Nvidia, the global leader in artificial intelligence chips, is facing major supply chain challenges that are hampering its ability to meet growing demand for its products. Despite the company announcing a slowdown in revenue growth during the last quarter, experts and analysts confirm that demand for its chips is still at its peak.
Supply chain constraints
Nvidia relies on Taiwanese chipmaker TSMC to manufacture its chips, but TSMC's limited production capacity in advanced packaging has become a bottleneck, preventing it from meeting growing demand.
Blackwell chip manufacturing complexity
Nvidia’s latest “Blackwell” chip is one of its most advanced products, requiring complex packaging processes that take months to complete. This complexity has slowed production and impacted volumes available to the market.
Design Defect Crisis
The discovery of a flaw in Blackwell's design led to additional delays due to the company needing to modify the masks used in the manufacturing process. This caused chip yields to drop and costs to increase.
Financial and operational impacts
Nvidia expects gross profit margins to fall below 70% in the short term, due to production challenges.
However, the company has managed to ship about 13,000 samples of the new Blackwell chip, and expects to exceed its quarterly sales expectations.
Future outlook
Despite these hurdles, demand for Nvidia chips remains “exceptionally strong and very strong,” according to analysts, but the biggest challenge facing the company is how well it can ramp up production to meet the growing market’s needs.
Supply chain constraints
Nvidia relies on Taiwanese chipmaker TSMC to manufacture its chips, but TSMC's limited production capacity in advanced packaging has become a bottleneck, preventing it from meeting growing demand.
Blackwell chip manufacturing complexity
Nvidia’s latest “Blackwell” chip is one of its most advanced products, requiring complex packaging processes that take months to complete. This complexity has slowed production and impacted volumes available to the market.
Design Defect Crisis
The discovery of a flaw in Blackwell's design led to additional delays due to the company needing to modify the masks used in the manufacturing process. This caused chip yields to drop and costs to increase.
Financial and operational impacts
Nvidia expects gross profit margins to fall below 70% in the short term, due to production challenges.
However, the company has managed to ship about 13,000 samples of the new Blackwell chip, and expects to exceed its quarterly sales expectations.
Future outlook
Despite these hurdles, demand for Nvidia chips remains “exceptionally strong and very strong,” according to analysts, but the biggest challenge facing the company is how well it can ramp up production to meet the growing market’s needs.