Broadcom Executive Admits: TSMC Capacity Shifts from "Near-Infinite" to "Touching Limits"

The explosive growth in AI chip demand is pushing the global semiconductor supply chain to a tipping point. A Broadcom executive warns that TSMC's production capacity has become a critical bottleneck in the supply chain, and shortage pressures are spreading from chips themselves to upstream and downstream sectors like 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," a stark contrast to just a few years ago when he would have described TSMC's capacity as "near-infinite." He expects TSMC to continue expanding its production capacity until 2027.

The impact of tight supply is rippling through the market. To cope with uncertainty, an increasing number of customers are signing long-term agreements of three to four years with suppliers to lock in capacity.

Samsung Electronics also confirmed last week that it is in negotiations with major clients to extend contract periods to three to five years, a trend that reflects the widespread anxiety across the entire industry chain regarding long-term supply security.

TSMC Capacity in Crisis, AI Construction Boom Depletes Advanced Process Margins

TSMC is the primary foundry for global advanced AI chips, serving tech giants like Nvidia, Apple, and Broadcom. According to Reuters, TSMC publicly acknowledged capacity tightness in January of this year and stated it is working to narrow the supply-demand gap – the massive wave of AI infrastructure construction has largely exhausted the remaining space in its advanced process lines.

Ramachandran was blunt about this. He stated that 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 at the height of the AI computing power arms race, chip design companies and system integrators will face a sustained period of pressure.

Bottlenecks Spread: Laser Devices and PCBs Become "Unexpected" Shortcomings

Beyond chips, supply chain pressures are diffusing into adjacent areas. Ramachandran pointed out that the laser device sector also faces significant supply constraints – despite multiple suppliers in the industry, overall capacity remains insufficient.

The situation with printed circuit boards (PCBs) is particularly prominent. He called the PCB shortage an "unexpected" bottleneck and cited PCBs for optical modules as an example: delivery times for related products have surged from about six weeks to six months. PCB suppliers in Taiwan and mainland China are both facing pressure from saturated capacity.

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

In the face of tight supply, various parties in the supply chain are adjusting their procurement strategies. Ramachandran stated that a significant number of customers are now turning to signing three- to four-year long-term agreements with suppliers in exchange for stable capacity commitments.

Samsung Electronics' moves last week confirmed this trend – the memory chip giant said it is discussing extending contract periods to three to five years with major clients. This move aims to provide longer-term supply security for customers while also helping suppliers mitigate the impact of demand fluctuations.

Regarding the industry outlook, Ramachandran's attitude is cautiously optimistic. He believes that the entry of new players and the continued expansion of existing capacity are expected to gradually alleviate supply pressure over time. However, in the short term, supply chain tightness is expected to persist through 2026, continuously testing the delivery capabilities of all parties across multiple critical segments.