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AI Boom Strains Chip Supply: Demand Outstrips Output
9 Oct
Summary
- Company faces 70% demand shortfall for some products into 2029.
- AI data center build-out is driving the unprecedented demand.
- Significant investments are being made to scale production capacity.
Lumentum Holdings is grappling with a significant supply shortage for its optical components, a situation driven by the intense demand from the technology sector's expansion of AI data centers. CEO Michael Hurlston revealed that the company is unable to fulfill approximately 70% of the demand for certain products into 2029, with other component shortages expected to persist until 2028. "We are completely sold out, so there's no end in sight," Hurlston commented, noting the constraints have worsened significantly in the past six months.
In response, Lumentum is aggressively scaling production, increasing output at its Tokyo-area factory by twelvefold over the past two years. The company plans substantial investments, at least $350 million, in its Japanese facilities and has also expanded capacity in England. Hyperscalers are collaborating by sharing capital expenditure risks to support this expansion. Furthermore, Hurlston indicated that acquisitions may be necessary within the next year to broaden the company's product offerings and meet evolving customer requirements.
