The AI boom is creating a domino effect. And with big tech locking up foundry capacities for at least 3 years, the lag seems permanent for the smaller players.
Reuters reports that even TSMC, the major producer of AI chips, is reaching its capacity limits with numerous supply chain constraints expected for the rest of the year. And honestly, the production limit isn’t about to increase any time soon, but a slight probability in 2027.
That will delay AI chip deliveries. But that’s a repercussion we all saw coming.
What’s more significant is how this scrunching of production capacity is impacting the rest of the market. Blame the boom in AI infrastructure because it’s not merely soaking up your memory but also your electricity flow.
In short, it’s resulting in a bottleneck migration- kind of a knock-off effect.
Suppliers are definitely prioritizing AI because of their billions of dollars worth of commitment to big tech companies. We’ve all seen it- the news headlines about the supercycle of huge investments by tech giants to ensure a constant supply of AI infrastructure and chips.
TSMC losing out on capacity isn’t a temporary demand swing. It’s that- the domino of bottlenecks.
The spearheaded focus on AI has pushed for an overwhelming demand for high-quality processors and memory. But then that pushed aside the common processors manufactured for consumer goods.
The traditional manufacturing capacity is sure to take the most brunt. You name it- packaging to raw material shortage, there’s a bunch of supplier constraints that aren’t even named. One of them is a warm shell shortage- it’s an expected crisis where AI firms have the chips but can’t power them. Hardware is sitting idle in warehouses in this case due to an electricity shortage.
As the demand for AI seems not to be taking a backseat, the problem will persist. It’s not a passing swing. It’s a structural imbalance, and TSMC’s production lapse just became the most crystal-clear proof of it.
