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According to market sources, TSMC is reportedly in discussions to acquire AUO’s L7 factory (a 7.5-generation display panel facility) and L5C factory (a fifth-generation panel facility) located in Taiwan’s Central Taiwan Science Park, as the chipmaker seeks to expand its advanced packaging capacity. The two companies may follow a cooperation model similar to Innolux’s approach, jointly developing advanced packaging technologies.

TSMC said it would not comment on market rumors, while AUO stated that it does not comment on unverified reports.

Sources familiar with the matter said negotiations between TSMC and AUO regarding the two facilities have entered the evaluation stage, with TSMC employees reportedly conducting on-site assessments. However, no final agreement has been signed and no official announcement has been made. Market estimates suggest that the potential transaction value could exceed NT$30 billion, making it one of the larger deals involving the sale of mature-generation panel facilities in Taiwan in recent years.

Industry analysts believe that as AI chips continue to evolve toward higher integration and greater computing performance, advanced packaging has become a critical area of competition in the semiconductor industry. TSMC is accelerating the development of its next-generation CoPoS advanced packaging technology, which aims to replace traditional 12-inch wafer-based substrates with large-format panel-level substrates. This transition from “round wafers to square panels” is expected to improve packaging efficiency for large AI chips while reducing manufacturing costs.

CoPoS is considered TSMC’s next-generation 2.5D advanced packaging solution following its widely adopted CoWoS technology. Compared with conventional wafer-level packaging, panel-level packaging uses larger substrate areas, helping address challenges such as limited wafer utilization, higher costs, and warpage issues in the packaging of large AI processors.

TSMC has already begun developing CoPoS-related production lines at its advanced packaging and testing facility in Chiayi, Taiwan, moving into equipment evaluation, material verification, and commercial validation stages. For future high-volume production, improving yield rates and strengthening manufacturing management capabilities will be key challenges.

As advanced packaging requires large cleanroom facilities and reliable power infrastructure, building new factories often involves lengthy construction cycles and significant investment. As a result, existing display panel factories with large-scale cleanrooms and established manufacturing infrastructure have become attractive options for semiconductor companies looking to rapidly expand advanced packaging capacity.