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 wave of technological innovation, the semiconductor giant Broadcom (U.S.: AVGO) is playing a key role. Its strategic push in the high-performance memory (HBM) and custom AI chip markets is becoming increasingly deep, while it also faces severe challenges across the global semiconductor supply chain.

Broadcom’s performance in the AI chip arena is especially impressive, particularly its custom ASIC (application-specific integrated circuit) chip solutions. According to predictions by Counterpoint Research, Broadcom is expected to secure 60% of global ASIC AI chip orders next year, highlighting its strong competitiveness in specific markets. Broadcom manufactures AI chips on behalf of tech giants such as Google (U.S.: GOOG) and OpenAI, and 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 orders for custom ASIC chips. These collaborations not only reinforce Broadcom’s core position in AI infrastructure, but also drive rapid growth in revenue from its AI chip business. Broadcom chairman H.ock Fuzzz? Chen Fuyang more? 更喊出? (U.S.: AVGO) set a target that AI chip revenue will reach $100 billion by 2027, expecting about a fivefold growth within two years. This not only shows Broadcom’s deep technical strength in the custom chip space, but also reflects the diversified strategies that AI giants are adopting to avoid relying on a single supplier.

Broadcom plays an important role as a major customer within the HBM supply chain, especially through its partnership with Samsung Electronics. Samsung Electronics’ new-generation HBM4 products have received positive feedback from NVIDIA (U.S.: NVDA), and supply negotiations with AMD (U.S.: AMD) customers are in the final stage. In the HBM3E product area, Broadcom is also Samsung Electronics’ core big customer. Although SK hynix’s HBM4 products have previously faced performance controversy, industry-wide views generally hold that, under the backdrop of AI demand far outstripping supply, the HBM shipment plans of Samsung and SK hynix will basically not change significantly. As one of the main demand parties, Broadcom’s supply stability is crucial to the entire AI industry chain.

However, the AI boom is pushing the global semiconductor supply chain to its limits. In a rare and stern warning, Broadcom executive Natarajan Ramachandran pointed out that the advanced process capacity of its key manufacturing partner TSMC (U.S.: TSM) is nearing its limit, and he expects supply pressure throughout 2026 to be very significant, only improving after production capacity expansion is in place after 2027. This problem is not limited to wafer manufacturing; issues related to supply tightening have spread to upstream and downstream segments such as laser components and printed circuit boards (PCBs). For example, paddle cards used in optical communication modules have seen their delivery cycle jump from 6 weeks to 6 months, underscoring the fragility of the supply chain. To deal with such uncertainties, 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 stable deliveries—an approach that has also become a common trend across the entire semiconductor industry chain.

Besides deepening its focus on core semiconductor businesses, Broadcom is also actively expanding its solutions portfolio. Recently, Broadcom introduced the Symantec Carbon Black XDR platform. This is a cloud-based solution designed to provide comprehensive cybersecurity defenses for organizations that lack resources for complex security deployments. This move not only enriches Broadcom’s product lineup, but also shows its ongoing investment in infrastructure software, along with collaboration and innovation with domestic industry supply chains.

Broadcom’s strategic layout in the AI era is clear—especially its strong growth potential in the custom AI chip and HBM markets. However, the 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, it is expected that as supply-chain pressure eases and new technologies mature, Broadcom is likely to continue maintaining its leading position in the AI-driven semiconductor market.

(Data source: Semiconductor Xinying, Semiconductor Industry in Depth, Xin Jisu, Xin Zhixun, Wall Street Insights, Zhitong Finance, Benzinga, 199IT, Tencent Technology, CaLianShe)

(The author is a licensed person by the CSRC, and neither the author nor their related parties hold any financial interest in the issuers of the recommended shares mentioned above.)

Analyst bio: Graduated from the University of Nottingham in the UK, holds a master’s degree in finance, and currently serves as a senior analyst at Futu. With more than 12 years of experience in the financial industry and investing, they are skilled in new-economy sectors in Hong Kong and the United States. Their style is mainly “staying steady for surprise attacks.”