TSMC's cutting edge chip production slowed by legacy chip shortages

A shortage of cheap chips is affecting production of cutting-edge chips, the CEO of TSMC has warned, with massive demand for the low-cost silicon consuming supply chains that could be used for more advanced chips, like Apple's A-series and M-series.

Apple chip partner TSMC and other producers are encountering an issue in manufacturing, brought on by the global chip shortage. An inability for the industry to keep up with production of cheap chips has impacted other industries that have increased demand for the components, but now it's causing a bottleneck.

TSMC CEO C.C. Wei told a tech symposium that the persisting demand of cheap chips is holding up manufacturing in other key supply chain segments, reports Bloomberg.

For example, extreme ultralithography system (EUV) producer ASML Holing NV, which makes machines used for chip production, is having trouble obtaining $10 chips for its machines. Wei also pointed to manufacturers of cars who see production stalled by the lack of a 50-cent radio chip.

Though TSMC is unable to meet demand for low-end chips and is in the process of building new facilities to cope with the situation, Wei warns that mature chip nodes could become more expensive to produce over time.

"The age of an efficient, globalized supply system has passed," said Wei, adding that the cost of production is also increasing due to efforts by countries to construct their own local facilities. Costs are swiftly rising, including inflation."

Other major players in the industry continue to have trouble with shortages, with Applied Materials still seeing its order backlog increasing. Nvidia also reported trouble securing chips for its products, including cheap power converters and transceivers.

The high demand for cheap chips using older nodes has a knock-on effect, in that chip producers have to spend more time on the most-wanted chips instead of newer technologies.

Apple does benefit from a close relationship with TSMC, as one of its biggest clients, and so it is less impacted by the chip crisis than others. However, the crisis could still impact Apple's demand for those same cheaper chips that it uses in its products.

While companies rush to catch up with demand, it seems that the shortages will continue to exist for quite some time. In April, Intel CEO Pat Gelsinger forecast that chip shortages will continue to be an issue until 2024.

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8 Comments

blastdoor 3566 comments · 15 Years

About 2 years ago

Meanwhile https://wccftech.com/gpu-market-crashed-in-q2-2022-nvidia-intel-amd-saw-huge-decline-in-gpu-shipments/

also https://www.bloomberg.com/news/articles/2022-07-15/china-s-economy-expands-at-slowest-pace-since-wuhan-outbreak

Point being — at the high end (GPU sales) we see declining demand and China’s slowing economy means a broader slowing of demand for lots of other products too (China has a bigger auto market than the US).

So Gelsinger might be wrong — we might see a shortage replaced with a glut by 2024.

But still, there’s also a real risk of a stupid move by China to invade Taiwan, which would definitely push us back to a shortage.

avon b7 8008 comments · 20 Years

Let's not forget either that cutting edge nodes have never made up more than a tiny fragment of the overall chip market. The real focus was always on 28nm and older nodes.

With the US attempting to de-couple supply chains from China, prices will rise as a result. That could lead to cutting edge designs losing demand and 'cheaper' solutions (chip stacking and for example) gaining more widespread acceptance in products like phones and chiplets gaining traction in HPC.

As companies move to increase supply, the output pendulum will definitely swing to the other side at some point.

jellybelly 135 comments · 15 Years

I thought I read somewhere that Apple paid for several/an ASML EUVL production device(s) and gets priority production with first dibs on scheduling as a result—in addition to being a huge customer.

That would be similar to the deal with the Massachusetts sapphire company, with Apple buying a location in Mesa AZ, building out a plant and buying the crystal growing and slicing devices. That deal went south, mostly for the Massachusetts company, due to Apple writing a good contract with timeline requirements for yield and quality that weren’t met.

They might be buying equipment for Foxconn as well, or did so in the past. I do remember well, that Apple designed the robotic devices for taking old iPhones apart for recycling and outsourced the operations.

FileMakerFeller 1561 comments · 6 Years

AppleInsider said:

"The age of an efficient, globalized supply system has passed," said Wei
I think this is hyperbole. The supply chains are being reorganised now as a bunch of very smart people try to come up with a new configuration that is more resilient to the effects of a global pandemic. That's not going to happen quickly - maybe 2030 is the year things settle down again - but it's going to happen because too many parties gain from the system as it was and are pushing to reinstate those benefits.

Reduced output along every link of the supply chain is always going to have a knock-on effect; demand nevertheless remains high and thus the restraints are more keenly felt. Raw materials are a problem, components are a problem, shipping is a problem, inflation is a problem but none of it is insurmountable and perhaps just the passage of time will alleviate the issues.

Concerns about other nations building their own facilities are perhaps valid, but the flip side of that is an expanding market for the technology that TSMC has developed. Either license it to the competing foundries with a high profit margin, or create a subsidiary / joint venture that builds and operates the foundries in countries that want them while holding onto the IP.

I found this article after a brief search, and it seems like parts of China enduring an extended heat wave and drought is a major factor impacting the supply of silicon wafers (China is the world's largest producer and is geographically close to TSMC's factories, normally a great combination) - so maybe accelerating efforts to fight climate change and reduce severe weather events like this is actually good business sense. Or perhaps TSMC can relocate its highest-quality production nodes to other countries on the list: as others have pointed out above, the volumes for these nodes are so relatively small that supply might not be as tight elsewhere as currently predicted.