TSMC warns of excessive chip inventory

[Silent_Buddha]

Apple Supplier Warns of 'Excessive Chip Inventory'—No, Really

TSMC cites softening demand in PCs, smartphones, and other consumer segments.

gizmodo.com

TSMC says that this is due to softening demand in the PC and smartphone markets combined with the cryptocurrency crash.

TSMC said in an earnings call on Thursday that while its net income hit record levels (up 76.4% year-on-year), softening demand in PCs, smartphones, and other consumer segments has led to an “excess inventory in the semiconductor supply chain.” The chipmaker predicts it will take “a few quarters” before things rebalance.

On the smartphone and PC front, declining demand follows two years of lockdowns and remote work, a period when consumers were eager to upgrade or buy new gadgets that they would rely upon. Now that home offices are fully equipped, demand has disappeared. Another culprit of the chip supply shortage, crypto mining, has imploded in recent months as crypto values continue their bottomless freefall.

PC and crypto might imply that NV and to a lesser degree AMD might be more impacted by this than other fabless semiconductors. Possibly evidence that rumors of NV possibly delaying their next gen GPUs to clear inventory of current gen GPUs might have some nugget of truth to them. Alternatively, this might be why some are speculating that NV will chose to delay next gen consumer GPUs.

On the flip side, chips used for consumer gadgets is increasing while demand for data center and automotive remain steady. TSMC implies that they'll be moving capacity away from markets with softening demand, for example PC, to other market segments where demand remains high.

To be clear, the chip shortage is far from over. While inventory for the high-end chips found in modern consumer gadgets is increasing, demand in other market segments, including data centers and automotive, has remained steady. Supply for those areas is tight, and TSMC must reallocate resources to account for such steady demand. Doing so may not be enough, as the chipmaker says consumer needs will continue to exceed “our ability to supply.”

Micron has also warned of decreasing demand.

Regards,
SB

 

[trinibwoy]

How quickly the tide turns. Wasn’t everyone recently freaking out about chip shortages?

 

[Silent_Buddha]

How quickly the tide turns. Wasn’t everyone recently freaking out about chip shortages?

Well, TSMC are still saying they won't be able to meet demand for total chip fabrication. They are just saying that in certain markets (PC being just one of them) there is now an excess of chips and that they'll need to shift capacity from those chip markets to other chip markets.

Those markets may be less lucrative, thus while they'll still be operating at capacity their revenue and profits are likely to take a dip due to this. Basically those markets where demand is still high and thus there are still shortages of chips are likely ones where companies weren't able to bid as high as a company like NV in order to secure more capacity. But now that those higher bidding companies are unable to use all the capacity they thought they would need, that capacity can be used for lower bidding companies.

Regards,
SB

 

[DegustatoR]

The most funny part is that it's proven *again* that all this was because of GPU cryptominers. Not because of some "supply issues" or anything like that.

 

[Kaotik]

The most funny part is that it's proven *again* that all this was because of GPU cryptominers. Not because of some "supply issues" or anything like that.

Supply issues were and still are real, for GPUs it might be past issue, but it doesn't make it less real.
Of course miners made things much worse especially for GPUs, too, though, but they were not the only reason for it.

 

[Deleted member 11852]

TSMC clearly have some customers which too much booked capacity and others with too little, there are must be some instances where people with too much Nx (N7, N6, N5) capacity can be re-alocated to people with too little. TSMC definitely have the contractual high-ground here, but they need to keep their customers happy.

Fab line R&D and investment is predicated on very speculative long-term needs and this has demonstrated how precarious that model is. If TSMC do not agree to some contractual concessions, they may find their biggest customers - Apple, AMD, Nvidia, Broadcom, Marvell, an MediaTek - are nog longer willing to commit to such long-term volume commitments which would really fuck over TSMC's ability to plan ahead.

 

[DegustatoR]

Supply issues were and still are real

Where? TSCM is warning about oversupplying, no one on the market is saying that there is any issue with production volumes. There are some goods which simply aren't being produced in high enough quantities due to allocation costs (I presume) but that's not a "supply issue".

 

[Deleted member 11852]

Where? TSCM is warning about oversupplying, no one on the market is saying that there is any issue with production volumes.

Sony are. They cannot source enough APUs for PS5 and have a genuine silicon supply issue. Consoles can be slapped together almost anywhere (Asia, South America), but the APUs can only be sourced from TSMC.

 

[Kaotik]

Where? TSCM is warning about oversupplying, no one on the market is saying that there is any issue with production volumes. There are some goods which simply aren't being produced in high enough quantities due to allocation costs (I presume) but that's not a "supply issue".

There are other industries besides GPUs and CPUs, you know? Just to get example from something that might easily touch your life too, car manufacturers have suspended part and at times all production due lack of chips even though chip manufacturers have even prioritized production for them. Several industries, which don't use GPUs or CPUs have had their order times extend from days or couple weeks to several months etc etc.

 

[DegustatoR]

Sony are. They cannot source enough APUs for PS5 and have a genuine silicon supply issue. Consoles can be slapped together almost anywhere (Asia, South America), but the APUs can only be sourced from TSMC.

Sony is getting exactly what they've paid for in allocation. The fact that they underestimated the demand doesn't have anything to do with production output at this point.

There are other industries besides GPUs and CPUs, you know? Just to get example from something that might easily touch your life too, car manufacturers have suspended part and at times all production due lack of chips even though chip manufacturers have even prioritized production for them. Several industries, which don't use GPUs or CPUs have had their order times extend from days or couple weeks to several months etc etc.

Oh, I know. I also happen to know that none of these industries actually experiencing any issues with volume of supply for some time now. It's been about a year since all the issues where limited to GPUs - and where completely because of crypto mining.

 

[Deleted member 11852]

Sony is getting exactly what they've paid for in allocation. The fact that they underestimated the demand doesn't have anything to do with production output at this point.

Sony can only book as much allocation is available. If TSMC is out of N7 lines, Sony can only book whatever is free.

 

[BRiT]

Are we even sure that the SOC is the limiting resource in making PS5s?

 

[DegustatoR]

Sony can only book as much allocation is available. If TSMC is out of N7 lines, Sony can only book whatever is free.

It doesn't work like you think. TSMC require prepayments these days and if you've miscalculated with actual demand you will have to renegotiate which is both costly and likely limited to some time periods. So if you've missed (or decided that the cost would be too high otherwise) then you're stuck with what you've requested for some time.
N7 output for PS5 SOC sized chips has been very good for some time now, as can be clearly seen from volumes AMD is pushing to the market.

 

[orangpelupa]

Are we even sure that the SOC is the limiting resource in making PS5s?

Yeah, with how varied PS5 qualities are (fan acoustics, coil whine, etc), it seems Sony has widened their quality standards/requirements to be able to get enough supply

 

[BRiT]

Yeah, with how varied PS5 qualities are (fan acoustics, coil whine, etc), it seems Sony has widened their quality standards/requirements to be able to get enough supply

There are still other chips that are not the main SOC that could be the limiting resource.

 

[Deleted member 11852]

Are we even sure that the SOC is the limiting resource in making PS5s?

Yes, Sony has reported the same problem in their investment calls since launch. It's so widely reported I'm not sure why anting thinks otherwise.

It doesn't work like you think. TSMC require prepayments these days and if you've miscalculated with actual demand you will have to renegotiate which is both costly and likely limited to some time periods. So if you've missed (or decided that the cost would be too high otherwise) then you're stuck with what you've requested for some time.
N7 output for PS5 SOC sized chips has been very good for some time now, as can be clearly seen from volumes AMD is pushing to the market.

TSMC has always required deposits on line space, it's not new. Samsung is the same. I'd like too see your source for this, is? Sony's investments calls have said the issue is with silicon and is why they continue to revise - lower - sales predictions. Sony have only ever lowered sales predictions for PS5, even lowed already-lowered revisions. That's not a sign of the chip supply shortage getting better, if that was the case they would be increasing sale predictions.

There were reports in late May of shortages easing but as of yet there has been no noticeable impact of stock levels, or revised sales targets announced.

 

[BRiT]

Yes, Sony has reported the same problem in their investment calls since launch. It's so widely reported I'm not sure why anting thinks otherwise.

They never said what the limiting resource was, just said "supply issues". I don't know why anyone including you thinks it's the main SOC when it was never said to be the limited resource. Show me the direct Sony statement that says otherwise.

 

[DegustatoR]

I'd like too see your source for this, is?

My source is all around you, on (e)shelves. All AMD N7 products are freely available for more than a year now - with the obvious exception of GPUs.

 

[Deleted member 11852]

My source is all around you, on (e)shelves. All AMD N7 products are freely available for more than a year now - with the obvious exception of GPUs.

So anecdotal evidence then. That's like me seeing some PS5s in a local shop and calling the stock situation resolved. How do you explain the continuous ongoing, issues faced by the auto industry? Or TSMC saying in March that the chip shortage would last several more years?

 

[DegustatoR]

So anecdotal evidence then. That's like me seeing some PS5s in a local shop and calling the stock situation resolved. How do you explain the continuous ongoing, issues faced by the auto industry?

Lack of any supply issues of products built on the same process is "anecdotal evidence" to you? So when some company says something which no other company is apparently experiencing then all of these other companies are lying? Or maybe it's just that one company who can't admit that for whatever reasons they can't order enough chips for their products, and this isn't at all related to some "supply issue"?

I mean this thread is about TSMC outright saying that they are producing *too many* chips right now. And Nvidia (and thus GPU miners) don't even make chips at TSMC just yet. So what does this tell us and how exactly is Sony's issue with PS5 volume a "supply issue" at this point?