Futu's Mao Junhao: Broadcom's Strategic Layout and Supply Chain Challenges in the AI Era: From HBM to CPO

In the current AI-driven technology wave, semiconductor giant Broadcom (U.S.: AVGO) is playing a key role. Its strategic rollout in high-performance memory (HBM) and the customized AI chip market is becoming increasingly deep, even as it faces severe challenges across the global semiconductor supply chain.

Broadcom’s performance in the AI chip arena is especially impressive, particularly with its customized ASIC (application-specific integrated circuit) chip solutions. According to Counterpoint Research’s prediction, Broadcom is expected to secure 60% of global ASIC AI chip orders next year, underscoring its strong competitiveness in specific markets. Broadcom manufactures AI chips on behalf of tech giants such as Google (U.S.: GOOG) and OpenAI, and it has already signed major compute-power cooperation deals with OpenAI for 1GW and with Anthropic for 3GW. Meta (U.S.: META) also has several-GW-level ASIC customized chip orders. These partnerships not only strengthen Broadcom’s core position in AI infrastructure, but also drive rapid growth in revenue from its AI chip business. Broadcom chairman Hsieh Fu-yang has even called for a target of AI chip revenue reaching $100 billion in 2027, with expected growth of about five times within two years. This not only shows Broadcom’s deep technical strength in customized chip areas, but also reflects the diversification strategies adopted by AI tech giants to avoid reliance on a single supplier.

Broadcom plays an important role as a key customer in the HBM supply chain, especially through its collaboration with Samsung Electronics. Samsung Electronics’ new-generation HBM4 product has received positive feedback from NVIDIA (U.S.: NVDA), and negotiations on supply with AMD (U.S.: AMD) customers are in the final stages. In the HBM3E product space, Broadcom is also Samsung Electronics’ core large customer. Although SK hynix’s HBM4 products have faced performance disputes, industry consensus generally holds that, against the backdrop of AI demand far outstripping supply, Samsung and SK hynix’s HBM shipment plans are unlikely to change significantly. As one of the major demand parties, Broadcom’s supply stability is crucial to the AI industry chain.

However, the AI boom has pushed the global semiconductor supply chain to its limits as well. Broadcom executive Natarajan Ramachandran issued a rare and serious warning, pointing out that its key manufacturing partner TSMC (U.S.: TSM) is nearing its limit in advanced process capacity. He expects that the full-year supply pressure in 2026 will be very significant, and that things will only improve after capacity expansion is in place sometime after 2027. This is not limited to wafer fabrication; the issue of supply tightness has spread to upstream and downstream areas such as laser components and printed circuit boards (PCBs). For example, the delivery lead time for paddle cards used in optical communication modules has jumped from 6 weeks to 6 months, highlighting the fragility of the supply chain. To cope with this kind of uncertainty, Broadcom has noted that more and more customers are signing long-term agreements lasting three to four years with suppliers to lock in capacity and ensure steady delivery, which has also become a common trend across the entire semiconductor industry chain.

In addition to deepening its core semiconductor business, Broadcom is also actively expanding its solutions portfolio. Recently, Broadcom launched the Symantec Carbon Black XDR platform—an cloud-based solution designed to provide comprehensive cyber security defenses for organizations that lack resources to implement advanced security. This move not only enriches Broadcom’s product lineup, but also shows its continued investment in infrastructure software, driving collaborative innovation with domestic industry chain partners.

Broadcom has a clear strategy for the AI era, especially with strong growth potential in the customized AI chip and HBM markets. However, the current tight situation in the global semiconductor supply chain—particularly the bottlenecks in TSMC’s advanced process capacity, key optical communication components, and PCBs—poses significant challenges to its future development. Broadcom and its partners are addressing these challenges by expanding capacity, signing long-term agreements, and promoting innovative technologies such as co-packaged optics (CPO). After 2027, as supply chain pressures ease and new technologies mature, Broadcom is expected to continue maintaining its leading position in the AI-driven semiconductor market.

(Data source: Semiconductor Pulse, Semiconductor Industry in Depth, Chip Express Speed, Chip Intelligence, Wall Street Insights, Zhitong Finance, Benzinga, 199IT, Tencent Technology, Caixin Media)

(The author is a licensed person by the CSRC; neither they nor their affiliates hold any financial interests in the issuers of the recommended share offerings mentioned above.)

Analyst profile: Graduated from the University of Nottingham in the UK, holds a master’s degree in finance. He is currently a senior analyst at Futu. With over 12 years of experience in the finance industry and investing, he specializes in Hong Kong and U.S. new economy sectors. His style is mainly a “hold steadily, launch sudden strikes” approach.