Rising demand for AI is stretching chip supply chains, with capacity constraints at key manufacturers creating ripples across components, timelines, and long-term sourcing strategies.
Broadcom has flagged growing supply chain pressures, with capacity constraints at its key manufacturing partner, TSMC, emerging as a major bottleneck amid rising demand for AI chips.
Natarajan Ramachandran from Broadcom said TSMC’s production limits are now becoming evident—something that would have seemed unlikely just a few years ago. While TSMC is expanding capacity through 2027, the crunch is already impacting supply in 2026.
TSMC, the world’s largest contract chipmaker, had earlier warned that its advanced manufacturing capacity remains tight due to the rapid buildout of AI infrastructure. The company, which serves clients like Nvidia and Apple, is working to bridge the widening gap between supply and demand.
Broadcom noted that the strain is not limited to chip production. Shortages are also emerging in critical components such as optical lasers and printed circuit boards (PCBs). Suppliers in Taiwan and China are facing capacity issues, leading to longer lead times.
In response, companies are increasingly entering long-term supply agreements to secure capacity, often locking in commitments for three to four years.
This shift is also reflected by Samsung Electronics, which recently said it is moving toward longer contracts of up to five years with key customers.
The trend highlights how the AI boom is putting pressure across the entire electronics supply chain, not just semiconductor manufacturing.
