TSMC Struggles to Meet Soaring Demand in New 'Chip Supercycle'
Currently the only supplier for cutting-edge chips, Taiwan Semiconductor Manufacturing Company has now been put under severe pressure by explosive demand driving the chip business: Artificial Intelligence demands production beyond supply.
Three Times Exceeded Demand
According to TSMC CEO C.C. Wei's comments at the SIA awards, TSMC has confirmed that current demand for TSMC's manufacturing services has reached approximately three times higher than the manufacturing capability of the company at present. Such a huge gap portends that the bottleneck in semiconductor production will probably last for several quarters.
Battle for Advanced Processes
The critical shortage is specifically with regard to the definition of "advanced processes," particularly as it relates to 5nm and 3nm nodes. Other foundries are also around, but most of the focus at this juncture in the industry is on TSMC technology. TSMC's customers competing for capacity include:
- AI Leaders: NVIDIA and AMD.
- ASIC contenders: Broadcom and Marvell.
- Tech Giants: Intel and Apple.
While TSMC continues efforts to increase footprints in Taiwan, the United States, and Japan, Wei calls the current capacity for these advanced nodes "insufficient" to address overwhelming market needs.
Impact on Supply Chain
This capacity crunch creates a challenging atmosphere in the broader tech industry. Due to long-term contracts, TSMC's major clients such as Apple and NVIDIA account for much of total output; hence, smaller companies have much longer lead times for orders. In short, the entire AI supply chain is now battling for limited space on TSMC's production lines.
Opportunities for Competitors
Hence, TSMC has to leave room for rival foundries, such as Intel and Samsung, but it remains to be seen whether these major tech companies would venture to transfer their crucial orders for chips to these second choices considering that TSMC is the dominant one in both yield and technology for AI applications.
