7 ms·

Why isn't it possible to do this industry at less than razor edge?

by hoseja 5y ago

sct202 5y ago
It wasn't razor edge in 2009, when TSMC was running a 40% utilization rate. Forecasting is hard, and when you have in recent experience a massive glut it makes companies conservative about demand forecasts and investments.
- xxpor 5y ago
  See also: oil "capital discipline" right now
blihp 5y ago
Because that's not where you end up in a world without numerous serious competitors.
- Macha 5y ago
  I would generally assume a lack of competitors would lead to a decreased need to innovate and therefore fatter margins.
  - blihp 5y ago
    Right, which is pretty much where we are now: very fat margins largely because fabs have been banging up against capacity for a while now because they could. (i.e. to avoid the risk of overcapacity... why take a chance if you don't have to?) In a more perfect world with healthy competition, one or more of them would see the lack of capacity and see opportunity to take the risk to build a new fab to take some of that business. The fact that it's basically governments saying 'you will do this' tells you everything you need to know about how much the players are really driven by competition. It's a great time to be a semi manufacturer: TSMC has customers like Apple funding their expansion, Intel has the U.S. government funding theirs. Can you blame them? A decade of record profits isn't what it used to be...
joenathanone 5y ago
The lithography machines and factories are prohibitively expensive, it can take years of production to break even, if you over build you may just end up in the red. Additionally the fabs have a limited lifespan when they are cutting edge and able to produce premium chips.
- rednerrus 5y ago
  Then shouldn't the government be involved in ensuring we have what's necessary? Seems like strategic reserves are in order here.
  - lsllc 5y ago
    It's not unprecedented -- during the cold war, the US Air Force spent $279M (~$3B in today's money) on building some of the largest presses in the world specifically to enhance the capabilities around building complex and strong aircraft parts: https://en.wikipedia.org/wiki/Heavy_Press_Program https://en.wikipedia.org/wiki/Heavy_Press_Program
    - stevenhuang 5y ago
      Wow. Attached is a fascinating doc going through the specs and construction process of this feat https://web.archive.org/web/20120227025023/http://files.asme.org/asmeorg/communities/history/landmarks/5488.pdf https://web.archive.org/web/20120227025023/http://files.asme... It has pictures!
    - blamazon 5y ago
      Fascinating link! Check out this titanium bulkhead for an F-15 before and after pressing: https://upload.wikimedia.org/wikipedia/commons/9/9e/F15_bulkhead_before-after_pressing.jpg https://upload.wikimedia.org/wikipedia/commons/9/9e/F15_bulk...
  - 55873445216111 5y ago
    In practical terms, the government is just too slow to actually help. They always shoot behind the target. The semiconductor market is cyclical. By the time the CHIPS Act, etc, actually get passed and implemented, the market will already be in oversupply and voters/politicians will complain about government handouts for these companies.
deelowe 5y ago
I'm not sure I agree with some of the responses. The issue is that the price to build or retrofit fabs goes up significantly with each generation. Only a few companies have been able to survive given the amount of financial risk involved.
55873445216111 5y ago
It takes >$10B and >2 years to build a fab which will be effectively obsolete ~2 years after it opens. If it doesn't open on schedule or is underloaded, the ROI goes negative almost immediately. (I somewhat oversimplified this of course but it's to make the point.)
- hoseja 5y ago
  Obsolete? Automakers etc are huuuungry for old chips.
  - 55873445216111 5y ago
    Yes but there is a huge technology gap. example: Automakers need a lot more small low-power MCUs built on ~130/90nm process. A 14nm fab that started 2 years ago is never going to be producing those 130/90nm MCUs. Furthermore, the semi toolmakers that produce the tools needed to build 130/90nm chips stopped making those tools years ago. This is a rabbit-hole that just keeps going. The problem isn't going away soon or easily.
    - mjevans 5y ago
      Maybe three different 'bands' of production: * cutting / bleeding edge (as now) * 80/20 trailing edge (5 year LTS of cutting edge) * Cost focused 'lifetime' LTS It seems like the cutting edge is built, and transitioned to the 80/20 already. It's that cost focused bulk components / entry level that lacks investment or even planning. Maybe that's where some industry development and co-ordination from regulators could help establish a market that's healthy.
  - StillBored 5y ago
    Not just automakers, and not just old fabs. Not everything needs the latest bleeding edge process. So, even then some of the old processes get updated to support larger wafers. Ex: brand new 65nm fab: https://www.electronicsweekly.com/news/business/bosch-opens-fab-2021-06/ https://www.electronicsweekly.com/news/business/bosch-opens-... So, 10-15 year ROI easy, and I'm guessing that might stretch even further as the trend to ever smaller nodes slows. AKA I'm betting 2nm doesn't look nearly as aged in 2040 as 90nm looks today.

Why isn't it possible to do this industry at less than razor edge?

by hoseja 5y ago

Why isn't it possible to do this industry at less than razor edge?

It wasn't razor edge in 2009, when TSMC was running a 40% utilization rate. Forecasting is hard, and when you have in recent experience a massive glut it makes companies conservative about demand forecasts and investments.

xxpor 5y ago
See also: oil "capital discipline" right now

blihp 5y ago

Because that's not where you end up in a world without numerous serious competitors.

Macha 5y ago
I would generally assume a lack of competitors would lead to a decreased need to innovate and therefore fatter margins.
- blihp 5y ago
  Right, which is pretty much where we are now: very fat margins largely because fabs have been banging up against capacity for a while now because they could. (i.e. to avoid the risk of overcapacity... why take a chance if you don't have to?) In a more perfect world with healthy competition, one or more of them would see the lack of capacity and see opportunity to take the risk to build a new fab to take some of that business. The fact that it's basically governments saying 'you will do this' tells you everything you need to know about how much the players are really driven by competition. It's a great time to be a semi manufacturer: TSMC has customers like Apple funding their expansion, Intel has the U.S. government funding theirs. Can you blame them? A decade of record profits isn't what it used to be...

joenathanone 5y ago

The lithography machines and factories are prohibitively expensive, it can take years of production to break even, if you over build you may just end up in the red. Additionally the fabs have a limited lifespan when they are cutting edge and able to produce premium chips.

rednerrus 5y ago
Then shouldn't the government be involved in ensuring we have what's necessary? Seems like strategic reserves are in order here.
- lsllc 5y ago
  It's not unprecedented -- during the cold war, the US Air Force spent $279M (~$3B in today's money) on building some of the largest presses in the world specifically to enhance the capabilities around building complex and strong aircraft parts: https://en.wikipedia.org/wiki/Heavy_Press_Program https://en.wikipedia.org/wiki/Heavy_Press_Program
  - stevenhuang 5y ago
    Wow. Attached is a fascinating doc going through the specs and construction process of this feat https://web.archive.org/web/20120227025023/http://files.asme.org/asmeorg/communities/history/landmarks/5488.pdf https://web.archive.org/web/20120227025023/http://files.asme... It has pictures!
  - blamazon 5y ago
    Fascinating link! Check out this titanium bulkhead for an F-15 before and after pressing: https://upload.wikimedia.org/wikipedia/commons/9/9e/F15_bulkhead_before-after_pressing.jpg https://upload.wikimedia.org/wikipedia/commons/9/9e/F15_bulk...
- 55873445216111 5y ago
  In practical terms, the government is just too slow to actually help. They always shoot behind the target. The semiconductor market is cyclical. By the time the CHIPS Act, etc, actually get passed and implemented, the market will already be in oversupply and voters/politicians will complain about government handouts for these companies.

deelowe 5y ago

I'm not sure I agree with some of the responses. The issue is that the price to build or retrofit fabs goes up significantly with each generation. Only a few companies have been able to survive given the amount of financial risk involved.

55873445216111 5y ago

It takes >$10B and >2 years to build a fab which will be effectively obsolete ~2 years after it opens. If it doesn't open on schedule or is underloaded, the ROI goes negative almost immediately. (I somewhat oversimplified this of course but it's to make the point.)

hoseja 5y ago
Obsolete? Automakers etc are huuuungry for old chips.
- 55873445216111 5y ago
  Yes but there is a huge technology gap. example: Automakers need a lot more small low-power MCUs built on ~130/90nm process. A 14nm fab that started 2 years ago is never going to be producing those 130/90nm MCUs. Furthermore, the semi toolmakers that produce the tools needed to build 130/90nm chips stopped making those tools years ago. This is a rabbit-hole that just keeps going. The problem isn't going away soon or easily.
  - mjevans 5y ago
    Maybe three different 'bands' of production: * cutting / bleeding edge (as now) * 80/20 trailing edge (5 year LTS of cutting edge) * Cost focused 'lifetime' LTS It seems like the cutting edge is built, and transitioned to the 80/20 already. It's that cost focused bulk components / entry level that lacks investment or even planning. Maybe that's where some industry development and co-ordination from regulators could help establish a market that's healthy.
- StillBored 5y ago
  Not just automakers, and not just old fabs. Not everything needs the latest bleeding edge process. So, even then some of the old processes get updated to support larger wafers. Ex: brand new 65nm fab: https://www.electronicsweekly.com/news/business/bosch-opens-fab-2021-06/ https://www.electronicsweekly.com/news/business/bosch-opens-... So, 10-15 year ROI easy, and I'm guessing that might stretch even further as the trend to ever smaller nodes slows. AKA I'm betting 2nm doesn't look nearly as aged in 2040 as 90nm looks today.