There is an increase in demand for AI. We’re already feeling this based on how prices of memory have gone up. Now, it seems that even the world’s largest semiconductor manufacturers are having trouble keeping up as well. According to TSMC, they’re struggling to keep up with AI demand.
TSMC struggling to keep up with AI demand
According to reports from both Reuters and Bloomberg, it appears that TSMC is struggling due to the overwhelming demand for AI. During a shareholder meeting, TSMC CEO C.C. Wei said, “Customer demand is so high, and we can only support so much. We are doing our best to ensure TSMC does not become a bottleneck.”
TSMC operates in several countries, including the US. However, even with its expansion in the US, it’s not enough. To make matters worse, it seems that TSMC is considering raising its prices. When asked by shareholders if TSMC might raise its price, Wei said that the company would “like to do that.” However, he also said TSMC will refrain from making abrupt increases.
It’s not surprising that even TSMC, at its size, is facing difficulties meeting demand. The world is all over the place right now. The war in Iran has caused major disruptions in the supply of oil. That in turn has had its effect on various industries, causing prices to be raised across the board.
This means that the price hikes we’re seeing aren’t in isolation and could greatly complicate things moving forward. If it becomes too expensive to produce certain components, companies might scale back. They might delay the release of new products, or new products won’t have any major upgrades, which could cause customers to hold off from buying them.
Diversifying sources
That being said, it’s not surprising that companies are looking to move beyond TSMC. Relying on a single company on a normal day is already risky. But in this current climate, it’s not the smartest play.
This is why we’re not surprised to hear that companies like Apple are looking elsewhere. More recently, there are reports that Apple has turned to Intel for the production of some of its chips. The Cupertino company isn’t ditching TSMC yet, and it can’t. However, for the production of older chips that don’t require such advanced manufacturing processes, Apple can use other sources.
Don’t expect things to return to normal so soon either. Various companies and analysts have indicated it could be years before the market normalizes.
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