As Moore's Law slows, advanced packaging has become the critical lever driving breakthroughs in AI chip performance, according to DIGITIMES chief semiconductor analyst Tony Huang. Speaking with DIGITIMES Asia, Huang emphasized that heterogeneous integration is now as pivotal to system performance as transistor scaling once was.
Without advanced packaging, moving from 28nm to A16 would deliver roughly an 80-fold increase in compute density per reticle area, Huang said. With it, the gain rises to around 320 times.
Bottlenecks driving innovation
He explained that AI workloads have exposed multiple technical bottlenecks—what he calls the new "walls": the memory wall, addressed through high-bandwidth memory (HBM); the I/O and communication walls, tackled by reducing latency through chiplet and interposer technologies; the power and thermal walls, mitigated through power efficiency and thermal management; and the yield and fabrication walls, eased by smaller chiplets with higher yields.
Technologies such as 3D SoC stacking, hybrid bonding, and co-packaged optics (CPO) are now key enablers, he added.
Credit: Dgitimes
Market growth outpacing the semiconductor industry
Huang forecasts that advanced packaging for AI data center chips will grow at a compound annual rate of 45.5% from 2024 to 2030, far outpacing the overall semiconductor industry's 8.7% and the broader packaging and testing sector's 9.5%.
"2.5D CoWoS-type solutions still dominate and will account for more than half of the total market," he said. "Their share will gradually decline from 69% to 58% as 3D and hybrid approaches mature."
He noted that the industry is transitioning from 2.5D to 3.5D packaging, citing AMD's MI300X AI accelerator, which combines 3D SoIC and 2.5D CoWoS and is manufactured by TSMC. Broadcom is also developing a 3.5D accelerator using a face-to-face structure, he said.
Taiwan's dominant position
"Taiwanese companies accounted for about 77% of the global data center AI packaging market in 2024," Huang said. "Even with intensifying competition from Intel, Samsung, and new US and Chinese ecosystems, Taiwan's share is expected to stay near 70% by 2030."
If HBM assembly—still primarily done in South Korea—is excluded, Taiwan's market share reached 90% in 2024, he added.
Defining the landscape
Huang noted that DIGITIMES defines data center AI chips in three categories: AI server CPUs; AI accelerators, including GPUs from NVIDIA and AMD, and custom AI chips like Google's TPU and AWS Trainium; and AI networking chips such as switch ICs from Broadcom and DPUs from NVIDIA.
CPO, or co-packaged optics, falls within the AI networking segment and is also considered advanced packaging.
"TSMC's hybrid bonding approach integrates electrical ICs and photonic ICs into a single optical-electronic module," Huang explained.
China's self-sufficiency push
China, meanwhile, is pushing for over 70% self-sufficiency in data center AI chips. Key domestic players include SMIC (foundry), CXMT (HBM2E memory), and SJ SEMI (2.5D CoWoS-type packaging).
By 2030, Huang estimates that Chinese AI chips could represent more than 15% of global shipments, though their revenue share may reach only 10–12% due to lagging technology.
"To close the gap, Chinese vendors are adopting large-scale clustering and optical interconnect approaches," he said.
"For example, Huawei's next-generation AI chips—expected around 2028—will roughly match the performance of Nvidia's H200 from 2023, but China compensates with scale and software optimization."
The new axis of progress
Advanced packaging, with its projected 45.5% compound annual growth rate, represents more than an engineering trend—it's the new axis of progress for the AI era.
"If transistor scaling was the vertical climb of Moore's Law, advanced packaging is the horizontal expansion," Huang concluded. "It's what allows AI chips to break physical limits and deliver the performance needed for the data-driven world ahead."
Tony Huang will deliver a keynote speech at a DIGITIMES webinar on advanced packaging on December 5, 2025. This interview offers a preview of his insights—more details will be shared during the event.
Article edited by Jerry Chen
