What the 28-Nanometer Shortage Means for the Chip Industry
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Several leading chipmakers, including Qualcomm (QCOM) and Nvidia (NVDA), have announced that they will have trouble fully satisfying demand in the coming months because of capacity constraints for cutting-edge 28-nanometer chip wafers. Taiwan Semiconductor (TSM), or TSMC, the world's largest foundry and technological leader in 28 nm chip production, simply doesn't have enough production capacity on hand to fulfill all its orders. The shortage is likely to cause a scramble in the chip supply chain--foundries will race to expand capacity and buy new equipment, while chipmakers will look at alternatives, such as using 40 nm chips or switching to competing foundries, in order to fulfill demand.
How We Got Here
Initially, rumors swirled that TSMC's production yields for 28 nm chips were subpar and that technological roadblocks were the source of many customers' frustrations. But more-recent comments indicate that 28 nm yields are acceptable, but TSMC simply doesn't have enough production capacity to fully meet demand.
Brian Colello does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.