TSMC Hiking Price of Chip Production - Bound to Increase the Costs for CPUs and GPUs

[CommanderAlex]

 

 

Summary

 

Taiwan Semiconductor Manufacturing Company will greatly increase the price for new chip production. TSMC will be increasing prices all across the board for their popular processes in favor of improving gross margins. As a result, the costs of manufacturing CPUs, GPUs, SoCs, and controllers, will increase. Prices are set to increase up to 10% for 7nm and below, while prices will increase by 20% for 16nm and higher. This price hike is expected to happen in Q1 2022. 

 

Quotes

Quote

What remains to be seen is how higher production costs will affect the price of actual hardware, such as CPUs and GPUs designed by AMD or SoCs developed by Apple. Apple sells expensive smartphones and PCs, so a 10% increase of chip costs will not harm the company's balance sheet significantly. Meanwhile, companies like AMD and Qualcomm sell chips and a 10% increase of their costs will either harm their financial results, or will force them to increase their prices.

Due to the unprecedented demand that has been happening over the past year (roughly) and strong demand eating up the supply faster than what can be supplied, TSMC raised prices as a result. This is due to the increased costs of increasing production and now this is being passed down to its customers/clientele. 

 

TSMC's N5 and N7 fabrication technologies made up 49% of the companies $13.29 billion dollar revenue in Q2 2021. This figure should roughly go up by 10% in Q1 2022. Their N16 and N28 fabrication processes made up for 25% of TSMC's revenue in Q2 2021. Overall, these price hikes will rake in more money for TSMC moving forward. 

 

While this is all happening, a member from TSMC's executive team said, 

Quote

...it will be very costly to manufacture in the U.S. and Japan...

as they are in the works of building a new semiconductor facility in the State of Arizona (USA).

 

 

TSMC is not the only foundry in the semiconductor manufacturing realm set to increase prices. GlobalFoundries, PowerChip Semiconductor Manufacturing (PSMC), Semiconductor Manufacturing International (SMIC), and United Microelectronics (UMC) have increased prices already due to the demand for semiconductors. 

My thoughts

This really sucks for those looking at trying to snatch a new CPU or graphics card with the current high demands for the latest cards out there from both AMD and Nvidia. While Intel is starting to kick the can down the road with their dedicated GPU market, hopefully for the better, they might bring competitive offerings over the coming years. 

 

Sources

Tom's Hardware

Nikkei Asia

TSMC Financial Results

[Donut417]

45 minutes ago, SpiderMan said:

his really sucks for those looking at trying to snatch a new CPU

Should help them recoup the cost of building their new facilities. Maybe this will help with expansion down the road as well. 

 

On top of that, the fact is costs have gone up. Be it raw materials or the best example is labor. I never though I see fast food paying $15/hr in the Metro Detroit area. Companies are fighting over the few candidates that are available, and while I can speak for people employed outside the US, general in the US the salary is the biggie for most. The point Im making is that if costs go up for semi conductor manufactures then costs will also increase for consumers. 

[StDragon]

When the entire semiconductor industry is looking to build a total of just under 1 TRILLION USD in plants over the next 5 years, that has to be paid off somehow.

 

Low supply + high demand = increase pricing.

 

I'm surprised the increase is that low frankly. 

[CommanderAlex]

2 minutes ago, Donut417 said:

Should help them recoup the cost of building their new facilities. Maybe this will help with expansion down the road as well. 

 

On top of that, the fact is costs have gone up. Be it raw materials or the best example is labor. I never though I see fast food paying $15/hr in the Metro Detroit area. Companies are fighting over the few candidates that are available, and while I can speak for people employed outside the US, general in the US the salary is the biggie for most. The point Im making is that if costs go up for semi conductor manufactures then costs will also increase for consumers. 

I've expected the costs increase for semiconductors would increase for consumers. Hopefully production at the new semiconductor facilities that TSMC has in the pipeline come online at their expected time of completion. 

 

That's pretty much anything in economics with price increases due to wage increases, as they don't want their profits to decline, so they compensate. 

[Donut417]

1 minute ago, StDragon said:

I'm surprised the increase is that low frankly. 

You dont want to piss off the customer base. A small increase no one will bat an eye. A large increase and those customers might decide to take their business else where. OR in some cases those customers are large enough that they could build their own FABs. For example the big 3 auto makers here in the US could probably afford to build their own if they needed. 

[StDragon]

1 minute ago, Donut417 said:

For example the big 3 auto makers here in the US could probably afford to build their own if they needed. 

That will NEVER, in a BAZILLION YEARs, ever, ever, happen.

 

One word: Unions!

Nope... not. going. to. happen. The semiconducting industry is that cut-throat.

[Donut417]

1 minute ago, StDragon said:

That will NEVER, in a BAZILLION YEARs, ever, ever, happen.

 

One word: Unions!

Nope... not. going. to. happen. The semiconducting industry is that cut-throat.

They wouldn't be competing with TSMC. They would produce the chips for their own products. So unions dont matter. The chip crisis is like the oil crisis in the 70s. The only difference is the auto makers have an option to solve the issue on their own. Also I read that at one time GM actually had a FAB, they have since sold it. 

[StDragon]

1 minute ago, Donut417 said:

They wouldn't be competing with TSMC. They would produce the chips for their own products. So unions dont matter. The chip crisis is like the oil crisis in the 70s. The only difference is the auto makers have an option to solve the issue on their own. Also I read that at one time GM actually had a FAB, they have since sold it. 

You don't understand. To accomplish what your asking for is the automotive industry owning the fabs, but not actually running them as the employees wouldn't be an employee of the big 3 auto

[Donut417]

Just now, StDragon said:

You don't understand. To accomplish what your asking for is the automotive industry owning the fabs, but not actually running them as the employees wouldn't be an employee of the big 3 auto

The auto makers can hire the right people to run the FABs, thats not an issue. They also have the money and who knows what government handouts they could ask for to get the facilities built. Just because they have a UNION doesnt mean that they cant get reliable knowledge workers. I dont know why everyone things Unions are crap, they are not. I also dont know why the auto makers couldn't run the fabs themselves, as long as you have the right people with the right knowledge anything is possible.  

[MultiGamerClub]

Knowing the prices in norway is already fucked by taxes and seeing prices of msrp then shot 60% up in the sky already here.. And now they want to increase cost further?

 

Fuck man.. Guess ill stay on my 3600 a bit longer until i can afford 5800x not costing 550$ anymore.. ???

Makes no sense but oh well, this is the world it seems.

[StDragon]

2 minutes ago, Donut417 said:

I dont know why everyone things Unions are crap, they are not. I also dont know why the auto makers couldn't run the fabs themselves, as long as you have the right people with the right knowledge anything is possible.  

Unions are expensive. That's the problem. Long-term, they would lose their ass on such a deal; specifically when a product can be sourced cheaper overseas. Running a fab isn't in their interests.

 

The problem isn't the fab shortage; this sort of thing comes in cycles. No, the problem is the arrogance of the automotive industry in not securing the quota contracts in advanced and instead lead others in line hoover up the supply. Now they cry foul because a demand in cars has gone up and they don't have supply to show for it. Guess that will teach them a hard lesson.

[pas008]

Wonder if Samsung will follow

[StDragon]

1 minute ago, pas008 said:

Wonder if Samsung will follow

Yes. Prices will go up. Fabrication is sorta fungible as a commodity. Question really is, how much of a percentage will they raise their prices; not if.

[Donut417]

1 minute ago, StDragon said:

Running a fab isn't in their interests.

It is when they have 2021 models new still on the lot in 2022 because they have no chips. It probably will cost them more money to store these cars that they CANT sell then it would be the run the fab. 

 

3 minutes ago, StDragon said:

Guess that will teach them a hard lesson.

How the fuck where they suppose to know that the government was just gong to give money away by the boat loads? Because when they were talking lock downs it sounded like everyone was going to go broke over this, they didnt know that the government would just give money away for free. 

 

5 minutes ago, StDragon said:

ss on such a deal; specifically when a product can be sourced cheaper overseas

Well if the price is going up then its not cheaper overseas. Overseas is also the issue, they might be pressured by customers and employees for that matter to stop relying on overseas companies as much. 

 

7 minutes ago, StDragon said:

Unions are expensive.

Not sure you have been keeping up on current events. Union membership in the US is an all time low. Also with all the right to work states, unions have less power as a result. The Big 3 all have forced the UAW to take on healthcare costs of its union members, meaning the companies dont have to provide those employees with healthcare. A small raise every few years when the contract comes due is a small price to pay. 

[Blademaster91]

The prices of electronics has gone up already, GPU's are f*cked as it is, another price increase might be noticeable, but maybe not when a 6800XT is already $1500 if you can even find one.

But I think semiconductor fabs can solve this on their own, although I suppose the semiconductor industry would rather pass it onto consumers whenever they can, like the RAM shortages.

[TetraSky]

When one foundry does pretty much has all the chip manufacturing of every big companies out there... They get to dictate however much they want to charge. I just hope they were smart enough and got the price fixed in their contracts so we'd be safe for a while...

[StDragon]

3 minutes ago, Donut417 said:

Union membership in the US is an all time low. Also with all the right to work states, unions have less power as a result. The Big 3 all have forced the UAW to take on healthcare costs of its union members, meaning the companies dont have to provide those employees with healthcare. A small raise every few years when the contract comes due is a small price to pay. 

Just to clear the air on this topic: I'm not against Unions per se. Collective bargaining is a right, it's fair, and just. But, as with all things in life, there's consequences. One of those consequences is that it makes your labor more expensive. That's why people have left Unions because it's no longer regarded as a secure path to retirement. Also it's an issue of ranking and mobility within the organization; some people just don't want to be in the pecking order for the long-haul. To each his own.

Anyways, back on subject, running a fab is a long-term investment. It makes zero-sense to be your own client making a part that is uber complicated and expensive to manufacture. That's like asking "Why doesn't the big 3 autos run their own oil refineries to make gasoline"?  

[Fasterthannothing]

well just when we all thought this couldn't get any worse it does. All the prices are going sky high I'm going to need to load up a wheelbarrow with cash to buy a cheeseburger soon. 

[cj09beira]

Building new fabs, expanding production will all take time, and soon this bubble will burst and many companies will be left with excess supply, just ask amd if it was worth it to increase the 290x's supply during the mining craze of 2014-15 (not sure about the date).

loosing out on sales now might avoid loosing out on loses later, for us consumers its about time some restraint was beaten on our heads, with all this "Eco friendly" bs, people sure forget about it every year or two when they do ahead and buy a new pc or phone just because (not saying its is everyone of course).

i will be waiting for a bit longer for that long awaited rx 480 successor (meaning higher perf at a similar price point) till then no moneys from me.

though it might just be that inflation will make this dream impossible, hope not.

 

1 hour ago, StDragon said:

Just to clear the air on this topic: I'm not against Unions per se. Collective bargaining is a right, it's fair, and just. But, as with all things in life, there's consequences. One of those consequences is that it makes your labor more expensive. That's why people have left Unions because it's no longer regarded as a secure path to retirement. Also it's an issue of ranking and mobility within the organization; some people just don't want to be in the pecking order for the long-haul. To each his own.

Anyways, back on subject, running a fab is a long-term investment. It makes zero-sense to be your own client making a part that is uber complicated and expensive to manufacture. That's like asking "Why doesn't the big 3 autos run their own oil refineries to make gasoline"?  

its the type of org that works well short term to resolve specific issues, not so much if it exits for long.

imnsho.

[Kisai]

3 hours ago, cj09beira said:

its the type of org that works well short term to resolve specific issues, not so much if it exits for long.

imnsho.

 

Y'all gotta understand that a L A B O U R union exists to protect the labourers from being exploited. That's the entire point. The internet should have made unions extinct, by making labor mobility infinite and wage negotiation completely transparent. Yet the direct opposite has happened, people are just incompetent at negotiating a fair wage, and the people who are promoted within labor spaces are typically the least competent at doing the job and most competent at social engineering. That's how you get high levels of corruption in non-unionized workforces with people peeing in jars to keep up their KPI's.

 

The fact that you can have a multi-national company making billions of dollars in profits, and the non-unionized workforce needs foodstamps just to work for the company (eg McDonalds and Walmart) tells you what exactly has gone wrong. Corporations are being subsidized by taxpayers when the staff still needs government handouts.

[cj09beira]

6 hours ago, Kisai said:

 

Y'all gotta understand that a L A B O U R union exists to protect the labourers from being exploited. That's the entire point. The internet should have made unions extinct, by making labor mobility infinite and wage negotiation completely transparent. Yet the direct opposite has happened, people are just incompetent at negotiating a fair wage, and the people who are promoted within labor spaces are typically the least competent at doing the job and most competent at social engineering. That's how you get high levels of corruption in non-unionized workforces with people peeing in jars to keep up their KPI's.

 

The fact that you can have a multi-national company making billions of dollars in profits, and the non-unionized workforce needs foodstamps just to work for the company (eg McDonalds and Walmart) tells you what exactly has gone wrong. Corporations are being subsidized by taxpayers when the staff still needs government handouts.

except the same corruption happens in unions as well, not sure about McDonalds but walmart works at very slim margins, its lower than 10% if i am not mistaken, that doesn't mean that they couldn't distribute salaries differently but when you have high amounts of low skilled workers ready to replace the workers already there its hard for salaries to be pushed up, less immigration would probably help.

the best would be a return to smaller stores, where the dynamic is different, but that ship has probably sailed.

[StDragon]

2 hours ago, cj09beira said:

the best would be a return to smaller stores, where the dynamic is different, but that ship has probably sailed.

Pretty much that. It's called the "Wal-Mart Effect". The TLDR of it all is that as consumers chase cheaper prices below local labor and manufacturing rates, that incentivized outsourcing manufacturing further. The amount of cargo shipped - not just finished product, but over the course of production supply chain) - is stupendously bonkers! But it works. Just throw cheap labor and lots of fuel (to ship) at the problem.

Well, that's what's happened with the semiconductor industry. But now much of it needs to be brought back to the West (the Americas, Europe) for national security purposes.

Put it to you all this way. If a certain country were to be taken over, that's 60% of chip capacity taken off the grid overnight. Meaning, that old 1950's Sunbeam Toaster just increased in value substantially. And that wouldn't be the only thing.

[Mark Kaine]

Tbh, I would too. No competition, why wouldn't you.

 

2 hours ago, StDragon said:

Well, that's what's happened with the semiconductor industry.

I think what really happened, its not worth it anymore for most people to make high end semi conductors, like big "fabs" down from 12 in 2000 to "3" currently (or something like that)... theres a reason IBM doesn't make mass market chips anymore, and AMD sold there's too, intel being stuck at 14 for nearly a decade... 

Sure its a price question, but also hitting a hard wall where chip production  actually isn't feasible  anymore with *no* alternative in sight. (Nope, nano tubes aren't going to save us, well i don't think so anyway ~)

[suicidalfranco]

On 8/26/2021 at 6:46 AM, Kisai said:

Y'all gotta understand that a L A B O U R union exists to protect the labourers from being exploited.

Yeah right, and because of them paychecks in Italy haven't been stuck at the same level for the past 20 years, they don't force you to subscribe at a union when you get hired and take 3% off of your paycheck, not subscribing means not getting the job, their contribution nets to nothing in your working life, they don't give themselves a higher pay that is close to those of the politicians compare to the rest of the working force, like a public servant they'll never risk getting fired...

I could go on and on all day, unions are the cancer of society, a tumor that once settled in can't be removed without killing its host.

Don't do the same mistake we did America, never, ever let a union in. They'll fix nothing and only make everything worse

[Kisai]

10 minutes ago, suicidalfranco said:

Yeah right, and because of them paychecks in Italy haven't been stuck at the same level for the past 20 years, they don't force you to subscribe at a union when you get hired and take 3% off of your paycheck, not subscribing means not getting the job, their contribution nets to nothing in your working life, they don't give themselves a higher pay that is close to those of the politicians compare to the rest of the working force, like a public servant they'll never risk getting fired...

I could go on and on all day, unions are the cancer of society, a tumor that once settled in can't be removed without killing its host.

Don't do the same mistake we did America, never, ever let a union in. They'll fix nothing and only make everything worse

Nah.

 

Here's the thing. As I said in the original statement, The union exists to protect the Labour workforce. If the wages are insufficient, then the union stages a strike, which requires a strike vote. Unions in the US and Canada are very successful as long as they have "no outsourcing" clauses in them. The second they're allowed to outsource, the union is worthless, because the employer will outsource everything and let existing union staff retire and shrink without having any leverage to raise their wages.

 

Amazon in particular should be unionized, because people are killing themselves working in absolutely unsafe conditions.

 

However, that said, unions for grocery stores in North America are very worthless, failing to even get their labor force interested in raising their wages and telling them to accept contracts without reading them. This is how you end up being paid below minimum wage.

 

Unions for acting, and art talent are nothing but good overall, and again they have the same problem as unions for call centers and such. The second they're allowed to outsource, everything possible gets outsourced and the union dies through attrition.

 

Try getting a job in Canada with a Unionized workplace that isn't glued to the floor (eg a call center, a factory, etc) it's pretty much impossible to get hired into a good union job because they gave too much leverage to the employer, and now those jobs are in India, Philippines, or Mexico.

 

A Global workforce that is immobile is also subject to bad labor policy of the country they are in. If there were no borders, every job would be filled that needed to be filled, instead of the most skilled engineers and doctors getting stuck driving taxi's and operating corner stores because their credentials are only good enough to get into the country, but not good enough to be qualified for the job. 

https://www.nationalobserver.com/2017/04/06/news/canada-has-plan-stop-qualified-immigrant-doctors-driving-taxis

Quote

An earlier 2012 report by the federal Immigration Department found that in a survey of 50,000 cab drivers across Canada, 200 were doctors or have PhDs, and that 20 per cent of drivers who immigrated to Canada have undergraduate university degrees or master’s.

 

 

TSMC can build a factory in the US or Canada to take advantage of cheaper energy or water costs, but ultimately the country and state is subsidizing that factory to "lure them" to their neck of the woods, and politicians can change those deals on a whim. That doesn't bring the engineers here.

 

https://www.theverge.com/21507966/foxconn-empty-factories-wisconsin-jobs-loophole-trump

 

Quote

In exchange for billions in tax subsidies, Foxconn was supposed to build an enormous LCD factory in the tiny village of Mount Pleasant, creating 13,000 jobs.

 

Three years later, the factory — and the jobs — don’t exist, and they probably never will.

These political deals do nothing but funnel taxpayer money into the pockets of foreign companies that can not be compelled to deliver on their promise, and once that money is spent, it's not recouped.

 

China (PRC) has this figured out, and we're suckers. They require everyone investing in China to partner with a domestic company, and then a few years later the partnership is terminated, the domestic company has looted all the IP it wants from the partnership, and in turn compete with identical, or create counterfeit products that it sells back to us.

https://www.pcgamer.com/a-rogue-arm-ceo-and-a-centuries-old-law-are-causing-a-headache-for-nvidias-big-deal/