The growth of artificial intelligence is putting huge pressure on the global semiconductor industry, and the strain may not ease anytime soon. According to Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, demand for advanced chips continues to exceed what the company can produce. As AI adoption expands across industries, the gap between supply and demand is expected to remain a major challenge for years.

Speaking at TSMC’s annual shareholders’ meeting in Taiwan, Chief Executive Officer C.C. Wei said the company is still struggling to keep up with customer needs. “It will be a long time before we can meet customer demand,” Wei said.

AI adoption is increasing demand for advanced chips

The surge in demand is mainly due to the growing use of AI technologies in consumer products, businesses and government services. AI applications require powerful processors and advanced semiconductors, creating strong demand across multiple industries.

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TSMC manufactures chips for some of the world’s biggest technology companies, including NVIDIA and AMD. As the dominant player in the global foundry market, the company has become a crucial supplier for firms building AI infrastructure and advanced computing systems. Major customers such as NVIDIA and Broadcom are competing for access to TSMC’s most advanced manufacturing facilities as they race to develop next-generation AI products.

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Consumers could eventually feel the impact

The continued shortage of advanced semiconductors may eventually affect consumers as well. Industry experts have warned that strong demand for high-performance chips could lead to higher prices for smartphones, laptops, gaming consoles and new AI-powered devices. TSMC has also indicated that it may review its pricing strategy as demand remains strong. Though the company said it would approach any price increases carefully, it acknowledged the need to maintain profitability while investing heavily in new factories and production capacity.

TSMC is spending billions to expand production

To meet growing demand, TSMC is investing heavily in new manufacturing facilities, particularly in the United States. The company is building a major semiconductor hub in Phoenix, Arizona, and has already committed more than $165 billion to the project. Under plans linked to the US-Taiwan trade partnership, TSMC is expected to add at least four more chipmaking plants in the US, requiring another $100 billion in investment. Wei said the land TSMC has acquired in Arizona should be enough to support the company’s expansion needs for the next decade. Even with these investments, company executives have suggested that new production capacity may still not be enough to fully satisfy customer demand.

Tech companies are spending heavily on AI

The rush for advanced chips comes as major technology firms and cloud service providers dramatically increase spending on AI infrastructure. Collectively, these companies are expected to invest hundreds of billions of dollars in AI-related projects this year, creating even more demand for cutting-edge semiconductors. The strong outlook has already prompted TSMC to raise its full-year sales forecast. In April, the company also said its capital spending is likely to reach the higher end of its projected range, which could be as much as $56 billion this year.

AI success is boosting employee rewards

The AI boom is not only benefiting TSMC’s business but also its workforce. Wei reiterated that employees will receive more than a 30% increase in bonus payouts on average this year, reflecting the company’s strong financial performance and growing profits from AI-related demand. Although TSMC’s shares fell 1.7% in Taipei after Broadcom issued a weaker-than-expected outlook, the company’s stock has still risen more than fourfold over the past three years, largely driven by its central role in the global AI boom.