TSMC and 30 firms form silicon photonics alliance for AI chips

Taiwan's Ministry of Economic Affairs announced on September 6 that TSMC Taiwan Semiconductor Manufacturing Company Limited ↗ 6.33%, along with more than 30 leading Taiwanese corporations, will form a Silicon Photonics Industry Alliance aimed at securing the island's dominance in next-generation AI data transmission technology.biz.chosun+1

The consortium includes ASE, MediaTek, and Foxconn Hon Hai Precision Industry Co., Ltd., among others, and will focus on jointly developing co-packed optics (CPO) — a technology that integrates optical communication components directly alongside AI chips to transmit data using light rather than electrical signals. The announcement comes days after Semicon Taiwan 2026, held September 2–4 in Taipei, where silicon photonics was a central theme.ajupress+2

Tackling AI's Power and Data Bottleneck

As AI chip performance scales rapidly, the volume of data moving between chips has become a critical bottleneck. The Ministry of Economic Affairs said applying silicon photonics can reduce heat generated during data transmission and cut power consumption by 30 to 50 percent. CPO addresses this by converting electrical signals to optical signals close to the chip, increasing transmission speed while lowering energy use.biz.chosun

TSMC is set to begin mass production of CPO by the end of this year, while Nvidia ↗ 2.78% and Broadcom ↗ 0.74% are also entering the CPO product market. At Semicon Taiwan, a TSMC vice president said silicon photonics would play a "dominant role" next year in enabling chip-level CPO packaging.taipeitimes+1

Taiwan Leverages Existing Ecosystem

The government's strategy extends Taiwan's existing semiconductor manufacturing and advanced packaging strengths into the photonics domain. Taiwan holds more than 90 percent of the global market share in advanced chip processes at 7 nanometers and below, and roughly 50 percent of the semiconductor packaging and testing market.biz.chosun

The alliance fits within President Lai Ching-te's broader "AI New Top Ten Constructions" initiative, which includes silicon photonics and targets 15 trillion Taiwan dollars in production inducement effects and 500,000 AI-related jobs by 2040.biz.chosun

Next-Generation Packaging on the Horizon

TSMC is also advancing its CoPoS (chip on panel on substrate) packaging technology, which replaces traditional round wafers with rectangular 310-by-310-millimeter panels to raise material utilization from below 70 percent to above 90 percent. A pilot line began operating around June 2026 at VisEra's Longtan plant, with mass production targeted for the second half of 2028 or into 2029.circuit-chip+1

Samsung Electronics has separately unveiled its own 300-millimeter silicon photonics platform built on a mature CMOS process, first shown at OFC 2026, underscoring the broader industry race to bring optical interconnect technology into mainstream AI chip production.linkedin