TSMC Cuts Back CAPEX Budget Despite Record Profits

[konga]

TSMC is currently the most advanced foundry right now (for certain chip lines at least), they can charge whatever they wish. We as consumers can choose to vote with our wallet.

It's actually their clients who are voting with their wallets, and Apple cast a preeetty large vote recently when they flat-out told TSMC no to another price hike. More of their clients should follow suit, imo.

edit: Apparently there was an update to this story that I missed: https://www.macrumors.com/2022/10/05/apple-agrees-to-tsmc-chip-price-hike/

Disappointing.

 

[evernessince]

It's actually their clients who are voting with their wallets, and Apple cast a preeetty large vote recently when they flat-out told TSMC no to another price hike. More of their clients should follow suit, imo.

edit: Apparently there was an update to this story that I missed: https://www.macrumors.com/2022/10/05/apple-agrees-to-tsmc-chip-price-hike/

Disappointing.

Apple has no leverage. TSMC has a sizable lead in the market which means that you either accept TSMC's prices or your phones are going to be a combination of slow and power hungry compared to the competition.

 

[watzupken]

Slightly surprising that 5nm has already exceeded 7nm revenues, looks like Apple's moving fast to smaller nodes despite some weak demand ~

Apple Ditches iPhone Production Increase After Demand Falters

Apple Inc. is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize, according to people familiar with the matter.

www.bloomberg.com

Why is it surprising though? If you look at most of the big chip companies like, AMD, Apple, Mediatek, Qualcomm, Nvidia, etc, are all bunched up at TSMC's 5nm, or 4nm (which essentially is still 5nm). The demand and $$$ probably came in some time last year, so no surprises here really. I believe Intel is also one of the big players tapping on TSMC's 5nm.

Apple has no leverage. TSMC has a sizable lead in the market which means that you either accept TSMC's prices or your phones are going to be a combination of slow and power hungry compared to the competition.

My take is, neither of them have an advantage over one another. Apple pays big money for being a "guinea pig" for TSMC's cutting edge node and is a major customer with AMD being a distant second if I am not wrong. If Apple pulls out completely, you can be sure the prices TSMC can charge will come crashing down. To Apple, this is a cost of using a third party foundry, but because the partnership have worked well over the years, thus, it is also very hard for them to move out of it.

 

[Gica]

Almost half of mass production (46%) is based on 16nm nodes or higher.

 

[TheLostSwede]

Much demand indeed. now if only TPU increase its capex(???) budget for its proofreaders.

Very commonly used term, but also explained in the post that it's about fab expansion.

 

[Wirko]

TSMC has 2nm on their roadmap for 2026. N3 will be around for 10 years yes but it won't be the leading node as you imply for 10 years. It'll be the leading node for a tad under 3 years, the same as 5nm.

In addition, this move is in response to a global recession and massive drop in worldwide chip demand. Not due to a slowdown in node processes advancement. This was a long time coming, people purchased a ton of chips during the pandemic and now the pendulum has swung the other way.

New nodes require increasingly higher volumes to be profitable. So while it's true what you're saying, fewer chip designers will be able to afford manufacturing on the leading node. Also, because of high costs, designers have started to combine latest node dies with older node dies on the same package, and they use the latest node sparingly. That's all good but it further reduces demand for leading node wafers.

The cost of designing a chip is rising. The cost of building a fab is rising sharply (see Moore's Law, not the First in this case but the Second). Not just chip designers, even governments won't be able to afford multibillion subsidies every year to each of the big three. I won't be surprised of one of the three (Samsung?) abandons leading edge development in a few years. Most foundries that existed a decade or two ago have already done that, and it happened when fabbing was far less capital intensive.

Consumers only have limited sway on modern chip pricing. Critical infrastructure and industries like healthcare rely on chips to function. You need servers to provide a bevy of online services as well, all of which has crept deeper into our everyday lives.

This isn't a matter customers should be tackling alone, governments should keep a close eye on chip manufacturing and prices as it is now of the upmost import to national security and the economy. Companies should absolutely not be able to charge whatever they want for what is increasingly becoming a necessity to operate in the modern world.

Hm, in many cases we consumers are still paying for these chips. It's monthly payments though, not $500 at once.

 

[Bomby569]

We need competition as this become a monopoly. The worst is that no one seems to be able to face them apart from Samsung and even them. I'm rooting for the Chinese to do something amazing in this field.

 

[Wirko]

But you see that's socialism (price caps & what not) & if you look at the general sentiment over here most users will not support it! So in essence "Capitalism" prevails & we get what we paid for

Or is it older-style capitalism? Capitalism evolves all the time, most users here are too young to remember but an important role of governments used to be to break up monopolies.

 

[Fourstaff]

Consumers only have limited sway on modern chip pricing. Critical infrastructure and industries like healthcare rely on chips to function. You need servers to provide a bevy of online services as well, all of which has crept deeper into our everyday lives.

This isn't a matter customers should be tackling alone, governments should keep a close eye on chip manufacturing and prices as it is now of the upmost import to national security and the economy. Companies should absolutely not be able to charge whatever they want for what is increasingly becoming a necessity to operate in the modern world.

We have a lot of say actually. Use phone for 1 more year, buy that budget option, go for the previous gen processors, etc. You can see how Apple is reducing their iPhone 14 orders due to lack of demand. I have no idea how they are going to legislate chip manufacturing and cost though, technology moves a lot faster than legislation.

 

[r9]

Moving fast? This is the 3rd gen they've been on N5 for the majority of their phones.

Only the iPhone Pro / Apple A16 is on N4 and that is still a "5nm" node "marketed" as "4nm". It's 6% more dense than N5, not a notable difference at all, most nodes have variations (low power, high power etc.) that can be +/- 15%

They've never taken this long to go to a new node with the iPhone.

View attachment 265732

It will be interesting to see where this goes.
Intel hit the wall a while back now tsmc.
Get ready to use 2-3kw PSU or maybe they might start bundling with a generator.

 

[RandallFlagg]

It will be interesting to see where this goes.
Intel hit the wall a while back now tsmc.
Get ready to use 2-3kw PSU or maybe they might start bundling with a generator.

Been saying this a while now but N7 / 7nm class nodes was the end of higher density (more chips per wafer) cancelling out the effects of higher node and development costs.

In the past when you go to a smaller node, the higher number of chips per wafer gives a cost per wafer manufacturing benefit that is enough to cancel out inflation / complexity of development cost per chip.

N5 was where cost per die went up slightly vs N7. i.e. that cost to manufacture went up slightly, whereas in the past it would go down. So there's no longer a cost benefit to going to a new smaller node.

Like everything, this is going to bifurcate the market. The 'haves' will buy expensive devices with N3 / 3nm or smaller class chips in them, while cheaper devices will have N5 class chips in them.

Apple is already bifurcating their lineup with iPhone 14 using the N5 node A15 SoC, while the iPhone Pro uses the N4 (still 5nm class) node A16. We also see it with Zen 4 pricing.

We're going to see that again next year, only the high end iPhones will have 3nm class N3 node A17. Everything else will have the 5nm class N4 node A16. I think it will stay like that for a long time.

 

[evernessince]

We have a lot of say actually. Use phone for 1 more year, buy that budget option, go for the previous gen processors, etc. You can see how Apple is reducing their iPhone 14 orders due to lack of demand. I have no idea how they are going to legislate chip manufacturing and cost though, technology moves a lot faster than legislation.

End consumers reducing purchase frequency will have an impact insofar as the leverage they have over a company's total profits.

Just as an example, 31% of Nvidia's income is from the sale of gaming video cards. An even small fraction of that 31% comprises customers that have the choice to reduce purchase frequency. That is because a portion of GeForce cards are purchased by prosumers / professionals for various work and those individuals do not have the option to reduce purchase frequency in many cases.

If recent / upcoming product launches are any indication, customers buying "budget" options are paying prior high-end prices.

 

[Fourstaff]

Just as an example, 31% of Nvidia's income is from the sale of gaming video cards. An even small fraction of that 31% comprises customers that have the choice to reduce purchase frequency. That is because a portion of GeForce cards are purchased by prosumers / professionals for various work and those individuals do not have the option to reduce purchase frequency in many cases.

Most professionals do in fact have an option: they can delay the purchase too, and make do with whatever they currently have. Unless those professionals are aiming for the latest and greatest, in which case they should also have the pricing power to pass on the cost to their customers.

For a very long time we get to enjoy higher performance for same money every year, but the recent slowdown in tech advancement from the foundries is putting an end to that. We used to get a few foundries who are able to compete at the cutting edge, now TSMC is the only one at the cutting edge. No one comes close so they get to dictate the price of the latest and greatest node. Anyone who wants the price friendly option will need to move to the previous nodes (7nm or 10nm) where competition is still alive.

 

[Wirko]

Been saying this a while now but N7 / 7nm class nodes was the end of higher density (more chips per wafer) cancelling out the effects of higher node and development costs.

In the past when you go to a smaller node, the higher number of chips per wafer gives a cost per wafer manufacturing benefit that is enough to cancel out inflation / complexity of development cost per chip.

N5 was where cost per die went up slightly vs N7. i.e. that cost to manufacture went up slightly, whereas in the past it would go down. So there's no longer a cost benefit to going to a new smaller node.

Like everything, this is going to bifurcate the market. The 'haves' will buy expensive devices with N3 / 3nm or smaller class chips in them, while cheaper devices will have N5 class chips in them.

Apple is already bifurcating their lineup with iPhone 14 using the N5 node A15 SoC, while the iPhone Pro uses the N4 (still 5nm class) node A16. We also see it with Zen 4 pricing.

We're going to see that again next year, only the high end iPhones will have 3nm class N3 node A17. Everything else will have the 5nm class N4 node A16. I think it will stay like that for a long time.

Very true. On top of that, heat density went out of control on N5, if not before.
On the other hand, manufacturing costs for any given node probably go down over time, we just don't know how fast and by how much.

 

[RandallFlagg]

Very true. On top of that, heat density went out of control on N5, if not before.
On the other hand, manufacturing costs for any given node probably go down over time, we just don't know how fast and by how much.

It might go down over time, but that time is probably measured in years, and it depends a great deal on volume.

But that said, not only is development cost on smaller nodes near exponential, the actual 300mm wafer cost is going up so much that the per-chip cost is now going up as well.

Look at row 8 specifically, the per chip cost went from $2433 at 90nm to 233 at 7nm, and now is reversing with 5nm. This is just the cost to manufacture, development cost and capital to build the smaller nodes is ramping up as well. This is why I'm saying, we hit the inflection point with 5/7nm nodes.

It will cost more per chip to make from now on. That cost will be passed to the consumer.

 

[ARF]

Things don't look rosy, at all.

The Taiwan Semiconductor Manufacturing Company (TSMC) has cut down its orders to suppliers according to reports in the Taiwanese press. TSMC, which is facing an industry slowdown as its customers struggle with demand slowdown, cut down capital expenditures for 2022 earlier this year, and the firm cited a lack of demand forecasting as the primary reason behind the drawdown.

TSMC Cuts Down Orders By Up to 50%, Sending Shockwaves Says Report (wccftech.com)