strong, advanced packaging can become a meaningful growth driver for Taiwan Semiconductor. It not only adds a new revenue stream but also strengthens TSM’s role in the semiconductor value chain, supporting long-term growth.
In 2025, Taiwan Semiconductor’s revenues jumped nearly 36% year over year to $122.42 billion, and it forecasts approximately 30% sales growth in 2026. We believe that TSMC’s global fab expansion push, investment in advanced packaging technology and rising AI-chip demand will help it meet its 2026 revenue growth target. The Zacks Consensus Estimate for 2026 revenues is pegged at $160 billion, indicating a year-over-year increase of 30.7%.
Intel $INTC INTC and GlobalFoundries GFS are also expanding their presence in advanced packaging technology.
Intel is making a strong push into advanced packaging through its IDM 2.0 strategy. Intel is investing in technologies like Foveros and EMIB to support chiplet architectures, similar to Taiwan Semiconductor’s approach. The company is also expanding its foundry services business, aiming to offer both manufacturing and packaging as a combined solution.
GlobalFoundries focuses more on mature nodes but is gradually enhancing its packaging offerings. While it does not compete directly in cutting-edge AI chips, GlobalFoundries is targeting specialized applications that require efficient integration.
While both companies are investing in packaging, TSMC maintains an edge due to its scale, customer base and tight integration with advanced node manufacturing.
Shares of Taiwan Semiconductor have surged around 87.7% over the past year compared with the Zacks Computer and Technology sector’s appreciation of 26.8%.
Image Source: Zacks Investment Research
From a valuation standpoint, TSM trades at a forward price-to-earnings ratio of 20.85, lower than the sector’s average of 21.47.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Taiwan Semiconductor’s 2026 and 2027 earnings implies a year-over-year increase of 34.9% and 22.9%, respectively. The consensus mark for 2026 and 2027 earnings has been revised upward over the past 30 days.
Image Source: Zacks Investment Research
Taiwan Semiconductor currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.
