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TSMC cancels chip price cuts and promises $100B investment surge

297 points by baybal2 6y ago

LatteLazy 6y ago
Careful setting next year's quotas based on last year's shortages...
- carlmr 6y ago
  True, but where do you see demand dropping off? I would actually assume demand will go up even more, since the economy was slowed down due to the pandemic.
  - foolmeonce 6y ago
    I think the changes pushed people to invest in new devices, etc, for a per-user lifestyle, while going back to restaurants, meeting rooms, etc, there's an excess of second hand inventory.
    - Shivetya 6y ago
      oh I bet many are going to find the opportunity provided by the equipment gives them a lot of flexibility with work but also to communicate with friends and family. Many had never considered using zoom, their ipads, and other means, to keep in touch. The visual aspect may finally lead to where people will desire phones calls are both audio and visual. maybe the video phone will become an actual reality instead of something most people only see on TV and in movies
  - bsder 6y ago
    > True, but where do you see demand dropping off? Likely December. Right now, because everyone is fearful of shortages, they've overbought or are in the process of overbuying. At some point, everyone is going to realize that, in the US, carrying inventory has tax implications, and everybody is going to try to dump a bunch of inventory back into the system that they really didn't need and aren't prepared to pay taxes on. Which will be fine for a while--until the middlemen get back up to what they consider useful inventory levels and quit buying. And all the prices will crash.
    - iopq 6y ago
      For TSMC there's very little risk This is because a newly competitive AMD takes up a ton of wafers. They can't make them fast enough, and in 2022 they are releasing a completely new platform with DDR 5 on 5nm, and presumably new GPU line. This should again clobber Intel 10nm products. Even if there's no chip shortage, the customers of TSMC are very healthy (AMD, Apple, other phone manufacturers).
    - rcxdude 6y ago
      Who's keeping inventory? Certainly for consumer channels there's basically no inventory to be had.
      - bsder 6y ago
        End companies, themselves. Any inventory that shows up gets overbought immediately. Two companies I know have x10 the microcontrollers they need for the year because they overbought when they could. If they pushed those microcontrollers back right now, they'd make quite a nice profit. But they won't. Instead, those companies will hit the tax implications starting in December and then will try to push their overbought inventory. Of course, at that point everybody will be trying to push their inventory and the prices will crash.
  - rasz 6y ago
    Crypto bans would free a large portion of GPU demand.
  - LatteLazy 6y ago
    Honestly, I think it should already be dropping off. Everyone, their kids and their pets has updated their electronics this year. That made sense as work/school from home was a thing. Now they have new electronics, and no need for additional electronics. Plus pretty soon things will reopen, and people will have opportunities to spend money on beer and restaurants and events. Even if covid 2.0 launches this year, I already have a new ipad etc. I think there'll be very low sales for most electronics for a while.
- bigdogc 6y ago
  I don’t think the shortage will be over in the next 2-3 years at the least. This is a huge problem that the media only briefly covers. Biden just announced 25b to semiconductors bc homeland security knows we have major flaws in the supply chain.
- Wohlf 6y ago
  This isn't about next year though, this is about planning capacity for the next decade at least.
Hypx 6y ago
This reminds me of Moore's Second Law, namely that the cost of maintaining Moore's Law will itself follow an exponential growth curve. You figure there will come a date where any attempt to maintain Moore's Law will become so expensive that there's no way it can avoid slowing down drastically. At which point the semiconductor industry will behave like other heavy industries and improves at a much more modest rate.
bigdogc 6y ago
How much would it cost to start a design semiconductor business? On the low end of the budget.
- qbasic_forever 6y ago
  To build chips similar to what TSMC produces (i.e. some of the most cutting-edge fab tech in the world)? Hundreds of billions of dollars. Decades of experience. Growing silicon crystals and turning them into transistors barely bigger than a few dozen atoms is immensely difficult. And then turning that into a process you can repeat with precision and churn out at high yield is another enormous hurdle.
  - staticassertion 6y ago
    Serious question as someone totally naive on this. A few hundred billion dollars seems like an extremely good deal to lead this area of technology - why don't we see funding for this at a government level? I mean, we now have a 2 trillion dollar infrastructure plan. Is there an impediment I'm not aware of? Or maybe it's not as good of a deal as I think?
    - qbasic_forever 6y ago
      Modern semiconductors were invented in America, literally why we call it Silicon Valley. We used to have the best fabs in the world but 80's and 90's corporate American business culture decided it was better to shut down all that manufacturing and move it overseas for more short-term profit. They're now coming to the hard realization that maybe that was a massive mistake.
      - Gibbon1 6y ago
        20 years ago I had the line, American businessman and political leaders are stupid. Because they think they own those factories in China and the far east.
      - cbozeman 6y ago
sschueller 6y ago
Maybe we should start pulling chips of trashed electronics. There must be hundreds of thousands decently fast chips going into our trash. How many dead xboxes and PlayStations have chips in them that are still good? I'm thinking of a reverse pick and place machine that pulls chips of boards (boards that can not be used to fix other dead devices) and is able to test each valuable component for later reuse.
- Nextgrid 6y ago
  It's technically possible for sure, but I would be surprised if the total cost of such a process was worth it compared to buying new chips in bulk.
- xxs 6y ago
  >How many dead xboxes and PlayStations have chips in them that are still good? Those things have one big APU (with weak CPU cores), some VRM and memory, GDDR5 + useless DDR3. I'd discount the APU as it'd need someone to make OS support for with the blessing of Sony/Microsoft. That leaves the chips of GDDR5, which can be used by low end GPUs - I don't think they'd ever recoup and investment and likely cheap manual labor of preheat + hot air is the easier option. No idea if anyone would get a license from AMD or NVidia for such GPU. Edit: the capacitors would have the best value but well... I cant see anyone relying on old caps for anything but repair.
  - eptcyka 6y ago
    You can buy a motherboard with the xbone apu in China and run windows 10 on it. https://www.anandtech.com/show/16336/installing-windows-on-an-xbox-one-s-apu-the-chuwi-aerobox-review https://www.anandtech.com/show/16336/installing-windows-on-a...
- baybal2 6y ago
  > Maybe we should start pulling chips of trashed electronics. There must be hundreds of thousands decently fast chips going into our trash. This is already been happening for decades on industrial scale in countries doing eWaste recycling. Just a decade ago, you could've still find people selling refurbished chips in Shenzhen on every corner. Now it kinds of became a much more low profile enterprise. The US defence department, colloquially known as the pentagon, ran a wargame scenario a few years ago to see what will happen if US will be hit with a worst case scenario, years long semiconductor unavailability due to sabotage of domestic fabs, massive industry wide cyberattack, or something happening to Taiwan. One of comissioned think tanks recommended that exact methods of military going door-to-door to gather old gaming console, smartphones, and PCs for conversion to use in munitions, and military equipment.
throwaway4good 6y ago
From the article: "However, Liu said that it is "economically unrealistic" for all countries to "onshore" additional chip production, warning that this could lead to more unprofitable capacity." Well. The world is clearly not listening to that. So the question is how the business of chip manufactoring will look in 2 or 3 years?
- simonh 6y ago
  He may well be right, but concerns about supply chain security might make it worthwhile for countries to subsidise capacity that would not otherwise be economically viable.
  - throwaway4good 6y ago
    It makes sense for China to overinvest in national chip manufactoring due to sanctions. However for the west, of which Taiwan here is a part of, it is very risky. If the west no longer supplies China's chip market, it would need significant less chip manufactoring capacity.
    - cwhiz 6y ago
      If the west can’t supply China, the west should ban Chinese imports.
      - nindalf 6y ago
        You assume there would be malice involved. Even today TSMC prioritises some customers (Apple) over others (car manufacturers). In a future Taiwan that is a part of China, TSMC might have a new pecking order where Huawei is at the top and now Apple is chip constrained. You'd ban all Chinese imports unless one Chinese company rewrites it's contracts? Of course not.
        cwhiz 6y ago
        With China there will unequivocally be malice.
heisenbit 6y ago
The expected price reductions will have been part of the financial modelling for products. Big customers of TSMC is Apple which traditionally build the best products with the best inputs and then sells them for quite some time benefiting from lower input costs.
ksec 6y ago
1. TSMC were spending ~$30B per year on capital expenditure already. 2. Since leading edge node is forever increasing in cost, the next 3 years, i.e 3nm in 2022 and 2nm in 2024 are expected to be higher. ~$100B investment aligned with their initial plan / trend / target anyway. 3. So really the major news is stopping ( or to be precise, delaying ) price reduction. Which is unusual but understandable given the current demand situation. And No, it is not TSMC's fault. You should ask how every single Fabless Semiconductor company has failed with their demand, supply chain analysis and projection. Although one could argue it is not their fault either, since their client gave wrong projection. The only company that is not affected is possibly Apple. 4. There has been mounting pressure from investors, politicians and MSM media on Intel IDM 2.0, and supply problems. This announcement feels more like addressing those concerns. 5. Remember both Samsung and Intel are expanding capacity. And even GF and many other smaller players. It took DRAM and NAND three years to catch up with demand ( and then over supply ). Which in hindsight is pretty damn impressive. Although during the ~2016 - 2019 everyone felt awful.
- Kliment 6y ago
  Every single fabless semiconductor designer failed to predict demand because their customers lied to them. The car industry pulled a really dick move last year, and then pulled an even more dick move in the opposite direction, and now everyone is screwed. Back in early 2020 the car manufacturers decided that demand for cars would go down, and because they have a religious aversion to keeping any stock, cancelled lots of orders with their vendors, screwing said vendors over. Their vendors could not afford their fab slots because automotive is such a big part of their revenue, so they cancelled their fab slots. Those slots were happily sold on to entertainment and computing customers, who anticipated a jump in demand due to people staying home more. So far so normal. However, the car industry got it badly wrong - people, afraid of public transit, started buying more cars rather than less. The car industry, being screwed due to their just-in-time religion of zero stock, was faced with their production lines stopping so they called up all their vendors, and asked for those orders back, and some more on top. The vendors then tried to get their fab slots back, and were told to come back next year. Some of them ended up buying other fabless IC designers out of their slots, causing the problem to spread. Others cancelled their existing orders to other customers, and auctioned off their existing inventory to increasingly desperate car manufacturers at a 6x to 8x premium. Anyone who was not prepared to pay that or didn't act fast enough was screwed. From that point on, a bunch of companies that depend on those lines of microcontrollers had to rapidly redesign their product to use another device, taking even more devices off the market with unplanned demand. The users of those devices then had to move to others, causing even more availability cascades. This is how two nasty moves by the car industry caused global market disruption in a number of industries that depend on electronics. This is not a normal "demand has increased, and industry can't keep up" event, it's elephants dancing and trampling everyone else underneath. This is further aggravated by the top three automotive semiconductor suppliers (NXP, Renesas, Infineon) having their facilities destroyed in two unrelated disastrous events - a fire at Renesas' wafer processing plant, and Texas freezing over, destroying NXP's and Infineon's fabs through cleanroom contamination and process interruption. Those events took out months' worth of production, and destroyed product that had already been sold before manufacture. This would have been recoverable in a normal market, because distributor stock could hold a couple months, but in this case it was game over for non-automotive customers as all distributor stock was already gone by then. I see this in my work every day now - customers coming to me for help with redesigning products to use a different microcontroller, or help with sourcing parts from unusual sources because their normal channels are gone. I've been in this industry a long time and never seen anything like this before. This is not a failure of supply chain analysis and projection on the part of the fabless semicon vendors. This is their biggest customers fucking their vendors over not once but twice by lying to them about their own demand.
georgeburdell 6y ago
Selfishly... so will all this CapEx by TSMC, Samsung, and Intel put pressure on wages? I’m in the industry at a large company getting 3% raises, 10% of comp as stock, and a salary about 1/3 less than a software dev. All while being highly reviewed. I write a lot of software for my job (although it’s not my title) and I’ve been thinking of trying for pure software jobs even if the work is more boring (I do semiconductor R&D)
- ed25519FUUU 6y ago
  3% raise a pretty typical for software engineers as well.
  - justsid 6y ago
    3% raise of 50k is much less than 3% of 150k though. GP could get a hella big pay bump and then much larger raises if he switched, even if on paper it’s still the same percentage.
- coryrc 6y ago
  I switched for the money
- throwawayiIiIII 6y ago
  I also find it surprising that Hardware Engineers have a lower pay scale (Although I didn't hear very big differences like you said). Is there some kind of supply-demand behind this? Engineers for car-related things as well. Anecdotally I think you could in theory get a title change to software engineer, while doing the same thing, to get more pay.
  - kccqzy 6y ago
    There are big differences. A close friend who's a hardware engineer shared with me her salary. With five years of experience and a MS, her salary is the same as a fresh-out-of-undergrad junior software engineer at the same company. That's $120k in the valley.
MangoCoffee 6y ago
1. can we afford to just build fab without consideration of profit? what you going to do when you can't turn a profit with all the fabs in the US? 2. TSMC and the rest of the foundry industry are exposed to the highly cyclical nature of the semiconductor industry. we are seeing the high demands for chip because of covid and car vendors' f'ck up. what you going to do with all the fabs build in the US when you are hit with downturn? we saw Intel struggle with 10nm and 7nm delay. i think its wiser to invite fab company like TSMC and Samsung to build fab in the US even with smaller capacity.
- ip26 6y ago
  1. Yeah, we certainly could, but profit is what got us from 50um to 3nm.
- dirtyid 6y ago
  Some choice quotes from Mark Liu, chairman of TSMC this week agreeing with you: * "It's economically unrealistic for all the countries to build additional chip production capacity," * “Uncertainties led to double booking, but actual capacity is larger than demand,” How quickly those concerns are resolved “really depends on future U.S.-China negotiations.” * each country developing its own domestic semiconductor industry would lead to a lot of “nonprofitable” capacity. >what you going to do with all the fabs build in the US when you are hit with downturn? Priority sourcing from domestic fabs, let TSMC whither, by design. Semi is oil now, there's more strategic/geopolitical considerations than supply/demand curve. US/EU/CN do not want Taiwan to have semi dominance, it's not in anyone's interest. Current TSMC position is happenstance due to poor industrial policies that countries are scrambling to address. IMO press releases and capex spending around Arizona announcement suggest TSMC wasn't prepared to built US fab, let alone 6. US pressured them, EU failed to. There's a good chance TSMC/Taiwan will try to delay their silicon shield evaporating for as long as they can. Probably not a coincidence big ticket US weapons sales are scheduled around when fabs would be up.
  - genmud 6y ago
    Speaking as someone in AZ, the fact that we can get a 5nm fab going here in the US speaks volumes to how effective that pressure was. I actually disagree with Mark Liu, on his opinion on it leading to a lot of nonprofitable business... I think that for the US and EU it is actually critical from a national security and economic standpoint to develop new semiconductor capabilities. I think that there will be profit in doing domestic semiconductor, but only because the government is going to have to subsidize the buildout of this capability. I do think that its going to become a race to the bottom for wafer/ic costs, but that is actually a really good thing. I think there are going to be more companies that are developing in house technology and more focus on things like FPGA and edge-based compute. If TSMC, GlobalFoundries, UMC and Intel are smart, they will focus on pivoting towards the software/simulation side of things, IP cores and flexible logic like FPGA type of solutions. Ideally they would want every big company developing their own CPUs, edge devices, etc. and have them optimized for their process nodes. I suspect this won't be the last major fab push, especially since people are seeing how fragile the supply chain is.
tempfs 6y ago
I am wondering if this concentration of capacity in Taiwan with China looming over it is really such a great idea.
- vkou 6y ago
  It's been a great idea for Taiwan, and it's been a great idea for price sensitive consumers, who don't give two figs about where in the globalized marketplace their products come from. Whether it's been a great idea for someone who isn't a price sensitive consumer doesn't matter - markets don't optimize the world for the comfort of ideologues. You can't sell ideology. If China were to successfully annex Taiwan, there would be two likely outcomes. 1. China would be difficult to sanction, because in a world with chip shortages, we can't drop our reliance on TSMC fabs. (See, also, Russia selling oil and gas to the EU, despite sanctions on it. Given the option to take the moral high ground, and using Russian natgas to not freeze to death in the winter, Germans are taking the latter, while the Department of State gnashes it's teeth.) 2. Or, as some posters on HN gleefully speculate, the TSMC fabs will be destroyed, either by TSMC, or by the United States. I'm sure that will be quite cathartic for all of thirty minutes, until we all realize that we're in for a multi-year chip shortage that makes today's problems look like nothing. Hope everyone's looking forward to half the supply, and quadruple the prices.
- fastball 6y ago
  TSMC is building a fab in AZ.
  - knowaveragejoe 6y ago
    While true, if I recall correctly that fab will be a tiny minority of TSMC's overall output.
mullingitover 6y ago
This reminds me of a fun fact I learned many years ago, which is that there's a corollary to Moores Law: the same growth curve applies to the cost of building new fabs.
qaqa 6y ago
How do you think the company will pay for this capital expenditure outlay – with cash, debt financing, sell additional shares of stock, something else? What makes you think the company will use this method of financing? Do you think this is the right approach? Why or why not?
deleted 6y ago
[deleted]

297 points by baybal2 6y ago

LatteLazy 6y ago

Careful setting next year's quotas based on last year's shortages...

carlmr 6y ago
True, but where do you see demand dropping off? I would actually assume demand will go up even more, since the economy was slowed down due to the pandemic.
- foolmeonce 6y ago
  I think the changes pushed people to invest in new devices, etc, for a per-user lifestyle, while going back to restaurants, meeting rooms, etc, there's an excess of second hand inventory.
  - Shivetya 6y ago
    oh I bet many are going to find the opportunity provided by the equipment gives them a lot of flexibility with work but also to communicate with friends and family. Many had never considered using zoom, their ipads, and other means, to keep in touch. The visual aspect may finally lead to where people will desire phones calls are both audio and visual. maybe the video phone will become an actual reality instead of something most people only see on TV and in movies
- bsder 6y ago
  > True, but where do you see demand dropping off? Likely December. Right now, because everyone is fearful of shortages, they've overbought or are in the process of overbuying. At some point, everyone is going to realize that, in the US, carrying inventory has tax implications, and everybody is going to try to dump a bunch of inventory back into the system that they really didn't need and aren't prepared to pay taxes on. Which will be fine for a while--until the middlemen get back up to what they consider useful inventory levels and quit buying. And all the prices will crash.
  - iopq 6y ago
    For TSMC there's very little risk This is because a newly competitive AMD takes up a ton of wafers. They can't make them fast enough, and in 2022 they are releasing a completely new platform with DDR 5 on 5nm, and presumably new GPU line. This should again clobber Intel 10nm products. Even if there's no chip shortage, the customers of TSMC are very healthy (AMD, Apple, other phone manufacturers).
  - rcxdude 6y ago
    Who's keeping inventory? Certainly for consumer channels there's basically no inventory to be had.
    - bsder 6y ago
      End companies, themselves. Any inventory that shows up gets overbought immediately. Two companies I know have x10 the microcontrollers they need for the year because they overbought when they could. If they pushed those microcontrollers back right now, they'd make quite a nice profit. But they won't. Instead, those companies will hit the tax implications starting in December and then will try to push their overbought inventory. Of course, at that point everybody will be trying to push their inventory and the prices will crash.
- rasz 6y ago
  Crypto bans would free a large portion of GPU demand.
- LatteLazy 6y ago
  Honestly, I think it should already be dropping off. Everyone, their kids and their pets has updated their electronics this year. That made sense as work/school from home was a thing. Now they have new electronics, and no need for additional electronics. Plus pretty soon things will reopen, and people will have opportunities to spend money on beer and restaurants and events. Even if covid 2.0 launches this year, I already have a new ipad etc. I think there'll be very low sales for most electronics for a while.
bigdogc 6y ago
I don’t think the shortage will be over in the next 2-3 years at the least. This is a huge problem that the media only briefly covers. Biden just announced 25b to semiconductors bc homeland security knows we have major flaws in the supply chain.
Wohlf 6y ago
This isn't about next year though, this is about planning capacity for the next decade at least.

Hypx 6y ago

This reminds me of Moore's Second Law, namely that the cost of maintaining Moore's Law will itself follow an exponential growth curve. You figure there will come a date where any attempt to maintain Moore's Law will become so expensive that there's no way it can avoid slowing down drastically. At which point the semiconductor industry will behave like other heavy industries and improves at a much more modest rate.

bigdogc 6y ago

How much would it cost to start a design semiconductor business? On the low end of the budget.

qbasic_forever 6y ago
To build chips similar to what TSMC produces (i.e. some of the most cutting-edge fab tech in the world)? Hundreds of billions of dollars. Decades of experience. Growing silicon crystals and turning them into transistors barely bigger than a few dozen atoms is immensely difficult. And then turning that into a process you can repeat with precision and churn out at high yield is another enormous hurdle.
- staticassertion 6y ago
  Serious question as someone totally naive on this. A few hundred billion dollars seems like an extremely good deal to lead this area of technology - why don't we see funding for this at a government level? I mean, we now have a 2 trillion dollar infrastructure plan. Is there an impediment I'm not aware of? Or maybe it's not as good of a deal as I think?
  - qbasic_forever 6y ago
    Modern semiconductors were invented in America, literally why we call it Silicon Valley. We used to have the best fabs in the world but 80's and 90's corporate American business culture decided it was better to shut down all that manufacturing and move it overseas for more short-term profit. They're now coming to the hard realization that maybe that was a massive mistake.
    - Gibbon1 6y ago
      20 years ago I had the line, American businessman and political leaders are stupid. Because they think they own those factories in China and the far east.
    - cbozeman 6y ago

sschueller 6y ago

Maybe we should start pulling chips of trashed electronics. There must be hundreds of thousands decently fast chips going into our trash. How many dead xboxes and PlayStations have chips in them that are still good? I'm thinking of a reverse pick and place machine that pulls chips of boards (boards that can not be used to fix other dead devices) and is able to test each valuable component for later reuse.

Nextgrid 6y ago
It's technically possible for sure, but I would be surprised if the total cost of such a process was worth it compared to buying new chips in bulk.
xxs 6y ago
>How many dead xboxes and PlayStations have chips in them that are still good? Those things have one big APU (with weak CPU cores), some VRM and memory, GDDR5 + useless DDR3. I'd discount the APU as it'd need someone to make OS support for with the blessing of Sony/Microsoft. That leaves the chips of GDDR5, which can be used by low end GPUs - I don't think they'd ever recoup and investment and likely cheap manual labor of preheat + hot air is the easier option. No idea if anyone would get a license from AMD or NVidia for such GPU. Edit: the capacitors would have the best value but well... I cant see anyone relying on old caps for anything but repair.
- eptcyka 6y ago
  You can buy a motherboard with the xbone apu in China and run windows 10 on it. https://www.anandtech.com/show/16336/installing-windows-on-an-xbox-one-s-apu-the-chuwi-aerobox-review https://www.anandtech.com/show/16336/installing-windows-on-a...
baybal2 6y ago
> Maybe we should start pulling chips of trashed electronics. There must be hundreds of thousands decently fast chips going into our trash. This is already been happening for decades on industrial scale in countries doing eWaste recycling. Just a decade ago, you could've still find people selling refurbished chips in Shenzhen on every corner. Now it kinds of became a much more low profile enterprise. The US defence department, colloquially known as the pentagon, ran a wargame scenario a few years ago to see what will happen if US will be hit with a worst case scenario, years long semiconductor unavailability due to sabotage of domestic fabs, massive industry wide cyberattack, or something happening to Taiwan. One of comissioned think tanks recommended that exact methods of military going door-to-door to gather old gaming console, smartphones, and PCs for conversion to use in munitions, and military equipment.

throwaway4good 6y ago

From the article: "However, Liu said that it is "economically unrealistic" for all countries to "onshore" additional chip production, warning that this could lead to more unprofitable capacity." Well. The world is clearly not listening to that. So the question is how the business of chip manufactoring will look in 2 or 3 years?

simonh 6y ago
He may well be right, but concerns about supply chain security might make it worthwhile for countries to subsidise capacity that would not otherwise be economically viable.
- throwaway4good 6y ago
  It makes sense for China to overinvest in national chip manufactoring due to sanctions. However for the west, of which Taiwan here is a part of, it is very risky. If the west no longer supplies China's chip market, it would need significant less chip manufactoring capacity.
  - cwhiz 6y ago
    If the west can’t supply China, the west should ban Chinese imports.
    - nindalf 6y ago
      You assume there would be malice involved. Even today TSMC prioritises some customers (Apple) over others (car manufacturers). In a future Taiwan that is a part of China, TSMC might have a new pecking order where Huawei is at the top and now Apple is chip constrained. You'd ban all Chinese imports unless one Chinese company rewrites it's contracts? Of course not.
      - cwhiz 6y ago
        With China there will unequivocally be malice.

heisenbit 6y ago

The expected price reductions will have been part of the financial modelling for products. Big customers of TSMC is Apple which traditionally build the best products with the best inputs and then sells them for quite some time benefiting from lower input costs.

ksec 6y ago

1. TSMC were spending ~$30B per year on capital expenditure already. 2. Since leading edge node is forever increasing in cost, the next 3 years, i.e 3nm in 2022 and 2nm in 2024 are expected to be higher. ~$100B investment aligned with their initial plan / trend / target anyway. 3. So really the major news is stopping ( or to be precise, delaying ) price reduction. Which is unusual but understandable given the current demand situation. And No, it is not TSMC's fault. You should ask how every single Fabless Semiconductor company has failed with their demand, supply chain analysis and projection. Although one could argue it is not their fault either, since their client gave wrong projection. The only company that is not affected is possibly Apple. 4. There has been mounting pressure from investors, politicians and MSM media on Intel IDM 2.0, and supply problems. This announcement feels more like addressing those concerns. 5. Remember both Samsung and Intel are expanding capacity. And even GF and many other smaller players. It took DRAM and NAND three years to catch up with demand ( and then over supply ). Which in hindsight is pretty damn impressive. Although during the ~2016 - 2019 everyone felt awful.

Kliment 6y ago
Every single fabless semiconductor designer failed to predict demand because their customers lied to them. The car industry pulled a really dick move last year, and then pulled an even more dick move in the opposite direction, and now everyone is screwed. Back in early 2020 the car manufacturers decided that demand for cars would go down, and because they have a religious aversion to keeping any stock, cancelled lots of orders with their vendors, screwing said vendors over. Their vendors could not afford their fab slots because automotive is such a big part of their revenue, so they cancelled their fab slots. Those slots were happily sold on to entertainment and computing customers, who anticipated a jump in demand due to people staying home more. So far so normal. However, the car industry got it badly wrong - people, afraid of public transit, started buying more cars rather than less. The car industry, being screwed due to their just-in-time religion of zero stock, was faced with their production lines stopping so they called up all their vendors, and asked for those orders back, and some more on top. The vendors then tried to get their fab slots back, and were told to come back next year. Some of them ended up buying other fabless IC designers out of their slots, causing the problem to spread. Others cancelled their existing orders to other customers, and auctioned off their existing inventory to increasingly desperate car manufacturers at a 6x to 8x premium. Anyone who was not prepared to pay that or didn't act fast enough was screwed. From that point on, a bunch of companies that depend on those lines of microcontrollers had to rapidly redesign their product to use another device, taking even more devices off the market with unplanned demand. The users of those devices then had to move to others, causing even more availability cascades. This is how two nasty moves by the car industry caused global market disruption in a number of industries that depend on electronics. This is not a normal "demand has increased, and industry can't keep up" event, it's elephants dancing and trampling everyone else underneath. This is further aggravated by the top three automotive semiconductor suppliers (NXP, Renesas, Infineon) having their facilities destroyed in two unrelated disastrous events - a fire at Renesas' wafer processing plant, and Texas freezing over, destroying NXP's and Infineon's fabs through cleanroom contamination and process interruption. Those events took out months' worth of production, and destroyed product that had already been sold before manufacture. This would have been recoverable in a normal market, because distributor stock could hold a couple months, but in this case it was game over for non-automotive customers as all distributor stock was already gone by then. I see this in my work every day now - customers coming to me for help with redesigning products to use a different microcontroller, or help with sourcing parts from unusual sources because their normal channels are gone. I've been in this industry a long time and never seen anything like this before. This is not a failure of supply chain analysis and projection on the part of the fabless semicon vendors. This is their biggest customers fucking their vendors over not once but twice by lying to them about their own demand.

georgeburdell 6y ago

Selfishly... so will all this CapEx by TSMC, Samsung, and Intel put pressure on wages? I’m in the industry at a large company getting 3% raises, 10% of comp as stock, and a salary about 1/3 less than a software dev. All while being highly reviewed. I write a lot of software for my job (although it’s not my title) and I’ve been thinking of trying for pure software jobs even if the work is more boring (I do semiconductor R&D)

ed25519FUUU 6y ago
3% raise a pretty typical for software engineers as well.
- justsid 6y ago
  3% raise of 50k is much less than 3% of 150k though. GP could get a hella big pay bump and then much larger raises if he switched, even if on paper it’s still the same percentage.
coryrc 6y ago
I switched for the money
throwawayiIiIII 6y ago
I also find it surprising that Hardware Engineers have a lower pay scale (Although I didn't hear very big differences like you said). Is there some kind of supply-demand behind this? Engineers for car-related things as well. Anecdotally I think you could in theory get a title change to software engineer, while doing the same thing, to get more pay.
- kccqzy 6y ago
  There are big differences. A close friend who's a hardware engineer shared with me her salary. With five years of experience and a MS, her salary is the same as a fresh-out-of-undergrad junior software engineer at the same company. That's $120k in the valley.

MangoCoffee 6y ago

1. can we afford to just build fab without consideration of profit? what you going to do when you can't turn a profit with all the fabs in the US? 2. TSMC and the rest of the foundry industry are exposed to the highly cyclical nature of the semiconductor industry. we are seeing the high demands for chip because of covid and car vendors' f'ck up. what you going to do with all the fabs build in the US when you are hit with downturn? we saw Intel struggle with 10nm and 7nm delay. i think its wiser to invite fab company like TSMC and Samsung to build fab in the US even with smaller capacity.

ip26 6y ago
1. Yeah, we certainly could, but profit is what got us from 50um to 3nm.
dirtyid 6y ago
Some choice quotes from Mark Liu, chairman of TSMC this week agreeing with you: * "It's economically unrealistic for all the countries to build additional chip production capacity," * “Uncertainties led to double booking, but actual capacity is larger than demand,” How quickly those concerns are resolved “really depends on future U.S.-China negotiations.” * each country developing its own domestic semiconductor industry would lead to a lot of “nonprofitable” capacity. >what you going to do with all the fabs build in the US when you are hit with downturn? Priority sourcing from domestic fabs, let TSMC whither, by design. Semi is oil now, there's more strategic/geopolitical considerations than supply/demand curve. US/EU/CN do not want Taiwan to have semi dominance, it's not in anyone's interest. Current TSMC position is happenstance due to poor industrial policies that countries are scrambling to address. IMO press releases and capex spending around Arizona announcement suggest TSMC wasn't prepared to built US fab, let alone 6. US pressured them, EU failed to. There's a good chance TSMC/Taiwan will try to delay their silicon shield evaporating for as long as they can. Probably not a coincidence big ticket US weapons sales are scheduled around when fabs would be up.
- genmud 6y ago
  Speaking as someone in AZ, the fact that we can get a 5nm fab going here in the US speaks volumes to how effective that pressure was. I actually disagree with Mark Liu, on his opinion on it leading to a lot of nonprofitable business... I think that for the US and EU it is actually critical from a national security and economic standpoint to develop new semiconductor capabilities. I think that there will be profit in doing domestic semiconductor, but only because the government is going to have to subsidize the buildout of this capability. I do think that its going to become a race to the bottom for wafer/ic costs, but that is actually a really good thing. I think there are going to be more companies that are developing in house technology and more focus on things like FPGA and edge-based compute. If TSMC, GlobalFoundries, UMC and Intel are smart, they will focus on pivoting towards the software/simulation side of things, IP cores and flexible logic like FPGA type of solutions. Ideally they would want every big company developing their own CPUs, edge devices, etc. and have them optimized for their process nodes. I suspect this won't be the last major fab push, especially since people are seeing how fragile the supply chain is.

tempfs 6y ago

I am wondering if this concentration of capacity in Taiwan with China looming over it is really such a great idea.

vkou 6y ago
It's been a great idea for Taiwan, and it's been a great idea for price sensitive consumers, who don't give two figs about where in the globalized marketplace their products come from. Whether it's been a great idea for someone who isn't a price sensitive consumer doesn't matter - markets don't optimize the world for the comfort of ideologues. You can't sell ideology. If China were to successfully annex Taiwan, there would be two likely outcomes. 1. China would be difficult to sanction, because in a world with chip shortages, we can't drop our reliance on TSMC fabs. (See, also, Russia selling oil and gas to the EU, despite sanctions on it. Given the option to take the moral high ground, and using Russian natgas to not freeze to death in the winter, Germans are taking the latter, while the Department of State gnashes it's teeth.) 2. Or, as some posters on HN gleefully speculate, the TSMC fabs will be destroyed, either by TSMC, or by the United States. I'm sure that will be quite cathartic for all of thirty minutes, until we all realize that we're in for a multi-year chip shortage that makes today's problems look like nothing. Hope everyone's looking forward to half the supply, and quadruple the prices.
fastball 6y ago
TSMC is building a fab in AZ.
- knowaveragejoe 6y ago
  While true, if I recall correctly that fab will be a tiny minority of TSMC's overall output.

mullingitover 6y ago

This reminds me of a fun fact I learned many years ago, which is that there's a corollary to Moores Law: the same growth curve applies to the cost of building new fabs.

qaqa 6y ago

How do you think the company will pay for this capital expenditure outlay – with cash, debt financing, sell additional shares of stock, something else? What makes you think the company will use this method of financing? Do you think this is the right approach? Why or why not?

deleted 6y ago

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