TAIPEI, May 22 (Reuters) - Advanced Micro Devices ( AMD ) is working with Taiwan partners to ramp up production capacity as stronger-than-expected demand squeezes the global CPU market, CEO Lisa Su said on Friday.

Speaking in Taipei after a visit to China, Su said she had met AMD's largest customers in China and globally and came to Taiwan to ensure supply capacity could support a significant increase in central processing unit (CPU) production.

Taiwan plays a pivotal role in the global AI supply chain for companies including Nvidia and Apple, and its position is anchored by the world's largest contract chipmaker, TSMC, a major supplier of AMD.

"The overall CPU market has had significantly higher demand than any of us predicted a year ago," Su said. "I would say the CPU market is tight."

She said AMD was ramping up capacity quickly and expected supply to increase every quarter this year, with significantly more supply planned for 2027 and beyond.

Growth was being driven by AI inferencing and agentic AI, Su said.

CPUs have taken centre stage as companies and businesses gravitate towards agentic AI - systems that perform autonomous functions - broadening demand beyond graphics processing units, or GPUs, that are used to train large models.

Su met Chinese Vice Premier He Lifeng in Beijing on Monday, with He saying China welcomes companies including AMD to "seize the opportunities presented by China's development and deepen mutually beneficial cooperation."

China accounts for about 20% of AMD's revenue, Su said, adding that the country remained a very important market for the U.S. chip designer.

"Frankly, you look at the size of the market and the size of our portfolio, and we'll continue to partner very closely with our Chinese customers," she said,

She said AMD would continue working closely with Chinese customers while complying with U.S. export controls that restrict shipments of some of its high-end AI chips.

TAIWAN ECOSYSTEM

AMD said on Thursday it would invest more than $10 billion in Taiwan's AI sector to deepen strategic partnerships and expand its capacity to build and assemble advanced AI chips.

Su said the investment would focus on advanced packaging, substrates and manufacturing for rack-scale systems.

"Because the lead time on some of these investments is quite long, they have to secure land and buildings and manufacturing capacity to do that," she added.

She said AMD was co-investing with partners to ensure sufficient capacity for expansion in 2026 and beyond, including through 2029.

The U.S. chip designer said it was working with Taiwanese partners including ASE, its unit SPIL, PTI, Wiwynn, Wistron, Inventec, Unimicron, AIC, Nan Ya PCB and Kinsus.

AMD also said on Thursday it had started ramping production of its Venice CPUs using TSMC's 2-nanometre process technology.

"We made two bets, actually. The first bet was a bet on TSMC, and I think that has turned out to be a really great bet for us," Su said.

She said AMD's second major bet was that increasingly complex silicon technology would require chips to be broken into smaller pieces and integrated through advanced packaging technologies, an approach now widely adopted across the semiconductor industry.