Broadcom executive admits: TSMC's production capacity has gone from "nearly unlimited" to "reaching its limits."

Broadcom executive admits: TSMC's production capacity has gone from "nearly unlimited" to "reaching its limits."

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The explosive growth in demand for AI chips is pushing the global semiconductor supply chain to a critical point. Broadcom executives have warned that TSMC's capacity has become a key bottleneck in the supply chain, and the shortage pressure is spreading from the chips themselves to upstream and downstream sectors such as laser devices and printed circuit boards.

Natarajan Ramachandran, Director of Product Marketing for Broadcom's Physical Layer Products Division, told the media on Tuesday that TSMC's capacity has "reached its limit." Just a few years ago, he would have described TSMC's capacity as "almost limitless." He expects TSMC to continue expanding production until 2027.

The impact of supply tightness is being transmitted to the market. To cope with uncertainties, more and more customers are entering into long-term agreements with suppliers lasting three to four years to lock in production capacity.

Samsung Electronics also confirmed last week that it is negotiating with major customers to extend contract cycles to three to five years. This trend reflects a widespread anxiety across the entire supply chain about long-term supply security.

TSMC Capacity in Crisis, AI Construction Boom Exhausts Advanced Process Surplus

TSMC is the major foundry for advanced AI chips worldwide, with clients including tech giants such as Nvidia, Apple, and Broadcom. According to Reuters, TSMC publicly acknowledged tight capacity this January, stating it is working to narrow the supply-demand gap—the massive wave of AI infrastructure construction has basically exhausted the remaining space in its advanced process production lines.

Ramachandran spoke frankly about this. He said, TSMC’s capacity expansion plans will continue until 2027, but before that, the capacity gap will impose substantial constraints on the supply chain in 2026. This means that amid the most intense AI computing power arms race, chip design companies and system integrators will face a prolonged period of pressure.

Beyond chips, supply chain pressure is spreading to adjacent sectors. Ramachandran pointed out that there are also obvious supply constraints in the field of laser devices—although there are many suppliers in the industry, overall capacity is still insufficient.

The situation for printed circuit boards (PCBs) is particularly prominent. He called the PCB shortage an "unexpected" bottleneck, citing PCBs used in optical modules as an example: The delivery cycle for related products has surged from about six weeks to six months. PCB suppliers in both Taiwan and mainland China are facing capacity saturation pressures.

Industry Response: Long-Term Orders Secure Capacity, New Entrants May Ease Pressure

In response to tight supply, all parties in the industrial chain are adjusting their procurement strategies. Ramachandran said that many customers are now turning to long-term agreements with suppliers, lasting three to four years, in exchange for stable production capacity commitments.

The moves disclosed by Samsung Electronics last week further confirm this trend—the memory chip giant stated it is exploring contract extensions with major customers for three to five years, aiming to provide customers with longer-term supply guarantees, and also help suppliers smooth out demand fluctuations.

Regarding industry prospects, Ramachandran is cautiously optimistic. He said that the entry of new players and the continuous expansion of existing capacity are expected to gradually ease supply pressure over time. In the short term, however, supply chain tightness is expected to last throughout 2026 and will continue to test delivery capabilities in several critical sectors.

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