TSMC reportedly auctioning off excess wafer capacity, despite backlog of orders

[midian182]

What just happened? We've long heard that semiconductor manufacturers are working through a backlog of orders as they struggle to alleviate worldwide chip shortages, so it seems strange to learn that TSMC has just auctioned off its "excess" capacity.

According to ComputerBase sources (via PC Gamer), TSMC recently auctioned off its excess wafer capacity "to the highest bidders." No word on what the excess capacity might be or the bidders' identity, though it's thought to have gone to the automotive industry.

Rumors of a bidding system for chip capacity at Taiwan's foundries have surfaced again, media report, saying the system is in place and excess capacity for the 2nd quarter has gone to the highest bidders at a 15%-20% premium. $UMC $TSM #semiconductors

— Dan Nystedt (@dnystedt) March 3, 2021

Automakers have suffered more than most during the chip shortages. Many companies have already reduced or said they might reduce their output due to a lack of chips for their vehicles. The situation has led to the Biden administration taking steps to, hopefully, address the problem.

Desperation for manufacturing capacity has driven up TSMC's price. Financial analysis Dan Nystedt tweeted that excess capacity for the 2nd quarter cost the unknown highest bidders a 15% to 20% price premium, which will undoubtedly be welcomed by TSMC.

Covid-19 and the resulting number of people working from home, complex manufacturing processes making chips more difficult to produce, the larger number of chips in every device, logistical problems, package shortages, and the US-China trade war have produced a perfect storm leading to unprecedented chip shortage, and this is despite Wafer producers increasing their output 40 percent in December.

Wafer capacity leaders

Company	Monthly wafer manufacturing capacity	Total global capacity share
Samsung	3.1 million	14.7%
TSMC	2.7 million	13.1%
Micron Technology	1.9 million+	9.3%
SK Hynix	~1.85 million	9%
Kioxia	1.6 million	7.7%
Intel	884,000	~4.1%

The bad news is that the end of the crisis won't arrive anytime soon. Many analysts believe the market won't return to normal until sometime next year, by which time supply should have caught up with demand, and inventories will be replenished.

In other TSMC news, we recently heard that the company is set to produce 3nm chips by year's end with Apple as its partner.

Permalink to story.

https://www.techspot.com/news/88803-tsmc-reportedly-auctioning-off-excess-wafer-capacity-despite.html

 

[terzaerian]

Card manufacturers announcing paper launches for non-existent cards while bidding 20% premium they don't have over on chip manufacturing capacity TSMC doesn't even have because there is a drought

Clown world 2021

 

[Shadowboxer]

I bet TSMC must be making an absolute killing right now.

 

[brucek]

We are obviously seeing a lot more markup than just 15-20% in scalper (=market auction) pricing for high end GPUs, but I guess the manufacturers are not willing to make/price a special edition to connect the dots all the way through.

 

[punctualturn]

TSMC recently auctioned off its excess wafer capacity "to the highest bidders."

This is interesting.

Because it means that at least AMD for example, are not limited by TSMC, but by the amount of chips that they ordered.

Maybe somehow they projected less demand than what they have?

 

[mbrowne5061]

Card manufacturers announcing paper launches for non-existent cards while bidding 20% premium they don't have over on chip manufacturing capacity TSMC doesn't even have because there is a drought

Clown world 2021

Literally no one said nVidia or AMD won these bids. In fact, the speculation is that auto makers won the bid.

 

[mbrowne5061]

This is interesting.

Because it means that at least AMD for example, are not limited by TSMC, but by the amount of chips that they ordered.

Maybe somehow they projected less demand than what they have?

Or they decided there was no point in biding on capacity at a 15-20% premium, just to reduce their profit margins.

 

[terzaerian]

Literally no one said nVidia or AMD won these bids. In fact, the speculation is that auto makers won the bid.

Curses, deboonked again

 

[punctualturn]

Or they decided there was no point in biding on capacity at a 15-20% premium, just to reduce their profit margins.

But think about this, how did TSMC ended with a surplus?

That seems to indicate that their customers had a choice for more chips, but decided to do not order them.

 

[Theinsanegamer]

But think about this, how did TSMC ended with a surplus?

That seems to indicate that their customers had a choice for more chips, but decided to do not order them.

If there was no demand for the "surplus" then it wouldnt be going for a 20% premium.

TSMC was likely sandbagging total production and once demand was driven up they figured they could make additional money while claiming "shortages" as to why nvidia/AMD/car manufacturers/whomever uses TSMC cant get enough chips. Also known as "oversubscribing production"

If you actually BELIEVE that TSMC has a "surplus" then I have a fantastic bridge in alaska to sell you.

 

[punctualturn]

If there was no demand for the "surplus" then it wouldnt be going for a 20% premium.

TSMC was likely sandbagging total production and once demand was driven up they figured they could make additional money while claiming "shortages" as to why nvidia/AMD/car manufacturers/whomever uses TSMC cant get enough chips. Also known as "oversubscribing production"

Makes sense.

If you actually BELIEVE that TSMC has a "surplus" then I have a fantastic bridge in alaska to sell you.

Uncalled for, to be honest.

 

[OortCloud]

The world needs many more companies capable of producing these wafers. Monopolistic behaviour like this can't be allowed to continue. Yes I understand that producing cutting-edge silicon is extremely complex, but something needs to change. Hopefully the companies that TSMC blackmails will remember this and look elsewhere if an alternative becomes available.

 

[neeyik]

Surplus capacity doesn't necessarily mean TSMC has the capability of generating more chips on their N7 node for AMD. They still have fabs producing inventory on 28nm through to 500nm nodes, as well as 16FF, N7, and N5. Most of Nvidia's DRIVE products are made on 16FF and 12FFN, for example (on the very latest one is on N7).

 

[Austinturner]

This is interesting.

Because it means that at least AMD for example, are not limited by TSMC, but by the amount of chips that they ordered.

Maybe somehow they projected less demand than what they have?

TSMC almost certainly contracts out only the capacity it is confident of being able to deliver on each node it produces (so it doesn’t cop huge penalties for failure to deliver) and then when demand is high works their butts off to increase capacity and optimise production, creating some un-contracted capacity, they will then logically try to maximise their return on that surplus capacity.

I don’t necessarily believe over-subscribing would make sense as the person above suggested, they get paid for chips delivered and they can always sell the extra capacity if they have it.

The company with the highest margins and demand for their end products should bid the most for that surplus capacity.

 

[kiwigraeme]

I concur with Austinturner - Everyone else is getting a nice profit bump - why not the foundry - These are big boys - They have to fulfill their orders with other big boys.
If your company wanted YOU to work overtime/weekends to make some more money - You would want them to charge more and yourself to get paid more .
Not only this is how capitalism works - it's how we want to be rewarded for doing extra work .
Some of TSMC customers are doing the scalping - Just like very popular music bands promoters - setting aside tickets to the auction markets.Viagogo ( or whatever it's called ) -then publicly saying it's a real shame scalpers do this - the band just wants everyone to pay the normal price

 

[Bamda]

Surplus capacity doesn't necessarily mean TSMC has the capability of generating more chips on their N7 node for AMD. They still have fabs producing inventory on 28nm through to 500nm nodes, as well as 16FF, N7, and N5. Most of Nvidia's DRIVE products are made on 16FF and 12FFN, for example (on the very latest one is on N7).

That explanation is too logical for most of these people to understand. And car mfg. are not using the same nodes as Nvidia and AMD.

 

[toooooot]

The scene from teh pirates of the caribean when the navy captain says that it is just the business

 

[0dium]

Surplus capacity doesn't necessarily mean TSMC has the capability of generating more chips on their N7 node for AMD. They still have fabs producing inventory on 28nm through to 500nm nodes, as well as 16FF, N7, and N5. Most of Nvidia's DRIVE products are made on 16FF and 12FFN, for example (on the very latest one is on N7).

Yeah. Why did everyone think that it's spare N7 capacity. This seems unlikely, must be an older node.