Friday, July 1st 2022
NVIDIA to Cut Down TSMC 5nm Orders with the Crypto Gravy Train Derailed, AMD Could Benefit
NVIDIA is reportedly looking to reduce orders for 5 nm wafers from TSMC as it anticipates a significant drop in demand from both gamers and crypto-currency miners. Miners are flooding the market with used GeForce RTX 30-series graphics cards, which gamers are all too happy to buy, affecting NVIDIA's sales to both segments of the market. Before the crypto-currency crash of Q1-2022, NVIDIA had projected good sales of its next-generation GeForce GPUs, and prospectively placed orders for a large allocation of 5 nm wafers from TSMC. The company had switched back over to TSMC from Samsung, which makes 8 nm GPUs from the RTX 30-series.
With NVIDIA changing its mind on 5 nm orders, it is at the mercy of TSMC, which has made those allocations (and now faces a loss). It's incumbent on NVIDIA to find a replacement customer for the 5 nm volumes it wants to back out from. Chiakokhua (aka Retired Engineer), interpreted a DigiTimes article originally written in Chinese, which says that NVIDIA has made pre-payments to TSMC for its 5 nm allocation, and now wants to withdraw from some of it. TSMC is unwilling to budge—it could at best hold off shipments by a quarter to Q1-2023, allowing NVIDIA to get the market to digest inventory of 8 nm GPUs; and NVIDIA is responsible for finding replacement customers for the cancelled allocation.
The same article paints a different picture for AMD: the company has reduced orders for 7 nm and 6 nm nodes; but its 5 nm orders are unaffected. AMD makes not its its next-generation RDNA3 GPUs on 5 nm, but also its next-generation "Zen 4" CPU chiplets. Any drop in demand for GPU silicon would be internally adjusted by increasing "Zen 4" chiplet orders. AMD's growth as a processor manufacturer is no longer bottlenecked by technology-leadership, but by volumes. The company could jump at the prospect of higher 5 nm allocation, as it would enable it to increase output of "Zen 4" processors to meet rising demand of high-margin server processors with its upcoming EPYC "Genoa" and "Bergamo" processors.
Source:
Chiakokhua (Twitter)
With NVIDIA changing its mind on 5 nm orders, it is at the mercy of TSMC, which has made those allocations (and now faces a loss). It's incumbent on NVIDIA to find a replacement customer for the 5 nm volumes it wants to back out from. Chiakokhua (aka Retired Engineer), interpreted a DigiTimes article originally written in Chinese, which says that NVIDIA has made pre-payments to TSMC for its 5 nm allocation, and now wants to withdraw from some of it. TSMC is unwilling to budge—it could at best hold off shipments by a quarter to Q1-2023, allowing NVIDIA to get the market to digest inventory of 8 nm GPUs; and NVIDIA is responsible for finding replacement customers for the cancelled allocation.
85 Comments on NVIDIA to Cut Down TSMC 5nm Orders with the Crypto Gravy Train Derailed, AMD Could Benefit
I look forward to their reckoning after their greedy practises of the last 3-4 year.
This was the lie spread very early on by miners in anticipation of a crash making their scheme unprofitable to ensure that they can double-dip by getting rid of the hardware, and that's all it ever was.
-No more mining, or severely reduced, this is where the majority of the GPUs were going at the inflated prices
-People aren't cooped up inside post pandemic, and are now doing other things
-Everything is just more expensive, this is a lux item and an optional purchase, or people are just totally priced out of the market and have other priorities
-Power bills are not a joke, 600W cards are just stupid, consumers dont live in data centers which are equipped with the power and cooling necessary to run @ high wattage
-Prices are still too high on the ampere cards, or unavailable, best buy has no stock of 3070s FEs, its chronic, if you aren't around for a "Drop" then you can't buy one
Don't buy used miner eWaste, don't buy this 2+ year old generation of cards for overpriced retail, send an important message with your money
It looks like Lovelace will come with a much higher power draw across the board, and most likely with a huge price hike (everything in a coming months will come with a price hike, money just isn't worth as much any more). So, not really appealing from the start, no matter the performance increase.
The last time we saw this was in 2018. Cryptocurrency crash in early spring, and miners were selling their barely used Pascal cards (GTX 1080, 1080 Ti) - most of them were only mining for a couple of months, overpaid them, then they were just hoping to get any return and were selling them cheaply. So we had months of cheap used cards, but prices in stores remained unreasonably high - at time I just thought retailers were drunk on high profits from late 2017 cryptohigh. Tur(d)ing, RTX 2080, was released in fall of 2018, with a worse price / performance ratio than Pascal - price hike was higher than performance increase (but you got to be a tester for a couple of games that tried raytracing and DLSS). That actually drove the prices of now dwindling used Pascal cards higher.
In hindsight I now think high retail prices of Pascal cards that just didn't return to MSRP throughout 2018 were a clear sign the next gen will be priced much higher - prices used to fall way below MSRP when the old gen was nearly 2 years old.
And I think we're seeing something similar now. I know we've all seen headlines "card prices falling, card prices at all time low", but for instance here in Europe cheapest "$699" (800 EUR with tax) RTX 3080 card is still 850 EUR. A year and a half after release. And that's for a gimped LHR vesion. And if it plays out exactly the same as in 2018, retail prices will remain that high all the way to much more expensive Lovelace release.
But I'm sure we'll see plenty of articles on how that's normal, expected, and actually a good thing.
Also although many RDNA2 models are below SRP, Nvidia still is above supposedly less than 3 months away for Ada, so if Nvidia isn't happy with the sales are getting and has so much current gen stock why the prices are still so high? something doesn't add up!
According to rumors, NVIDIA has paid TSMC $1.64 billion in Q4 2021 to reserve 5nm capacity, with another $1.79 billion in Q1 2022.
Overall by the end of 2022 (5 quarters) supposedly the total ammount would be $9 billion.
According to Nvidia's earnings reports in Q3 2020 alone the spendings related to inventory purchases/ prepayments for future products was $2.54 billion, so draw your own conclusions.
Before 2 months there were rumors that Intel somehow secured 5nm TSMC capacity, so may it be Nvidia related?
On the topic: what nvidia is doing shows that they are indeed intentionally maintaining a shortage situation to maximize their profits. The only way that would work for them is if AMD would do the same, which they probably will. It doesn't takes too much to understand that nvidia and amd probably have secret agreements on this, which is completely illegal.
But as always the politicians are looking away on this because they are on the payroll. What a beautiful world we live in.
I do wish they were not cutting production though, because regardless of mining, next gen graphics cards were always hard to get / sold out the first few months at launch, as far back as I can remember anyway. Creating artificial shortages seems to be the name of the game these days though.
In any case, I don’t believe Nvidia is the only company that will cut back on orders with TSMC. The likes of Intel will surely be badly affected because they have paid a substantial amount to TSMC to ”hijack” allocation. If Intel is using TSMC 5nm primarily for their ASIC and GPUs, this cannot be a worst time for them since they are paying a lot, but may not be getting the ROI that they expected.I don’t want to burst your bubble, but this has always been the way profit seeking companies work. It makes no sense to fill the shelves and stores with GPUs that nobody is buying, which also puts pressure for you to lower prices. Computer hardware is not something cheap to produce, yet they depreciates really quickly. Just look at how much those RTX 3000 series cost a year back, and the expected value after RTX 4000 series arrives. Even without cryptomining skewing the prices, a last gen card quickly and substantially loses its value. And by the way, I am not defending Nvidia, but just pointing out the ugly truth.
IT consultancy seems to be holding on fine. People business... and I think that shift is global. Workforce is the key differentiator and we're about to get another Covid winter. All those stocks dealing in 'stuff' are in trouble, because there's no hands to make or move it.
I think what we can read between the lines is that computer parts are really a luxury item in the consumer space. We have SO. MUCH. CRAP. We'll just use it another year, because it still works fine. Back to my N=1... I'm still riding a 2016 GPU.
I'll reiterate what I've said many times while GPU prices were through the roof. Patience, patience, patience. Markets will correct and our discipline in not paying what we don't want determines how fast these shifts go.