TLDR
- Broadcom says TSMC is hitting production capacity limits due to surging AI chip demand
- The bottleneck is expected to persist through 2026, with capacity increases planned for 2027
- Shortages extend beyond chips to lasers and printed circuit boards (PCBs)
- PCB lead times have jumped from 6 weeks to 6 months for optical transceivers
- Companies are signing 3–5 year supply agreements to lock in capacity
Broadcom has flagged that supply chain constraints are tightening across the tech sector, pointing directly at its manufacturing partner TSMC as a key bottleneck. The warning came on Tuesday from Natarajan Ramachandran, director of product marketing in Broadcom’s Physical Layer Products division.
Ramachandran told reporters that TSMC is “hitting production capacity limits.” He said he would have described TSMC’s capacity as “infinite” just a few years ago — that is no longer the case.
TSMC is the world’s main producer of advanced AI chips. Its major customers include Broadcom, Nvidia, and Apple. The Taiwanese company acknowledged tight capacity in January and said it was working to close the gap between supply and demand.
According to Ramachandran, TSMC plans to increase capacity through 2027. But that growth has not arrived fast enough. “That has become a bottleneck, or that has kind of choked the supply chain in 2026,” he said.
The shortages are not limited to semiconductors. Ramachandran said supply constraints are spreading into adjacent parts of the technology supply chain.
He pointed to a shortage in the laser space, noting that despite multiple suppliers existing in the market, capacity remains tight. Printed circuit boards have also emerged as an unexpected pressure point.
PCB Lead Times Surge
PCBs used in optical transceivers are seeing lead times stretch from around six weeks to as long as six months. Both Taiwanese and Chinese PCB suppliers are running into capacity limits, according to Ramachandran, though he did not name specific companies.
This follows earlier reports of constraints hitting chipmakers Intel and AMD. Intel’s server product prices rose by around 10%, while AMD experienced longer delivery times. AMD said at the time it remained confident in meeting demand through its supplier agreements, including its relationship with TSMC.
Long-Term Supply Contracts on the Rise
In response to these pressures, many customers are now signing long-term supply agreements lasting three to four years. Samsung confirmed last week it is also shifting toward longer contracts of three to five years with major customers.
These agreements reflect a broader shift. Customers want supply security, and suppliers want to guard against demand swings.
Ramachandran said he is not overly worried about the long-term outlook. He expects new entrants and capacity expansion to ease constraints over time.
The news comes after Broadcom announced a partnership with OpenAI to build 10 gigawatts of custom AI accelerators. OpenAI will design the chips and systems while Broadcom helps develop and deploy them.
TSMC did not respond to a request for comment at time of publication.
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