Broadcom sounds alarm as TSMC capacity constraints threaten AI chip supply through 2026

Broadcom sounds the alarm as chip demand is pushing TSMC to its limits

Serving tech enthusiasts for over 25 years. TechSpot means tech analysis and advice you can trust. In a nutshell: Surging demand for artificial intelligence hardware is pushing global chip production to its limits, with ripple effects now spreading across the broader semiconductor supply chain. Broadcom is now contending with capacity constraints from its key manufacturing partner, TSMC - an illustration of how the AI boom is reshaping the production landscape for some of the world's most advanced components. "We are seeing that TSMC is hitting [production capacity] limits," Natarajan Ramachandran, director of product marketing in Broadcom's Physical Layer Products division, told reporters. He noted that a few years ago he would have described TSMC's capacity as effectively infinite. Now, however, capacity expansion plans extend through 2027, and while TSMC is working to increase output, the constraint has become a bottleneck for the supply chain in 2026, he said. TSMC did not immediately respond to an emailed request for comment. In January, the company said capacity was tight, as the boom in AI infrastructure buildout absorbed much of its advanced production capacity. It also said it was working to narrow the gap between supply and demand. The squeeze is particularly acute for cloud providers and AI developers that depend on TSMC's leading-edge nodes for accelerators and custom silicon. Ramachandran said the supply pinch extends beyond semiconductors. "Even though there are multiple suppliers in the industry today, there is definitely a constraint in the laser space," he told reporters. He added that printed circuit boards have also emerged as an unexpected bottleneck, with both Taiwanese and Chinese suppliers facing capacity limits that are contributing to longer lead times. He did not identify specific companies. The growing scarcity is prompting companies across the tech ecosystem to rethink procurement strategies. Many customers are now entering into multi-year agreements to secure guaranteed access to production, and some of these commitments span three to four years. For buyers, such agreements effectively reserve portions of future output at a time when tightness is affecting wafers, lasers, and boards. For suppliers, they provide clearer demand visibility, supporting heavy capital investment in new production lines and advanced processes. That approach mirrors moves by other chipmakers. Samsung Electronics said last week that it is working with major clients to adopt three- to five-year supply contracts, noting that extended commitments offer stability for both parties.

Broadcom flags supply constraints, says TSMC capacity a bottleneck

The Taiwanese firm, the world's main producer of advanced AI chips, said in January ⁠that capacity was tight, as the boom in AI infrastructure buildout has soaked up much of its advanced production lines. Chip designer Broadcom says it is experiencing supply chain constraints across the technology sector, including capacity limits at its manufacturing partner TSMC, as soaring demand for AI chips strains production. "We are seeing that TSMC is hitting (production capacity) limits," Natarajan Ramachandran, director of product marketing in Broadcom's Physical Layer Products division, ⁠told ⁠reporters on Tuesday, adding he would have described TSMC's capacity as "infinite" until a few years ago. "They will be increasing the capacity to 2027, but that has become a bottleneck, or that has kind of choked the supply chain in 2026," he said. TSMC did not immediately respond to an emailed request for comment. The Taiwanese firm, the world's main producer of advanced AI chips, said in January ⁠that capacity was tight, as the boom in AI infrastructure buildout has soaked up much of its advanced production lines. The world's largest contract chipmaker, whose ⁠major customers also include Nvidia and Apple - also said at the time that it was working hard to narrow the gap between supply and demand. Supply strains beyond chips Ramachandran said the shortages extend beyond semiconductors, affecting several adjacent supply chains. "Even though there are multiple suppliers in the industry today ... there is definitely a supply constraint in the laser space," he said, adding that printed circuit boards had also emerged as an "unexpected" bottleneck. He cited PCBs used in optical transceivers, saying lead times have stretched from about six weeks to six months. Both Taiwanese and Chinese PCB suppliers are facing capacity limits, contributing ⁠to the delays, he said, without naming the suppliers. Many customers are now entering long-term agreements with suppliers to secure capacity commitments for as long as three to four years, he added. The trend was underscored by memory chipmaker Samsung Electronics, which said last week that it is working with major customers to shift to longer contracts of three to five years. The move reflects customers' desire for longer-term supply security and suppliers' efforts to guard against demand swings.

Broadcom flags supply constraints, says TSMC capacity a bottleneck

TAIPEI, March 24 (Reuters) - Chip designer Broadcom said it is seeing supply chain constraints, including capacity limits at its manufacturing partner TSMC, highlighting the ripple effects of soaring demand for AI chips on the broader tech industry. "We are seeing that TSMC is hitting (production capacity) limits," Natarajan Ramachandran, director of product marketing in Broadcom's Physical Layer Products division, told reporters on Tuesday, adding he would have described TSMC's capacity as "infinite" until a few years ago. "They will be increasing the capacity to 2027, but that has become a bottleneck, or that has kind of choked the supply chain in 2026," he said. TSMC did not immediately reply to an emailed request for comment. The Taiwanese firm, the world's main producer of advanced AI chips, said in January that capacity was tight, as the boom in AI infrastructure buildout has soaked up much of its advanced production lines. The world's largest contract chipmaker, whose major customers also include Nvidia and Apple - also said at the time that it was working hard to narrow the gap between supply and demand. Broadcom's Ramachandran said supply constraints extend beyond chips to various tech supply chains. "Even though there are multiple suppliers in the industry today ... there is definitely a supply constraint in the laser space," he said, adding that printed circuit boards (PCBs) had also emerged as an "unexpected" bottleneck. Ramachandran said both Taiwanese and Chinese PCB suppliers are facing capacity constraints, contributing to longer lead times. He did not name the suppliers. Many customers are now entering long-term agreements with suppliers to secure capacity commitments for as long as three to four years, he said. The trend was underscored by memory chipmaker Samsung Electronics, which said last week that it is working with major customers to shift to longer contracts of three-to-five years. The move reflects customers' desire for longer-term supply security and suppliers' efforts to guard against demand swings. (Reporting by Wen-Yee Lee; Editing by Miyoung Kim and Kevin Buckland)