TSMC Claims Some Companies are Sitting on Chip Inventories

[TheLostSwede]

It appears that some of the current chip shortages might be artificially induced by one or multiple companies in the chip supply chain, according to an article by TIME Magazine. The article is taking a look at the role TSMC is playing in the global chip production industry and TIME has interviewed TSMC chairman Mark Liu among others in the industry.

Mark Liu is quoted as saying "But I told them, "You are my customer's customer's customer. How could I [prioritize others] and not give you chips?"" when asked about the complaints by car makers, since they were among the first to suggest TSMC was one of the issues. Due to the various allegations against TSMC, Liu had a team collect data points to try and figure out what was going on and to see which customers were truly running low on stock and which customers that might be stockpiling for a rainy day.



The end result of this was that TSMC decided to reallocate some production to customers it deemed to be running out of stock, whereas those that appeared to be sitting on their inventory, for whatever reason. This was apparently not a popular decision, but it seems like a fair one, considering the current situation. Liu is again quoted saying "there are people definitely accumulating chips who-knows-where in the supply chain," suggesting that it might not actually be TSMC's customers that are the issue here, but rather middlemen and distributors that are hoarding chips and pushing up prices.

The article is worth a read if you're interested in a slightly closer look at TSMC, although it doesn't go into any more detail about the chip hoarding. On the other hand, it does look at the geopolitical issues that TSMC and Taiwan faces, while Liu also frowns upon the current US$50 billion budget that President Biden has allocated for new foundries in the US, considering that TSMC is investing twice as much on its own over the next three years.

View at TechPowerUp Main Site

 

[Space Lynx]

good on TSMC for the re-allocation. but they will just have to suck it up, cause the President did the right thing in giving 50 billion to build up chip factories here in the USA. its a strategic resource.

 

[_Flare]

Yeah, stockpiling makes almost no sense. The only quick idea i have would be some big players try to dry out the supply of their competitors, but that would be a real stunt.
And if such thing would become public after some of the targeted competitors went insolvent/bankrupt.
Oh that would be a story, something like "A cartel of big players of commertial sector XY killed 100 startups by stockpiling needed chips."

I hope someone shines right on it
cheers

 

[TheLostSwede]

good on TSMC for the re-allocation. but they will just have to suck it up, cause the President did the right thing in giving 50 billion to build up chip factories here in the USA. its a strategic resource.

You should really the entire piece, as they're actually laughing at the US for investing so little.

 

[Space Lynx]

You should really the entire piece, as they're actually laughing at the US for investing so little.

I think TSMC is the one who will be sad in 2025 and beyond. Lot of people are sick of buying a new phone every year (other than iphone sheep), etc. Market trends will change, and on top of that with 4+ new factories coming online by end of 2023, there is going to be a gluttony supply of chips for all industries. TSMC can laugh all they want. USA is getting 2-3 more new factories on its soil, and thats enough for national security reasons.

 

[TheLostSwede]

Yeah, stockpiling makes almost no sense. The only quick idea i have would be some big players try to dry out the supply of their competitors, but that would be a real stunt.
And if such thing would become public after some of the targeted competitors went insolvent/bankrupt.
Oh that would be a story, something like "A cartel of big players of commertial sector XY killed 100 startups by stockpiling needed chips."

I hope someone shines right on it
cheers

Look at it as a short to mid-term investment. If you take something simple like and STM32 MCU, they're using in just about everything these days, as they are were dirt cheap at something like $1 or less for the most basic options. Now those same chips are going for $10 or more for the popular options.
Not all distributors are doing this, but a lot of the parts are no longer in stock with 52 weeks or longer lead times, so those that have stock, are taking advantage of it.

I would actually expect quite a few startups going bust due to this, as it's simply not economically viable to produce a lot of things right now, not just because of the price of some components, but also due to the much higher shipping costs that will eat in to your bottom line.

I think TSMC is the one who will be sad in 2025 and beyond. Lot of people are sick of buying a new phone every year (other than iphone sheep), etc. Market trends will change, and on top of that with 4+ new factories coming online by end of 2023, there is going to be a gluttony supply of chips for all industries. TSMC can laugh all they want. USA is getting 2-3 more new factories on its soil, and thats enough for national security reasons.

Well, that's your opinion, but you are clearly not keeping up with who the world is changing. TSMC is likely to continue to be on top of the foreseeable future, as they're building a couple of fabs in Arizona, if you missed it and are considering other parts of the world as well. I guess you simply don't understand how many customers they have outside of Apple.
I honestly don't think TSMC is the least bit concerned about US national security.

 

[Bomby569]

People do whatever they want with what they buy. I don't think stockpilling is the problem. The problem is why companies feel the need to stockpile. We need more companies producing chips, not just fabs, but more companies.

 

[dyonoctis]

I think TSMC is the one who will be sad in 2025 and beyond. Lot of people are sick of buying a new phone every year (other than iphone sheep), etc. Market trends will change, and on top of that with 4+ new factories coming online by end of 2023, there is going to be a gluttony supply of chips for all industries. TSMC can laugh all they want. USA is getting 2-3 more new factories on its soil, and thats enough for national security reasons.

Actually, iPhone sheep are also slowing down their upgrade :
People are keeping their old iPhones longer (cnn.com)

 

[las]

Actually, iPhone sheep are also slowing down their upgrade :
People are keeping their old iPhones longer (cnn.com)

I know Android sheeps that still upgrade yearly, I guess they want to have os updates for more than 12 months

 

[Bomby569]

phone wars

 

[TheoneandonlyMrK]

Hmnn , few companies are prepping big GPU releases soon too Soo some hoarding is to be expected.

 

[AusWolf]

I had a feeling something like this would surface eventually. PC components being a commodity one day, then not available the next, and the whole thing being blamed on covid (which I think has little to do with it) while prices are going up for no apparent reason just doesn't smell right.

 

[TheLostSwede]

Hmnn , few companies are prepping big GPU releases soon too Soo some hoarding is to be expected.

I don't think that's what being mentioned in the article. It's more likely that we're talking about MCU and SoC makers here, as a lot of those products have skyrocketed in price.

 

[Space Lynx]

Look at it as a short to mid-term investment. If you take something simple like and STM32 MCU, they're using in just about everything these days, as they are were dirt cheap at something like $1 or less for the most basic options. Now those same chips are going for $10 or more for the popular options.
Not all distributors are doing this, but a lot of the parts are no longer in stock with 52 weeks or longer lead times, so those that have stock, are taking advantage of it.

I would actually expect quite a few startups going bust due to this, as it's simply not economically viable to produce a lot of things right now, not just because of the price of some components, but also due to the much higher shipping costs that will eat in to your bottom line.


Well, that's your opinion, but you are clearly not keeping up with who the world is changing. TSMC is likely to continue to be on top of the foreseeable future, as they're building a couple of fabs in Arizona, if you missed it and are considering other parts of the world as well. I guess you simply don't understand how many customers they have outside of Apple.
I honestly don't think TSMC is the least bit concerned about US national security.

I understand full well how many customers TSMC has, but I also understand when the new factories go online (also Intel is taking over the car business since TSMC failed the car industry), Intel has already made several deals with the car industry. Once Intel's new factories go online, sure they will never match TSMC in volume, but overall shortages across all industries will finally catch up.

Bloomburg and several other financial predictions predict a gluttony of chips by end of 2023. I think in 2025 TSMC actually will be hurting quite badly. With super high inflation occurring, people are going to be less willing to upgrade electronic devices at the pace they used to, combine that with the new factories coming online from TSMC and Intel, its going to be a perfect storm for over supply and less demand probably late 2023 or early 2024. Which is good news for the consumer, but I just think TSMC will be hurting as far as record profits go, they won't be record anymore imo, they are enjoying their peak right now.

 

[TheLostSwede]

I understand full well how many customers TSMC has, but I also understand when the new factories go online (also Intel is taking over the car business since TSMC failed the car industry), Intel has already made several deals with the car industry. Once Intel's new factories go online, sure they will never match TSMC in volume, but overall shortages across all industries will finally catch up.

I think you're vastly overestimating Intel's ability as a foundry. Also, TSMC didn't fail anyone, the suppliers to the car makers failed them.

Bloomburg and several other financial predictions predict a gluttony of chips by end of 2023. I think in 2025 TSMC actually will be hurting quite badly. With super high inflation occurring, people are going to be less willing to upgrade electronic devices at the pace they used to, combine that with the new factories coming online from TSMC and Intel, its going to be a perfect storm for over supply and less demand probably late 2023 or early 2024. Which is good news for the consumer, but I just think TSMC will be hurting as far as record profits go, they won't be record anymore imo, they are enjoying their peak right now.

TSMC will as I said, never be hurting, just because demands goes down, doesn't mean it'll hurt TSMC, as they have more business than capability and this was the case two years ago as well.
They produce such a wide range of chips that it'll be impossible for anyone to compete directly with them at all levels. TSMC's profits might go down, but the only real effect that might have, is that they'll invest a bit less in new fabs, which they are cleverly investing in now, when they're making money hand over fist.
No oversupply is really expected and it's easier for someone like TSMC to shift production to something else, than it is for Intel.

 

[Halo3Addict]

I didn't realize there was a middle-man between customers and TSMC. I'll have to give the article a read later.

 

[neatfeatguy]

I don't think that's what being mentioned in the article. It's more likely that we're talking about MCU and SoC makers here, as a lot of those products have skyrocketed in price.

But what better way to help secure high prices right when the major Holidays are coming up?
1) Stock pile chips
2) Slow down manufacturing to help limit available inventory
3) Keep prices high or push higher due to limited availability
4) Ensure folks that more will be done to improve upon inventory
5) ????
6) Profit!

 

[TheLostSwede]

I didn't realize there was a middle-man between customers and TSMC. I'll have to give the article a read later.

How did you figure that out from the article? The issue is that the car manufacturers are complaining to TSMC that they can't get chips from ST, NXP, Qualcomm etc. and blame it on TSMC. TSMC responded by saying some companies are stockpiling chips, but they don't know who in the supply chain between TSMC's customers and the end customer who is to blame.

But what better way to help secure high prices right when the major Holidays are coming up?
1) Stock pile chips
2) Slow down manufacturing to help limit available inventory
3) Keep prices high or push higher due to limited availability
4) Ensure folks that more will be done to improve upon inventory
5) ????
6) Profit!

You're evil...

 

[neatfeatguy]

You're evil...

It's a guess on my part, but it feels like a logical flow of things based on how things are currently going and when coupled with the up and coming Holidays it makes sense on a sick, twisted level.

Bottom line is, for these companies - make the investors happy. Make them happy by making more money. Make more money by taking advantage of the situation....every braking news story about a shortage or a pandemic or a natural disaster or a freak accident (like a fire or power outage or explosion) that could, maybe, even when the above mentioned issues don't relate to a company directly.

Spoiler

Breaking news! Metal prices are still on the rise!
Breaking news! The cost of tuna has gone up 150% due to high demand.

Can making company for canned tuna says....tuna prices are increasing! We need to slow down manufacturing of cans so we can increase the bottom line of our product! Cut production by 30%, blame it on the pandemic of worker shortage and higher prices for metal. Increase the cost of our products by 50%.

Granted, this is just a dumb, basic example - but I wouldn't put it past any company out there to make as much money as they can by utilizing all the shit floating around right now.

The wife's parents, they already did their Christmas shopping for the grandkids and finished up with it about a week ago because they understand the issues of technology being in short supply. Are they fools for getting their shopping done so early? Or are they smart and bypass all the other people that'll wait until Black Friday or closer to Christmas?

 

[Fourstaff]

I must say this can either go wonderfully or horribly wrong. On one hand, doing detective work and trying to debottleneck the whole supply chain is commendable but on the other hand that opens to further abuse, be it contractual rights or just further gaming from middlemen.

 

[TheLostSwede]

It's a guess on my part, but it feels like a logical flow of things based on how things are currently going and when coupled with the up and coming Holidays it makes sense on a sick, twisted level.

Bottom line is, for these companies - make the investors happy. Make them happy by making more money. Make more money by taking advantage of the situation....every braking news story about a shortage or a pandemic or a natural disaster or a freak accident (like a fire or power outage or explosion) that could, maybe, even when the above mentioned issues don't relate to a company directly.

I'd say a touch too much tinfoil hat here, but yes, it's no doubt that some companies are taking advantage of the current situation.
However, most issues right now, has nothing to do with any "actual" shortages for most things, instead it appears to be logistics that is holding things up, which in turn leads to further shortages.

As I wrote in a different thread, when everything from fuel prices to the actual shipping containers are hitting record high pricing, plus of course the shipping costs from one continent to another, you end up with certain goods not being shipped, simply because there's no profit to be had and other goods gets a price hike at multiple stages until it reaches the consumer. This doesn't take into consideration labour related issues due to various restrictions or the long queues of freight ships shitting outside various major harbours around the world, waiting to be loaded or unloaded. Even IKEA has been in the news explaining why there are shortages in their stores and the main issue is transportation of the goods, not that the goods can't be made.

The wife's parents, they already did their Christmas shopping for the grandkids and finished up with it about a week ago because they understand the issues of technology being in short supply. Are they fools for getting their shopping done so early? Or are they smart and bypass all the other people that'll wait until Black Friday or closer to Christmas?

I'd say it was a smart move, as Black Friday is not going to be much of an even this year imho.

I must say this can either go wonderfully or horribly wrong. On one hand, doing detective work and trying to debottleneck the whole supply chain is commendable but on the other hand that opens to further abuse, be it contractual rights or just further gaming from middlemen.

Well, I would believe that TSMC has limited options when it comes to re-allocating production schedules, but I think they are trying to make sense of it all, since they're clearly not seeing the same issues as some industries are. At the end of the day, it comes down to what types of contracts that have been signed. It's also not really up to TSMC to prevent something like this, as it should be their customers responsibility. However, I guess ST, NXP, Qualcomm etc. are more than happy to sell as much as they can, just like Nvidia and AMD are, so this also comes down to another bout of greed making business so the poor shareholders can afford to eat...

 

[awesomesauce]

so he say some people are lying to increase/inflate price? shocking news..

 

[Bomby569]

so he say some people are lying to increase/inflate price? shocking news..

his problem is paranoia, he's afraid like many predict, this increase in production will end in a surplus of supply.

 

[demian_vi]

I think TSMC is the one who will be sad in 2025 and beyond. Lot of people are sick of buying a new phone every year (other than iphone sheep), etc. Market trends will change, and on top of that with 4+ new factories coming online by end of 2023, there is going to be a gluttony supply of chips for all industries. TSMC can laugh all they want. USA is getting 2-3 more new factories on its soil, and thats enough for national security reasons.

we got it USA is great and tsmc will be sad because people won't buy new devices every year going forward, but they will buy new cars which intel will equip according to you

 

[Turmania]

I believe a person occupying a significiant position in a company, should be more direct and not getting engaged in gossip. If you know the companies responsible you should name them or do not speak about it. But gossip is so lame.