As AI chip requirements skyrocket, Taiwan’s semiconductor industry faces unprecedented capacity strains, prompting calls for expanded manufacturing amid infrastructure bottlenecks and supply chain pressures that threaten to delay growth beyond 2026.
At SEMICON Taiwan 2026, MediaTek chief executive Tsai Li-hsing used a public appearance to underline just how tight the AI chip market has become, saying the industry needed far more capacity for 2027, 2028 and 2029. According to the report in People News, he described Taiwan’s semiconductor partners in cinematic terms before pressing for more output, a sign of how aggressively chipmakers are now trying to lock in supply well beyond the current cycle.
The pressure is not confined to chip designers. TSMC vice-president Hou Yongqing said equipment demand had almost doubled in six months, after rising from a baseline of one times expected demand at the end of last year to 1.5 times in the first quarter and 1.9 times by July, according to the same report. He said TSMC is now running around 13 fabs in Taiwan and five to six more overseas, close to 20 sites in parallel, and that some customers have already asked whether the company could stretch that to 30.
Hou said the bottleneck is not simply capital. Labour for construction and engineering, water, transport links and other infrastructure all constrain how quickly fabs can be built and fitted out. That fits with reporting from Taiwan News that Broadcom has also warned that surging AI demand is straining supply chains and that TSMC capacity has become a key constraint, with the risk of a broader choke point in 2026.
The strain is moving further down the chain. Unimicron chairman Jean Chien said ABF substrate capacity was now “extremely urgent”, because more complex AI designs require larger substrates and more layers, increasing the amount of production space each package consumes. People News reported that upstream material suppliers, many of them in Japan, are being pressed to expand as well, while Moody’s analysis, as summarised by Atlas PCB, suggests the industry’s pinch point is shifting from fab capacity to substrates, speciality chemicals and packaging materials, potentially holding chip delivery growth 15% to 20% below demand through 2027.
Disclaimer: This content is intended for informational purposes only. Readers are advised to exercise their own judgement, conduct due diligence, or consult a qualified expert before acting on any information provided.
