nVidia wants to buy less Wafers

[Rauten]

Summary

According to a DigiTimes article, due to the ongoing Crypto-debacle, nVidia is trying to back down from some of it's pre-allocated and pre-paid TSMC 5nm wafers - but TSMC is having none of it, demanding that they either eat their wafers (though they may still choose their favourite topping) or find them a replacement customer for those orders.

 

Quote from TechPowerUp, as it is in English.

 

Quotes

Quote

Before the crypto-currency crash of Q1-2022, NVIDIA had projected good sales of its next-generation GeForce GPUs, and prospectively placed orders for a large allocation of 5 nm wafers from TSMC. The company had switched back over to TSMC from Samsung, which makes 8 nm GPUs from the RTX 30-series.
With NVIDIA changing its mind on 5 nm orders, it is at the mercy of TSMC, which has made those allocations (and now faces a loss). It's incumbent on NVIDIA to find a replacement customer for the 5 nm volumes it wants to back out from.

 

My thoughts

HAH-HAH-HAH!

So they claimed they weren't selling to crypto miners, but created hardware specifically for crypto, were sued by stakeholders for finagling their crypto sales numbers, and now this.

Personally, as someone with no real investment or interest in anything crypto, good - the more it all burns down, the better.

 

AMD is pointed as a potential replacement customer, but as "the most reasonable option", not as a "talks are in place".

On one hand, I hope nVidia fails to find a replacement and has to eat the loss -- only way such huge companies learn is by hurting their bottom lines.

On the other hand, if AMD has more Zen4 wafers, it not only could help with availability, but also maybe with price? At least in the sense of avoiding shortages and preventing a price creep // scalpers.

 

Sources

https://www.digitimes.com.tw/tech/dt/n/shwnws.asp?cnlid=1&id=0000638859_23P7Q8BU6YQGPN8X7TLNT

https://twitter.com/chiakokhua/status/1542733213730508800

https://www.techpowerup.com/296396/nvidia-to-cut-down-tsmc-5nm-orders-with-the-crypto-gravy-train-derailed-amd-could-benefit

[sof006]

Suffer in your poor decisions Nvidia

[Dracarris]

1 hour ago, Rauten said:

On one hand, I hope nVidia fails to find a replacement and has to eat the loss -- only way such huge companies learn is by hurting their bottom lines.

FFS just flood the market with ample GPUs and sell them at a reasonable price where everyone involved makes some profit. I am so sick and tired of this availability disaster where apparently companies intentionally mess with supply-and-demand for their own ridiculous profits. GPUs first and now oil. The skyrocketing prices have nothing to do with there actually being not enough oil available, same goes for wheat.

[Arika]

Sooooooo more GPUs on the market then?

[venomtail]

Nvidia rode the crypto hype train for so long it ran out of tracks...

Whatever comes next they fully deserve it

[Fasterthannothing]

This is the direction every company is heading. The pace of sales the past few years was never sustainable. Everyone in the business world sees it coming. Car manufacturers, home builders, retail stores, and computer chip manufacturers are starting to see major major declines in sales that are causing them to flirt with catastrophic monetary issues due to a buildup of inventory but no sales if they don't change their ways of selling or lower incoming inventory levels.

 

 

Quote

We are really committed to going to an order-based system and keeping inventories at 50 to 60 days' supply,

https://www.caranddriver.com/news/a37187201/ford-build-to-order-online-ordering-changes/ 

 

Quote

Single-family home construction dropped more than 13% in April compared to March, according to the U.S. Census. That's the steepest decrease since April of 2020, when the pandemic was new and virtually the entire economy was forced to shut down overnight.

 

https://www.fool.com/the-ascent/mortgages/articles/new-home-construction-is-down-and-thats-bad-news-for-the-housing-market/

 

 

Quote

Target Corp. warned its profit would drop because it needs to cancel orders with vendors and offer discounts to clear out unwanted goods, the latest sign of the sudden mismatch between supply and demand inside America’s stores.

 

https://www.wsj.com/articles/target-warns-profit-will-drop-because-it-has-too-much-stuff-11654599664

[porina]

Turning down the tap at the right time is hard to predict, and this is the fall out from it. Contracts will be in place for whatever they agreed in past, and that stands unless both sides agree to changing it. Doesn't hurt to ask, but don't expect to get. It might be more interesting to know the scale of the change. Is it a big reduction? Like the stated AMD cut of 20k wafers at 7/6nm, although we don't know what the total figure is. So guess they expect weaker demand from their current products than previously predicted.

 

Thinking about the PC/gaming market in particular, we're still not in a great position. While RDNA2 GPUs seem to be mostly close to MSRP last time I looked, nvida in general are still elevated. Is there still scope for that to fall or have we reached a floor? A year and half after launch, PS5 are still largely unobtanium. But all this is on processes older than 5nm. 

 

Without more numbers it is hard to get a feel for the potential impact to end users like us. While it means we're more likely to have sufficient supply of next gen nvidia GPUs, if they keep that surplus allocation then part of the cost will have to be passed on.

[leadeater]

2 hours ago, Rauten said:

or find them a replacement customer for those orders.

 

 

[Rauten]

15 minutes ago, porina said:

It might be more interesting to know the scale of the change. Is it a big reduction? Like the stated AMD cut of 20k wafers at 7/6nm, although we don't know what the total figure is. So guess they expect weaker demand from their current products than previously predicted.

It's nothing but guesswork, but:

• TSMC has apparently given AMD an economical "slap on the wrist" for their 20k allocation reduction, which AMD has already agreed to.
• For nVidia, however, they've taken a "take the allocation or find us another customer!" approach.

Which, to me, indicates that nVidia's potential reduction must be huge, to produce such a different and harsher response from TSMC.

 

But yeah, it's just wild guessing with no hard data.

[porina]

12 minutes ago, Rauten said:

Which, to me, indicates that nVidia's potential reduction must be huge, to produce such a different and harsher response from TSMC.

There was some give from TSMC in the allowance of a delay of a quarter or two.

 

Via link below, cost of a 7nm wafer is $9346k in 2020. If we assume that price is still current and also applies to 6nm, AMD cut $187M spending at TSMC. Not exactly small change. 5nm wafers are near double that at $17k a pop.

 

https://www.tomshardware.com/news/tsmcs-wafer-prices-revealed-300mm-wafer-at-5nm-is-nearly-dollar17000

[Mihle]

1 hour ago, Rauten said:

It's nothing but guesswork, but:

• TSMC has apparently given AMD an economical "slap on the wrist" for their 20k allocation reduction, which AMD has already agreed to.
• For nVidia, however, they've taken a "take the allocation or find us another customer!" approach.

Which, to me, indicates that nVidia's potential reduction must be huge, to produce such a different and harsher response from TSMC.

 

But yeah, it's just wild guessing with no hard data.

Maybe the reason is that AMD was first to ask?

Maybe it's that simple?

[Zodiark1593]

2 hours ago, porina said:

 

 

Without more numbers it is hard to get a feel for the potential impact to end users like us. While it means we're more likely to have sufficient supply of next gen nvidia GPUs, if they keep that surplus allocation then part of the cost will have to be passed on.

Depending on how much Nvidia gets burned by excess capacity, this could bode quite poorly for the end user should future crypto booms occur, as Nvidia may be much more reluctant to try to match excessive demand. 

[LAwLz]

Just a thread-ly reminder that there is no solid evidence that it is crypto that have caused GPU shortages. In fact, there is a mountain of evidence suggesting that mining have had very little impact on it (about 10% of GPUs end up used for mining, 90% end up used by gamers and the likes), and that OP are leaving out a lot of important details. 

 

For example Nvidia never claimed to not sell to miners. They claimed to not sell gaming cards to miners, which seems to be true. There have been some stories regarding it but they have all be debunked (but nobody bothers to look past the initial headline anyway). 

For example there was some tweet about a miner buying directly from some distributor and people wrote articles about how Nvidia were selling to miners. The miner then made another tweet saying that it was specific mining cards that were sold but that was ignored since that doesn't get as many clicks. Also, there is info that suggest the mining specific SKUs are made using partially defective dies. So if Nvidia were not selling them the mining issue would be even larger than it is. But people are too stupid and caught up in conspiracy theories to even understand when someone does something that benefits them. 

 

 

This news story is also not about mining, even though OP likes to try and make it about it. The report specifically mentions lower expected demand from gamers as a reason for the reduced allocation. The article also mentions customers like Apple trying to reduce their allocation. 

 

 

Everything mentioning mining in the techpowerup article is mostly just the editor adding his own take and speculation, and if you ask me the speculation is utterly stupid. 

 

 

It is pretty clear what is happening here. Multiple chip companies, not just GPU manufacturers, are expecting lower sales after having had a period of massive demand fueld by things like stimulus checks and savings for vacations that never happened.

We are now also in a period of very severe inflation and potential layoffs as we move into a recession. People don't typically buy a bunch of really expensive gaming computers or phones when they are struggling financially. 

 

 

I also find it weird that the LTT thread only mentions Nvidia when AMD (and Apple) are also trying to cut their order. But I guess it is easier to spin the story into "Nvidia bad" if we just pretend like it's only about Nvidia and miners. 

 

 

I also find the comment about OP hoping that Nvidia can't get out of the deal to be stupid. Why do you want Nvidia to fail? All that means is that we, the consumers, will suffer because Nvidia will try and recoup their lost investment, and the wafer allocation can't be used by other companies who might need it. It also means that there is less pressure on TSMC to lower their prices, which has been one of the reason for the high prices lately. 

[Blademaster91]

If Nvidia wants to cut supply to keep prices high then they definitely deserve it after riding the crypto train.

And more supply for AMD seems good, there is still quite a demand for GPU's and prices still aren't back to normal yet.

 

[porina]

1 hour ago, Blademaster91 said:

If Nvidia wants to cut supply to keep prices high

They want to cut supply to keep prices low. It doesn't help them or their customers to pay for now unneeded capacity. 

[ToboRobot]

3 minutes ago, porina said:

They want to cut supply to keep prices low. It doesn't help them or their customers to pay for now unneeded capacity. 

If there is too many GPUs, and they are stilling on shelves unsold, the prices moves lower to stimulate sales.

Supply and demand is basic economics, and cutting supply doesn't keep prices low.

[Blademaster91]

18 minutes ago, porina said:

They want to cut supply to keep prices low. It doesn't help them or their customers to pay for now unneeded capacity. 

I don't see how cutting supply would keep prices low, if there is more than enough supply then we might see prices closer to MSRP. There wasn't enough supply of RTX 30 series cards until crypto crashed, and it seems like Nvidia doesn't want to compete miners selling off their used cards and wants to keep prices higher.

[porina]

1 minute ago, ToboRobot said:

If there is too many GPUs, and they are stilling on shelves unsold, the prices moves lower to stimulate sales.

Supply and demand is basic economics, and cutting supply doesn't keep prices low.

As a consumer you might want lower pricing. As a manufacturer you generally want to optimise your profits. Here nvidia have a possible excess supply of future fab capacity. It doesn't follow they will make those "excess" GPUs anyway. If say they expect to sell 1.0M of a certain model, they're not necessarily going to make 1.2M just because they can. They still make 1M units, but have to pay for 1.2M units regardless. Making more may result in less profit, so it doesn't make sense to do so.

 

So the three scenarios are:

1, nvidia don't get the reduction from TSMC. nvidia make all possible GPUs. User GPU pricing falls. nvidia profit will probably fall far from the optimal point.

2, nvidia don't get the reduction from TSMC. nvidia make only GPUs needed. nvidia profit is reduced since they have to pay more than they ideally need to, and some cost gets passed to end user.

3, nvidia get the reduction from TSMC. nvidia make only GPUs needed. nvidia profit where they expect it, pricing where they want it.

 

2 is the likely current scenario. 3 is the balanced scenario. It is not lowest price to end user which is 1, which'll likely lead to a drop in profits. Maybe it could work if you argue they're doing it to win market share, but given they totally crush AMD already there's no point in doing that. 

 

3 minutes ago, Blademaster91 said:

I don't see how cutting supply would keep prices low, if there is more than enough supply then we might see prices closer to MSRP. There wasn't enough supply of RTX 30 series cards until crypto crashed, and it seems like Nvidia doesn't want to compete miners selling off their used cards and wants to keep prices higher.

See above for long version. From nvidia perspective, they want enough supply. Paying for more than enough supply as it seems they currently have is a cost.

[HenrySalayne]

3 hours ago, LAwLz said:

Just a thread-ly reminder that there is no solid evidence that it is crypto that have caused GPU shortages. In fact, there is a mountain of evidence suggesting that mining have had very little impact on it (about 10% of GPUs end up used for mining, 90% end up used by gamers and the likes), and that OP are leaving out a lot of important details. 

And once again we're drifting into an alternate reality where red is green and where an imaginary mountain of evidence shows absolutely no connection between crypto and mining...

 

[ToboRobot]

1 hour ago, porina said:

As a consumer you might want lower pricing. As a manufacturer you generally want to optimise your profits. Here nvidia have a possible excess supply of future fab capacity. It doesn't follow they will make those "excess" GPUs anyway. If say they expect to sell 1.0M of a certain model, they're not necessarily going to make 1.2M just because they can. They still make 1M units, but have to pay for 1.2M units regardless. Making more may result in less profit, so it doesn't make sense to do so.

 

So the three scenarios are:

1, nvidia don't get the reduction from TSMC. nvidia make all possible GPUs. User GPU pricing falls. nvidia profit will probably fall far from the optimal point.

2, nvidia don't get the reduction from TSMC. nvidia make only GPUs needed. nvidia profit is reduced since they have to pay more than they ideally need to, and some cost gets passed to end user.

3, nvidia get the reduction from TSMC. nvidia make only GPUs needed. nvidia profit where they expect it, pricing where they want it.

 

2 is the likely current scenario. 3 is the balanced scenario. It is not lowest price to end user which is 1, which'll likely lead to a drop in profits. Maybe it could work if you argue they're doing it to win market share, but given they totally crush AMD already there's no point in doing that. 

 

Supply and demand (mcgill.ca)

Your examples completely disregard prices, which is what matters here.  What you state "cut supply to keep prices low" goes against established principles of economics.  Please consult with an econ textbook before you try to tell me what I want as a consumer and what businesses want.

[porina]

45 minutes ago, ToboRobot said:

Your examples completely disregard prices, which is what matters here.  What you state "cut supply to keep prices low" goes against established principles of economics. 

I get the concept but you're missing that nvidia don't have to overproduce. There's a big difference between having excess stock, and intentionally making it.

 

Looking back there may be another misunderstanding between us. When I said cut supply, I meant nvidia's request to reduce their allocation from TSMC. I did not mean nvidia reduce supply below that they planned, which would push up pricing due to constraint like we've seen in the last two years. Not having that reduction from TSMC will likely result in lower profit for nvidia than if they got it, and it follows some of that difference will end up with consumers.

 

edit: since you like the link earlier, I think I can express what I'm saying better referencing that. If you look at those supply/demand curves, then nvidia's renegotiations with TSMC may shift the supply curve vertically. nvidia will want a higher or lower sale price in line with what it costs them to get the number of GPUs they want. Making a fixed number of GPUs with any excess capacity unused, a bigger committed spending with TSMC will put the curve higher up. If they get the reduction agreed with TSMC, the curve will shift down. 

[BuckGup]

It's not an ASIC though and Nvidia cannot be stupid enough to think GPU mining is all said and done because the price fell. In 5-7 months we will be in full mining mode again. Bitcoin tends to crash in the summer months and slowly rise again throughout fall and the winter

[tim0901]

7 hours ago, LAwLz said:

Just a thread-ly reminder that there is no solid evidence that it is crypto that have caused GPU shortages. In fact, there is a mountain of evidence suggesting that mining have had very little impact on it (about 10% of GPUs end up used for mining, 90% end up used by gamers and the likes), and that OP are leaving out a lot of important details. 

Indeed. You can look at sites like eBay and Steam's hardware survey to get a glimpse at this. The laptop 3060 is the 5th most popular GPU on steam right now, above the 1050. The desktop version is only three spaces below it in 8th and the 3070 slips in in 11th. In total 6 of the top 20 cards are Ampere based, 8 are Turing based and 4 are Pascal based. If the cards were all ending up in the hands of miners, we wouldn't see this at all - these Ampere-based cards wouldn't be nearly this high on the survey.

 

But where is AMD? The only AMD cards in the top 20 are the RX 580 and "AMD Radeon Graphics" - I believe this is what their iGPUs APUs show up as. Only a few RDNA GPUs show up on the list at all - the 6600, 6600XT, 6700XT and 6900XT are the only ones I can see - but even the 3090 has a higher market share than any of them. Any one of those top-20 GPUs probably has a greater share of the GPU market alone than the entire RDNA2 lineup put together. This might suggest that they were all bought up by miners but, as has been rightly pointed out:

10 hours ago, porina said:

RDNA2 GPUs seem to be mostly close to MSRP last time I looked

and this has been true for quite a while now, unlike Nvidia cards which have dropped in price massively in the last few weeks. Additionally, if you look on sites like eBay there are far less listings for AMD cards right now than for Nvidia cards (by like, orders of magnitude) suggesting that the supply wasn't being bought up by miners either.

 

Which leads me two conclusions:

1. RDNA2's supply was basically non-existent
2. People don't really want them anyway

Were AMD's supply as high as Nvidia's, we should logically see far more of those cards available on the second-hand market today since, as far as I'm aware, most miners didn't care about which cards they bought so long as they were profitable. And sure some of the supply is invisible to us - cards used in compute situations and the like won't show up on the Steam Hardware Survey - but these are workloads that Nvidia has dominated for the last few generations anyway thanks to CUDA and so I can't imagine AMD has been selling that many cards to these sorts of customers.

 

Similarly, were demand as high for these cards as it is for Ampere cards, I don't think we'd see AMD's GPUs be as cheap as they are today, rather we'd see them priced much more in line with the Nvidia GPUs they are comparable to in terms of performance. My best guess is that demand for them is so low because customers clearly value the "other" stuff beyond pure performance that Nvidia offers (CUDA, DLSS, NVEnc etc.) enough that they don't consider AMD an option. During the scalpocolypse sure, people took what they could get causing AMD prices to rise too. But I don't think that - outside of AMD fanboys - many people considered AMD to be their first choice.

 

I wonder if AMD recognised that RDNA2 was their weakest product fairly early on and so redirected their silicon supply to other things. After all RDNA2, their console chips and Zen 3 are all made on the same TSMC N7 process, and all three of them were (at least at the start) seeing massive shortages.

 

That being said, new prices aren't necessarily the best place to look right now for indications of real-world GPU pricing. 2nd hand Nvidia GPUs are also getting cheap right now with 3080 Tis available at around £850, while 3090s are commonly listed for under £1k - both of which are hundreds below their MSRPs (which, lets be real, probably makes their current prices a more realistic price for them in the first place...) Even the 3080 10GB is seeing listings at below MSRP, albeit barely with most hovering around the FE MSRP of £650. The comparable AMD cards are available for slightly less (albeit in a much lower quantity) but the price difference is nowhere near as large as you see in new listings at places like Amazon.

[Blademaster91]

2 hours ago, porina said:

See above for long version. From nvidia perspective, they want enough supply. Paying for more than enough supply as it seems they currently have is a cost.

From your long version above, scenario #3 would be optimal for Nvidia, however the consumer still loses as GPU prices would likely remain high, of course that is what they want and Nvidia still sold every RTX 30 series GPU made, although the argument could be made how many of those went to mining farms.

And in scenario #3,  AMD may want to buy the extra capacity, if Nvidia wants to keep pricing up to where it was with the RTX 30 series being in low supply, AMD having extra production will keep their prices lower. I would hope consumers go for the lower priced option although most are biased towards buying from team green.

[porina]

16 minutes ago, Blademaster91 said:

From your long version above, scenario #3 would be optimal for Nvidia, however the consumer still loses as GPU prices would likely remain high, of course that is what they want and Nvidia still sold every GPU made, although the argument could be made how many of those went to mining farms.

Is it not reasonable for a company to make a fair profit? Enough to operate and expand for the future. A company will cease to continue if it is unable to make a profit (edit: ok, non-profit orgs are a thing, but they're aiming to break even). Their pricing would take that into consideration, and that is the point they are probably trying to keep at by making the request with TSMC. As a consumer, of course we don't want to pay any more than is necessary. There can be occasions where things can be picked up below cost, but they're not the norm.

 

16 minutes ago, Blademaster91 said:

And in scenario #3,  AMD may want to buy the extra capacity, if Nvidia wants to keep pricing up to where it was with the RTX 30 series being in low supply, AMD having extra production will keep their prices lower

I tried to keep the scenarios somewhat simple. For sure, in reality there's a lot more considerations that could feed into what happens.

 

16 minutes ago, Blademaster91 said:

I would hope consumers go for the lower priced option although most are biased towards buying from team green.

There are many that boil down hardware choice to some fps/$ calculation of some sort. If that really represents your needs, go for it. It is usually way more complicated than that.