TSMC is currently in a 'chip supercycle,' as almost every supplier relies on the Taiwan chip giant for their semiconductor needs.
TSMC Faces Advanced Process Demand To an Extent that Production Capacity Is Now "Insufficient"
The world is experiencing unprecedented chip demand driven by the advancements being made in the era of artificial intelligence. Almost every manufacturer, whether it is NVIDIA, AMD, Intel, or even ASIC competitors like Broadcom and Marvell, is rushing to place orders with TSMC to secure capacity for their respective products. Now, based on what TSMC's CEO C.C. Wei has said at the occasion of SIA awards, it is disclosed that the Taiwan chip giant currently sees demand that is "three-times' higher than what the firm can produce, which means that the semiconductor production bottleneck would last for several quarters ahead.
One of the reasons why TSMC experiences a constrained supply/demand situation is that the company is the sole supplier of 'advanced processes' that has managed to attract market spotlight. Sure, competitors like Intel and Samsung Foundry have their alternatives as well, but throughout the AI hype, we have only seen the processes by the Taiwan giant witnessing adoption. Nodes like the 5nm, 3nm, and beyond are claimed to be in massive demand, driven by Big Tech, which is why TSMC's CEO says that advanced process capacity is "insufficient" on an enormous scale.
Even after the massive fab buildout, TSMC is still engaged in regions like Taiwan, the US, and Japan, and the firm still sees a shortfall, which isn't a small one at all. More importantly, since TSMC has long-term contracts with more mainstream companies like NVIDIA and Apple eventually account for a large portion of TSMC's total output, which means that others are facing a prolonged wait time for their semiconductor needs, which is why it won't be wrong to say that the whole AI supply chain is battling to place orders at the Taiwan chip giant.
It would be interesting to see how the semiconductor supply chain evolves moving ahead, especially since there's a lot of interest at TSMC, which is currently unable to fulfill. This does open up opportunities for companies like Intel and Samsung, but would Big Tech take the risk of placing chip orders with someone other than TSMC? Well, we'll have to wait and see for now.
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