The Great Chip Shortage: Big Tech and AI companies are ramping up orders at a pace the industry can't easily absorb, turning advanced chip manufacturing into an extremely finite asset. TSMC, which controls roughly 70% of the global foundry market, is now so stretched that it can't realistically accommodate every customer seeking capacity.
TSMC's most advanced nodes are particularly bottlenecked, forcing the company to prioritize a small group of "loyal" clients. A recent report from DigiTimes mentions that everyone in the chip business is asking for a piece of the Taiwanese foundry, but demand far exceeds supply across the industry, with many companies unable to secure production at all. The resulting crunch is fueling broader concerns about whether the current AI boom is sustainable.
Broadcom recently acknowledged that TSMC is effectively hitting a ceiling in production capacity, challenging the long-held assumption that the foundry could scale output almost indefinitely. According to the report, many firms are now rethinking their strategies as TSMC funnels a steady stream of silicon to a narrow set of customers.
Much of the company's 3nm capacity is being directed toward Apple and Nvidia, two of its largest and most consistent partners. Their privileged access to cutting-edge nodes could further widen the competitive gap with rivals across chips and devices.
A smaller share of advanced capacity is allocated to Intel and AMD, though in more limited volumes compared to AI products. Meanwhile, ASIC designers like Broadcom are pushing for better deals but having a hard time trying to ramp up volume production of specialized AI accelerators.
The broader picture is one of mounting uncertainty. Ongoing geopolitical tensions, including the US-Israel conflict involving Iran, add another layer of risk to already strained supply chains. Some analysts believe the current constraints could ease within 1 to 2 years, though similar timelines have been floated before.
In response, parts of the industry are exploring alternatives. Samsung Foundry is courting new partners, including AMD, while Intel continues to face challenges ramping its own manufacturing output (or finding suitable clients). With supply tight and demand still surging, the balance of power in the chip industry could shift quickly in the months ahead.