TSMC’s “Three-Layer Cake” Theory: Why Optical Interconnects Are the Future of AI Chips

• Compute: The raw processing power and logic (e.g., N3, N2 nodes).
• Heterogeneous Integration & 3D IC: Advanced packaging (SoIC, CoWoS) to stack components.
• Photonics & Optical Interconnects: High-speed data transfer via light (COUPE technology).

The AI chip landscape is shifting.

While everyone’s been focused on raw compute power, Taiwan Semiconductor Manufacturing Company (TSMC – Taishenji 台积电) just dropped a framework that redefines how we should think about AI chip architecture.

And spoiler alert: it’s not just about faster processors anymore.

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Jensen Huang’s Five Layers Meet TSMC’s Three Layers

You’ve probably heard about Jensen Huang’s (Huang Renxun 黄仁勋) “five-layer cake” model for AI.

It’s become the standard way people talk about the AI ecosystem—stacking power, data centers, chips, models, and applications on top of each other.

But here’s where TSMC (Taishenji 台积电) got clever.

At the TSMC 2026 Technology Symposium (held May 16, 2026), Deputy Co-COO Kevin Zhang (Zhang Xiaojiang 张晓强) presented a new perspective: the chip itself can be deconstructed into three distinct layers, each critical to the future of AI infrastructure.

According to Zhang, these three layers are:

• Compute — The processing power everyone talks about
• Heterogeneous Integration & 3D IC — Connecting different chip components in 3D space
• Photonics and Optical Interconnects — What Zhang called “the most important for the future”

That last one?

That’s where things get interesting.

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COUPE Technology: The Secret Weapon in AI Data Centers

TSMC isn’t just theorizing.

They’re building it.

Li-Peng Yuan (Yuan Liben 袁立本), Director of Advanced Technology Business Development at TSMC (Taishenji 台积电), revealed the company’s comprehensive platform architecture, which includes:

• SoIC (System on Integrated Chips)
• CoWoS (Chip on Wafer on Substrate)
• COUPE (Compact Universal Photonic Engine) — optical interconnect technology

COUPE is the headline here.

This isn’t vaporware either.

The world’s first 200Gbps Micro Ring Modulator using COUPE technology began production this year, with a bit error rate of less than one in 100 million.

Zhang’s advice to the room?

“Definitely remember COUPE.”

And for good reason.

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How COUPE Actually Works

COUPE optical interconnect technology uses SoIC to 3D-stack:

• Electronic Integrated Circuits (EIC)
• Photonic Integrated Circuits (PIC)

By bringing these components closer together, COUPE achieves three critical improvements:

• Increased bandwidth
• Improved power efficiency
• Reduced electrical coupling loss

In April, TSMC announced that the COUPE silicon photonics integration platform was expected to enter mass production this year, marking a crucial milestone for Co-Packaged Optics (CPO) implementation.

This is huge for data centers that are drowning in data transfer demands.

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The 2030 Roadmap: 8X Bandwidth Density Increase

Here’s where Yuan’s projections get wild.

By 2030, TSMC plans to implement:

• 400Gbps optical modulators
• Multi-wavelength technologies
• Multi-fiber array technologies

The result?

8x increase in bandwidth density to 4TBps.

Let that sink in.

But that’s not even the most impressive part.

Compared to traditional copper wiring, COUPE delivers:

• 4x improvement in system energy efficiency
• 10x reduction in latency

When deeply integrated with packaging platforms, those numbers get even crazier:

• Up to 10x improvement in energy efficiency
• 20x reduction in latency

For AI data centers trying to manage power consumption and heat dissipation, this is game-changing.

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Who’s Already Buying In?

TSMC isn’t alone in recognizing COUPE’s potential.

According to Sinolink Securities (Guojin Zhengquan 国金证券), industry leaders are already adopting the technology:

• NVIDIA (Yingweida 英伟达)
• Broadcom (Botong 博通)

Both companies are using TSMC’s COUPE technology for PIC and EIC connections in their next-generation infrastructure.

This adoption is expected to solidify TSMC’s position in the silicon photonics era.

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The Market Explosion: CPO Expected to Hit ¥72.4 Billion RMB ($10 Billion USD) by 2030

Here’s the business side.

With scaled mass production set for 2026, the CPO (Co-Packaged Optics) supply chain is rapidly reaching maturity.

Market analysts expect exponential growth in the CPO market, with projections reaching ¥72.4 billion RMB ($10 billion USD) by 2030.

For context, that’s a massive leap from where the market is today.

This growth will be driven by:

• Increasing AI data center demands
• Hyperscaler investments in infrastructure
• Energy efficiency requirements becoming non-negotiable

If you’re an investor watching the AI infrastructure play, this is one segment worth tracking closely.

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CoWoS Advances: Stacking More Memory, Faster

While COUPE is stealing headlines, TSMC’s also quietly advancing its CoWoS roadmap.

Here’s what’s coming:

• 2028: Mass production of CoWoS with 14x reticle size, capable of integrating 20 HBM (High Bandwidth Memory) units
• 2029: Advancement to version exceeding 14x reticle size, capable of integrating 24 HBM units

For context, TSMC’s current 5.5x reticle size CoWoS—the world’s largest version in mass production—is already hitting a 98% yield rate.

That’s the kind of manufacturing maturity that gives confidence to the roadmap.

More HBM integration means more memory bandwidth for AI models and fewer physical constraints on chip design.

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What This Means for the AI Hardware Race

TSMC’s “three-layer cake” theory isn’t just academic.

It’s a strategic pivot that acknowledges a hard truth: compute power alone isn’t the bottleneck anymore.

The real challenge is moving data efficiently.

Optical interconnects solve that in ways copper never could.

By 2026, when scaled CPO production hits, expect to see:

• Next-generation AI accelerators from major vendors shipping with COUPE integration
• Hyperscalers designing data centers around optical-first architectures
• A noticeable shift in how we think about chip design—from “how fast can it compute” to “how efficiently can it communicate”

TSMC’s making a bet that optical interconnects are the future of AI infrastructure.

And judging by who’s already buying in, that bet is looking pretty solid.

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The Bottom Line on TSMC’s Three-Layer Cake AI Chip Architecture

Jensen Huang gave us a framework for thinking about AI infrastructure.

TSMC just gave us a more granular framework for thinking about the chips themselves.

If you’re building AI data centers, designing next-generation accelerators, or investing in semiconductor manufacturing, COUPE and CPO are the terms you need to know.

The optical interconnect era isn’t coming—it’s already here at TSMC.

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References

• TSMC First Proposes “Three-Layer Cake” Theory for AI Chips – Cailian Press
• Technology Symposium Events – TSMC
• NVIDIA AI Infrastructure and Architecture – NVIDIA
• Silicon Photonics Solutions – Broadcom