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

midian182

Posts: 6,578   +58
Staff member
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.

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.

 

terzaerian

Posts: 662   +924
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
 

brucek

Posts: 743   +1,014
TechSpot Elite
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.
 

NeoMorpheus

Posts: 362   +651
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

Posts: 1,791   +1,030
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

Posts: 1,791   +1,030
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.
 

NeoMorpheus

Posts: 362   +651
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

Posts: 2,313   +3,269
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.
 

NeoMorpheus

Posts: 362   +651
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

Posts: 570   +419
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

Posts: 1,808   +2,091
Staff member
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

Posts: 116   +116
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

Posts: 270   +228
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

Posts: 221   +108
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

Posts: 1,455   +728
The scene from teh pirates of the caribean when the navy captain says that it is just the business :D
 

0dium

Posts: 190   +224
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.