Update 1/9/2021 8:50am PT: Clarified that TSMC doesn't conduct all chip packaging in-house - some packaging is done by outside firms that are also subject to the ongoing ABF substrate shortages.
It's no secret that AMD's Zen-3 based Ryzen 5000 series CPUs are flying off the shelves faster than AMD can make them, but it looks like the same will be the case for Zen 3 notebook chips when they land in Q1. A report from DigiTimes doesn't specifically call out the reason behind the issues, but claims they could be due to either PlayStation 5 orders or a lack of packaging and substrate availability.
But the latter issue doesn't only affect AMD. Reports show that Nvidia, Apple, Huawei, EV cars, and virtually any other market that uses silicon interposers are suffering at the hands of the shortage of critical chip packaging supplies.
AMD Depends on TSMC, Who Depends on...
TSMC manufactures the silicon itself and then packages it onto a substrate so the chip can be soldered or installed onto a motherboard of some type, though it isn't entirely clear which products TSMC packages for its customers or that use OSAT (outsourced assembly and test) firms for final assembly. This is called chip 'packaging,' and reports of chip packaging problems have been circulating for a few weeks.
Of course, it doesn't help that TSMC's capacity is already fully booked, but this news could shed new light on the reasons behind the supply issues. Previously, it was suspected that TSMC simply didn't have enough in-house lithographic capacity to make more chips, but it turns out that its reliance on external sources for either packaging supplies or final packaging services possibly contributes to the problem. TSMC's major ABF substrate suppliers, including Unimicron Technology, Kinsus Interconnect Technology, and Nan Ya PCB, are experiencing shortages.
Digitimes' sources indicate that AMD can currently only satisfy about 50 to 60 percent of Zen 2 demand for notebooks, and that ODM's (Original Design Manufacturers) expect to run into serious shortage issues when Zen 3-based notebooks enter the market in Q3. That's narrowed down to two possibilities (or perhaps both): Either TSMC or OSAT firms can't package enough chips, or AMD's chips for the PlayStation 5 are soaking up all of its production capacity.
So, Just Increase Supply?
The situation isn't helped by the fact that demand is currently through the roof right now. AMD's CPUs, almost all GPUs, and the latest consoles are being bought up like pastries at a bakery — except there's only one bakery for an entire city.
Naturally, in such a situation, AMD is quite powerless as a fabless chipmaker because it relies on TSMC for its parts. One could argue that TSMC's suppliers should increase supply, but that would require increased capacity and investments from the substrate makers. No one can predict with any certainty that post-pandemic demand will remain at this level, potentially making that a poor investment for those firms, so that doesn't seem likely.
This means the current difficulties with finding Ryzen 5000, Radeon RX 6000, PS5, and Xbox Series X/S consoles are likely to continue. And the same goes for Nvidia's RTX 30-series GPUs.