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.