1. TSMC were spending ~$30B per year on capital expenditure already.
2. Since leading edge node is forever increasing in cost, the next 3 years, i.e 3nm in 2022 and 2nm in 2024 are expected to be higher. ~$100B investment aligned with their initial plan / trend / target anyway.
3. So really the major news is stopping ( or to be precise, delaying ) price reduction. Which is unusual but understandable given the current demand situation. And No, it is not TSMC's fault. You should ask how every single Fabless Semiconductor company has failed with their demand, supply chain analysis and projection. Although one could argue it is not their fault either, since their client gave wrong projection. The only company that is not affected is possibly Apple.
4. There has been mounting pressure from investors, politicians and MSM media on Intel IDM 2.0, and supply problems. This announcement feels more like addressing those concerns.
5. Remember both Samsung and Intel are expanding capacity. And even GF and many other smaller players. It took DRAM and NAND three years
to catch up with demand ( and then over supply ). Which in hindsight is pretty damn impressive. Although during the ~2016 - 2019 everyone felt awful.
> The only company that is not affected is possibly Apple.
This is an interesting point. Apple is pretty hard nosed on their predictions and capacity reservations, to the point where they could be funding part of this expansion at TSMC (as they have done for Hon Hai, among others, for decades).
I continue to be astonished by Apple’s ability to manage their supply chain so tightly (which requires not just an iron fist but very very intense internal process). They seem to be the only ones who can manage to do that.
And it’s not like other big companies are lazy; the part that really amazes me is that their process hasn’t leached out to other companies, as so much else does in the Valley.
I just saw something about this. The reason Apple hasn't been impacted is because their sales have been dropping for the past few years on iPhones and other devices. That trend hasn't changed during the pandemic. While many of the other players predicted drops during the pandemic, and initially it did, that demand dramatically increased, especially in the desktop market (AMD, Nvidia, etc). It is hard to fault companies from predicting the massive increase in a market that has been decreasing for decades(?) now. There is limited capacity at TSMC and Samsung. They leave buffer, but that was quickly consumed because almost everyone needed more capacity. It takes potentially years to increase capacity (build a new fab, etc), they have no room to allow any companies to adjust their capacity reservations.
So at the end of the day, it isn't that Apple was necessarily better...their demand just didn't change and continued the downward trend in certain product areas, giving them breathing room.
One thing to remember is that the current CEO Tim Cook started in the supply chain management side of the company...
And did that job for Steve Jobs during the growth of the iphone.
It would be expected that Apple would have extended insight into supply chain and capacity, seeing as the head of the company was/is the one who did that job.
Apple is experiencing supply chain issues, and there is a shortage of laptop devices right now if you try to make bulk orders (>1000 units). I have no context on their phones.
There aren't many companies that can compete with 100 billion dollar capex demands. While the loans are freely available, the development risk remains. TSMC has a proven track record pushing into the latest node - intel does not. Samsung has been a little bit behind for a while while keeping pace.
Following this trend - 2nm will have something on the order of 200 billion in capex outlays. Given that being first to market has a premium, the loan will be high risk. If you borrow thinking you'll be first and are late by 4 years then you and your bank are going to have a problem.
On the bright side, the new processes will have a longer life. When your 135nm process is replaced by 14nm within a less than a decade, there's a huge gap there and the old process isn't worth much. If you go from 14nm to 2nm, you can still use 14nm for a lot of price sensitive customers.
Every single fabless semiconductor designer failed to predict demand because their customers lied to them. The car industry pulled a really dick move last year, and then pulled an even more dick move in the opposite direction, and now everyone is screwed. Back in early 2020 the car manufacturers decided that demand for cars would go down, and because they have a religious aversion to keeping any stock, cancelled lots of orders with their vendors, screwing said vendors over. Their vendors could not afford their fab slots because automotive is such a big part of their revenue, so they cancelled their fab slots. Those slots were happily sold on to entertainment and computing customers, who anticipated a jump in demand due to people staying home more. So far so normal.
However, the car industry got it badly wrong - people, afraid of public transit, started buying more cars rather than less. The car industry, being screwed due to their just-in-time religion of zero stock, was faced with their production lines stopping so they called up all their vendors, and asked for those orders back, and some more on top. The vendors then tried to get their fab slots back, and were told to come back next year. Some of them ended up buying other fabless IC designers out of their slots, causing the problem to spread. Others cancelled their existing orders to other customers, and auctioned off their existing inventory to increasingly desperate car manufacturers at a 6x to 8x premium. Anyone who was not prepared to pay that or didn't act fast enough was screwed. From that point on, a bunch of companies that depend on those lines of microcontrollers had to rapidly redesign their product to use another device, taking even more devices off the market with unplanned demand. The users of those devices then had to move to others, causing even more availability cascades. This is how two nasty moves by the car industry caused global market disruption in a number of industries that depend on electronics. This is not a normal "demand has increased, and industry can't keep up" event, it's elephants dancing and trampling everyone else underneath.
This is further aggravated by the top three automotive semiconductor suppliers (NXP, Renesas, Infineon) having their facilities destroyed in two unrelated disastrous events - a fire at Renesas' wafer processing plant, and Texas freezing over, destroying NXP's and Infineon's fabs through cleanroom contamination and process interruption. Those events took out months' worth of production, and destroyed product that had already been sold before manufacture. This would have been recoverable in a normal market, because distributor stock could hold a couple months, but in this case it was game over for non-automotive customers as all distributor stock was already gone by then.
I see this in my work every day now - customers coming to me for help with redesigning products to use a different microcontroller, or help with sourcing parts from unusual sources because their normal channels are gone. I've been in this industry a long time and never seen anything like this before. This is not a failure of supply chain analysis and projection on the part of the fabless semicon vendors. This is their biggest customers fucking their vendors over not once but twice by lying to them about their own demand.
Now I know why my business, that has nothing to do with semiconductors are booming too.
I own a store that sells parts and tools to attach things to each other (originally we sold nuts and bolts but those are unprofitable without gigantic volumes).
In the last months suddenly we started to get an unusually high amount of orders from factories intending to use our products in manufacturing, while until then all we ever got was orders for replacements parts and maintenance.
Since we are a store, not a manufacturer, our prices aren't lowest as possible... so we are very confused about why Toyota/Honda and others for example, called us wanting parts, instead of calling our supplier, since we know they have their contact anyway (I won't say who it was but for example one time a manufacturer asked us if a product would help them, and asked us to design something for their production line... we did, then they ordered the product from our supplier and never paid us anything for all "free" engineering work we did for them).
So now I can guess what happened: car industry cancelled non-semiconductor orders too, their slots got sold, and now they want it back... so my store that tends to have higher stock than others keep getting new clients willing to pay through the nose to have parts because our own supplier doesn't have them in stock and can't deliver any in short term...
The thing about a car is that BOMs are monstrously large.
If you have 1000 ICs in a car, and one of them is missing, that's a $100,000 car you can't sell.
Car industry haphazardly buying out last stocks of ICs will not help them work around that "one missing chip" problem, and production lines are potentially stuck for many more months.
The panic was undue, well, or best say of no use. The are screwed, but its of no use for them to hope for some desperate moves improving the situation now if they can't assure 100% availability of all, and every component on their BOM.
I have few buddies who went to work on an ECU for MTU/Siemens. They ran exactly into that when their companies went for a complete redesign of their ECU to run on consumer STM32. They had hopes of that such old 180nm-130nm CMOS chips easily tolerating around 130C°, they did tests, it worked fine, and then they ran into undocumented high temperature protection kicking in on a slightly newer chip revision, but they already bough few millions of them, and other ICs for a new design in inventories.
You write at the beginning and end of your post that the car industry lied to their vendors, but then you also write they got it badly wrong, which means they were incorrect about their projections of demand. Surely it can't be both, and it sounds like the car industry did not lie, but simply were wrong about their predictions for the future.
Or am I misunderstanding?
Nevertheless, thanks for providing context for the whole situation.
Just in time delivery has its downfalls when vendors have issues, but this is a known trade-off to that model. If a company keeps inventory on hand, then they have the worry of owning excess parts that they can never use and is a sink cost later. So these companies can lose money with either, it just depends on the circumstances that cause it.
I'd be interested to learn more about the order cancellation you were saying that fabs were doing to non car manufacturers. Shouldn't contracts prevent that sort of behavior (without proper compensation)? And if they did that, they are burning bridges that would make people less likely to do business with them in the future. Maybe the car chip business is enough money to warrant such moves, but seems potentially sort sighted depending on exactly all what you said happened.
I think "lying" is pretty harsh. The pandemic caused many, many people and companies to have trouble predicting future demand. To me, it's a miracle that the American economy has kept going as strong as it has. I know it's very important for car manufacturers to predict future demand, and I know it's an extreme frustration for many people whose logistics are screwed up, but really, it shouldn't be a surprise that the car manufacturers mispredicted the impact of a once-in-a-lifetime pandemic.
You left out the AKM fire in October, which caused some essential production to get offloaded to Renesas. I think it may actually have gone to the same Naka plant that had the more recent fire.
> because they have a religious aversion to keeping any stock
In the US people love to keep huge numbers of cars in stock. Apparently most people buy from stock there, and almost nobody does JIT, for some reason. So this isn’t the case everywhere.
Top comment. Really appreciate this analysis. I think there is a tangential question to be asked: are consumers really demanding "software defined cars" in the first place?
Even that is not exactly the same. Cells, or logic gates per mm° is too rather ambiguous, as different implementations of same logic families do things differently, and the metric gets even wronger for different logic families.
The best I believe will be a whole cell library metric using some lowest common denominator blocks like registers, adders, bus pieces etc
Their 20B investment into their Arizona campus has me convinced. They're doing the right thing (if you live in the US), my 5900X is pretty unreliable and I never had issues with my Intel systems. The stars have aligned so I'm going to buy their chips from here on out.
>You should ask how every single Fabless Semiconductor company has failed with their demand, supply chain analysis and projection.
That's an oversimplification. As lead times increase, overbooking increases and that gives rise to further extension of lead time. Delays also become more prevalent at high utilization because there's no capacity in reserve. It's very difficult to predict where demand will go in a year of totally abnormal market behavior and unpredictable helicopter money.
In other words, fabless chipmakers are asked to do the impossible and some of them, predictably, failed to accomplish that task. Imagine asking AMD in April of 2020 to predict how many PS5s will sell during Christmas.
Selfishly... so will all this CapEx by TSMC, Samsung, and Intel put pressure on wages? I’m in the industry at a large company getting 3% raises, 10% of comp as stock, and a salary about 1/3 less than a software dev. All while being highly reviewed.
I write a lot of software for my job (although it’s not my title) and I’ve been thinking of trying for pure software jobs even if the work is more boring (I do semiconductor R&D)
I also find it surprising that Hardware Engineers have a lower pay scale (Although I didn't hear very big differences like you said). Is there some kind of supply-demand behind this? Engineers for car-related things as well.
Anecdotally I think you could in theory get a title change to software engineer, while doing the same thing, to get more pay.
There are big differences. A close friend who's a hardware engineer shared with me her salary. With five years of experience and a MS, her salary is the same as a fresh-out-of-undergrad junior software engineer at the same company. That's $120k in the valley.
If you don’t switch for higher salary, you are part of the problem. I can understand video game makers, but if your work is boring and have a low pay, and a great software skillset, improve the pay of your colleagues by switching.
> I write a lot of software for my job (although it’s not my title) and I’ve been thinking of trying for pure software jobs even if the work is more boring (I do semiconductor R&D)
This sounds like me in a past life. I assure you: It's worth the change. (Often) Easier work. Paid more. Treated better. Nicer work environment. It's worth it even if the pay were the same.
Also, with SW roles in your resume, you can then find jobs outside the semiconductor industry. Lots more options available to you.
3% raise of 50k is much less than 3% of 150k though. GP could get a hella big pay bump and then much larger raises if he switched, even if on paper it’s still the same percentage.
Maybe we should start pulling chips of trashed electronics. There must be hundreds of thousands decently fast chips going into our trash.
How many dead xboxes and PlayStations have chips in them that are still good?
I'm thinking of a reverse pick and place machine that pulls chips of boards (boards that can not be used to fix other dead devices) and is able to test each valuable component for later reuse.
> Maybe we should start pulling chips of trashed electronics. There must be hundreds of thousands decently fast chips going into our trash.
This is already been happening for decades on industrial scale in countries doing eWaste recycling. Just a decade ago, you could've still find people selling refurbished chips in Shenzhen on every corner. Now it kinds of became a much more low profile enterprise.
The US defence department, colloquially known as the pentagon, ran a wargame scenario a few years ago to see what will happen if US will be hit with a worst case scenario, years long semiconductor unavailability due to sabotage of domestic fabs, massive industry wide cyberattack, or something happening to Taiwan.
One of comissioned think tanks recommended that exact methods of military going door-to-door to gather old gaming console, smartphones, and PCs for conversion to use in munitions, and military equipment.
My first reaction to this plan is that it’s for the birds. The government would be better off just building a fab themselves. The raw materials aren’t that hard to get hold of; integrating consumer electronics into military systems would likely take just as long, if not longer (with all sorts of other negative effects on quality and security). I guess the analogy is with scrap metal drives in WWII, but this situation is nothing like that at all. It’s a fantasy scenario that makes no sense.
We defend Taiwan with everything we’ve got. There is no plan B, and it’s not just about semiconductors.
I can kinda see the value of getting a million PS3 cpus for in your new drone swarm or industry controllers. But how is gathering generic decades old hardware going to help? For Computation as a service its not that valuable or easy to install. And for reuse in 'new' devices it's even more questionable. All this stuff barely just works in this specific configuration.
"The US defence department, colloquially known as the pentagon, ran a wargame scenario a few years ago to see what will happen if US will be hit with a worst case scenario, years long semiconductor unavailability due to sabotage of domestic fabs, massive industry wide cyberattack, or something happening to Taiwan."
There is also the danger of counterfeit chips. It is already a plague for those of us hoping to get some good deals from Chinese vendors, but the US Navy as well was hit at least once with fakes.
Aren't these BGAs? Safely removing and then also re-balling large non-socketed chips is tricky.
Do they actually have machines for this? I understand that the re-work house we use do it by hand and also spend a chunk of time inspecting the chip once removed since it's very easily damaged. Maybe there are more automated places doing this on a mass scale, we don't do it very often which might explain the general poor results.
Xboxes and PlayStations have cryptographic chains of trust going back to their on die boot ROM. You can't just pull it out and use it on another Xbox or PlayStation, much less use them for generic computation.
I think the Xbox One is the first console to have no unsigned code execution at all during it's lifetime.
You can trivially run whatever code you wanted to if you seized the signing keys; I suspect that in such a "collect all the general-purpose computers for general-purpose computing things" that would be the first order of business.
Not that the government doesn't already have copies, of course.
>How many dead xboxes and PlayStations have chips in them that are still good?
Those things have one big APU (with weak CPU cores), some VRM and memory, GDDR5 + useless DDR3. I'd discount the APU as it'd need someone to make OS support for with the blessing of Sony/Microsoft. That leaves the chips of GDDR5, which can be used by low end GPUs - I don't think they'd ever recoup and investment and likely cheap manual labor of preheat + hot air is the easier option. No idea if anyone would get a license from AMD or NVidia for such GPU.
Edit: the capacitors would have the best value but well... I cant see anyone relying on old caps for anything but repair.
I bought a Tesla T4 on eBay. Many people will buy a set of broken laptops and use the parts to make a fixed one like Like Miami. Louis Rossman constantly has to find donor boards to fix laptops.
A PS3 only has 256mb of ram, so you need to get it out of the case, remove it from the board, check it still works, package it up and sell it.
But I can buy 2GB for 5 GBP. Can you do all the aforementioned things for less than that?
I wonder if we could sort and melt down chips as a source of raw semiconductors (I hear rare earth metal mining/refining is very dirty). Maybe that would be economic?
If latest chips were unavailable (war, civilisation collapse), we'd do just fine with existing chips for decades or maybe even centuries.
With clever software, you can eek much more real world use out of hardware. For example, your PS3 is probably sitting with its CPU idle right now, when it could be doing useful computations for someone else who needs more computing power.
Yet here we are https://www.youtube.com/watch?v=qNje63vx73s Chinese "Motherboard" made using salvaged VRMs and transistors, salvaged capacitors, salvaged Intel Chipset!, and made to work with retired Intel Xeons and older DDR3 ECC memory.
"However, Liu said that it is "economically unrealistic" for all countries to "onshore" additional chip production, warning that this could lead to more unprofitable capacity."
Well. The world is clearly not listening to that. So the question is how the business of chip manufactoring will look in 2 or 3 years?
He may well be right, but concerns about supply chain security might make it worthwhile for countries to subsidise capacity that would not otherwise be economically viable.
It makes sense for China to overinvest in national chip manufactoring due to sanctions. However for the west, of which Taiwan here is a part of, it is very risky. If the west no longer supplies China's chip market, it would need significant less chip manufactoring capacity.
1. can we afford to just build fab without consideration of profit? what you going to do when you can't turn a profit with all the fabs in the US?
2. TSMC and the rest of the foundry industry are exposed to the highly cyclical nature of the semiconductor industry. we are seeing the high demands for chip because of covid and car vendors' f'ck up. what you going to do with all the fabs build in the US when you are hit with downturn?
we saw Intel struggle with 10nm and 7nm delay. i think its wiser to invite fab company like TSMC and Samsung to build fab in the US even with smaller capacity.
Some choice quotes from Mark Liu, chairman of TSMC this week agreeing with you:
* "It's economically unrealistic for all the countries to build additional chip production capacity,"
* “Uncertainties led to double booking, but actual capacity is larger than demand,” How quickly those concerns are resolved “really depends on future U.S.-China negotiations.”
* each country developing its own domestic semiconductor industry would lead to a lot of “nonprofitable” capacity.
>what you going to do with all the fabs build in the US when you are hit with downturn?
Priority sourcing from domestic fabs, let TSMC whither, by design. Semi is oil now, there's more strategic/geopolitical considerations than supply/demand curve. US/EU/CN do not want Taiwan to have semi dominance, it's not in anyone's interest. Current TSMC position is happenstance due to poor industrial policies that countries are scrambling to address. IMO press releases and capex spending around Arizona announcement suggest TSMC wasn't prepared to built US fab, let alone 6. US pressured them, EU failed to. There's a good chance TSMC/Taiwan will try to delay their silicon shield evaporating for as long as they can. Probably not a coincidence big ticket US weapons sales are scheduled around when fabs would be up.
Speaking as someone in AZ, the fact that we can get a 5nm fab going here in the US speaks volumes to how effective that pressure was. I actually disagree with Mark Liu, on his opinion on it leading to a lot of nonprofitable business... I think that for the US and EU it is actually critical from a national security and economic standpoint to develop new semiconductor capabilities. I think that there will be profit in doing domestic semiconductor, but only because the government is going to have to subsidize the buildout of this capability.
I do think that its going to become a race to the bottom for wafer/ic costs, but that is actually a really good thing. I think there are going to be more companies that are developing in house technology and more focus on things like FPGA and edge-based compute. If TSMC, GlobalFoundries, UMC and Intel are smart, they will focus on pivoting towards the software/simulation side of things, IP cores and flexible logic like FPGA type of solutions. Ideally they would want every big company developing their own CPUs, edge devices, etc. and have them optimized for their process nodes.
I suspect this won't be the last major fab push, especially since people are seeing how fragile the supply chain is.
This reminds me of a fun fact I learned many years ago, which is that there's a corollary to Moores Law: the same growth curve applies to the cost of building new fabs.
Manufacturing you'd need billions and the support of your government. But a design business? There's quite a lot of those around.
Bare minimum estimates, working backwards:
- $? for marketing and distribution, physical inventory costs
- $100k/y for one field engineer (FAE)
- $250k for first successful manufacturing run
- $250k for first full mask run with bugs
- $100k bringup boards, test equipment, engineering time fixing it
- $25k shuttle run for initial testing. This will find at least one bug.
- $100-200k outsourced layout: this is boring, specialised, and low value-add, so get someone else to do it
- $500k/y misc software and testing staff or consultants
- $100-500k/y each: 3-5 senior design engineers. For best results, these are people you already know and are spinning out of their job at Big Boring Semi Co
Excellent description, I wished I could've pushed your comment higher.
People are always shocked when I tell how tiny is the semi industry, but it really is.
Besides the super-concentration of semi manufacturing which starts to get more coverage, designs needs some exposure too.
When Apple bought PA Semi, it went rather unnoticed, but people didn't know that the amount of logic designers of a such calibre who can design cores like ZEN, or Firestorm is probably less than 100 in the whole of North America.
Sounds very dramatic, but America is less than 100 senior logic designers away from getting out of design business too.
Do you know how it is to work on software in this industry ? Be it for the tools or embedded software programming or in VHDL / verilog.
I'm still in university and I've always liked hardware and low level related stuff but I've heard bad things about software in hardware companies like Qualcomm.
The professional tools are licensed at 100k-200k/year per seat each, there is no way around them if you want to actually tape out the chip. An experienced backend engineer needs 3-4 months to take a design from Verilog to a file that can be send to a Foundry. You also need access to a PDK from a manufacturer like TSMC and probably will have to license some of the digital-analog components (PLL, IO-Pads) from someone. Manufacturing itself is fairly expensive as well, we taped out via europractice ( https://europractice-ic.com/schedules-prices/), you pay about 12k per square millimetre in TSMC 65nm. Even older processes are more affordable, but you have to keep in mind that each of them requires at least some customisation and access to blocks specific to the process (memories for instance).
On the design and verification side the story is slightly better, verilator (https://www.veripool.org/wiki/verilator) for instance is an excellent tool that lets you simulate system-verilog code with high performance. It has seen wide industry adoption in the last years and now a couple of companies like Google, SiFive, etc. are investing in open source tooling for hardware. You can go a long way to building your design without having to pay for expensive licenses. The downside is that most of the interface type components (PCI-Express, DDR4, etc.) are prohibitively complicated to build yourself, so you will need to rely on external IP at some point.
To build chips similar to what TSMC produces (i.e. some of the most cutting-edge fab tech in the world)? Hundreds of billions of dollars. Decades of experience. Growing silicon crystals and turning them into transistors barely bigger than a few dozen atoms is immensely difficult. And then turning that into a process you can repeat with precision and churn out at high yield is another enormous hurdle.
Serious question as someone totally naive on this. A few hundred billion dollars seems like an extremely good deal to lead this area of technology - why don't we see funding for this at a government level? I mean, we now have a 2 trillion dollar infrastructure plan.
Is there an impediment I'm not aware of? Or maybe it's not as good of a deal as I think?
You can read around the parallax propeller 2 forums for an idea of what it takes on the low end - they were very open about the process. IIRC they have one guru who does software and Verilog, one who does RTL layout (term?) and the rest are support staff who do other things at the rest of the company most of the time (PCB designer, assembly, sales, HR, etc.)
The raspberry pi pico team also did a good podcast episode talking about this - I think it was a podcast called innovation coffee or something like that. Hosted by a guy from ARM Europe.
> How much would it cost to start a design semiconductor business? On the low end of the budget.
A decade ago, it would've taken you $1m in China for a 50/50 shot at it.
If your first tapeout works, you will make money, if not... you wasted $1m.
$1m looks like pocket change to most American tech people now, but the fabless trains has long since departed.
You will need a sum with few more zeroes, to get a jumpstart in the industry now.
There was 4-3 years long extreme consolidation push in the industry, with big swallowing dozens producers of commodity products. It is very reminiscent how the demise of American oil industry happened when the industry gone from thousands of oil producers, to less than 10 in one decade. Everybody bets now that there will be 10-15 or so mega-fabless running the industry in coming decade.
There are plenty of designs where just $10k will get you an ASIC built in some university... It won't be anything like leading edge silicon though, but for some products that's all you need.
A bunch of talented people with experience who can use the equipment productively = priceless. Probably can't be bought, otherwise some countries would already have done it.
It depends pretty heavily on the semiconductors you want to produce, if you want to replicate the technology of the early 60s people have done that in their kitchen (see cooking with Jerry for an example.)
True, but where do you see demand dropping off? I would actually assume demand will go up even more, since the economy was slowed down due to the pandemic.
I think the changes pushed people to invest in new devices, etc, for a per-user lifestyle, while going back to restaurants, meeting rooms, etc, there's an excess of second hand inventory.
Honestly, I think it should already be dropping off.
Everyone, their kids and their pets has updated their electronics this year. That made sense as work/school from home was a thing. Now they have new electronics, and no need for additional electronics. Plus pretty soon things will reopen, and people will have opportunities to spend money on beer and restaurants and events.
Even if covid 2.0 launches this year, I already have a new ipad etc.
I think there'll be very low sales for most electronics for a while.
Right now, because everyone is fearful of shortages, they've overbought or are in the process of overbuying.
At some point, everyone is going to realize that, in the US, carrying inventory has tax implications, and everybody is going to try to dump a bunch of inventory back into the system that they really didn't need and aren't prepared to pay taxes on.
Which will be fine for a while--until the middlemen get back up to what they consider useful inventory levels and quit buying. And all the prices will crash.
I don’t think the shortage will be over in the next 2-3 years at the least. This is a huge problem that the media only briefly covers. Biden just announced 25b to semiconductors bc homeland security knows we have major flaws in the supply chain.
Readit News
2. Since leading edge node is forever increasing in cost, the next 3 years, i.e 3nm in 2022 and 2nm in 2024 are expected to be higher. ~$100B investment aligned with their initial plan / trend / target anyway.
3. So really the major news is stopping ( or to be precise, delaying ) price reduction. Which is unusual but understandable given the current demand situation. And No, it is not TSMC's fault. You should ask how every single Fabless Semiconductor company has failed with their demand, supply chain analysis and projection. Although one could argue it is not their fault either, since their client gave wrong projection. The only company that is not affected is possibly Apple.
4. There has been mounting pressure from investors, politicians and MSM media on Intel IDM 2.0, and supply problems. This announcement feels more like addressing those concerns.
5. Remember both Samsung and Intel are expanding capacity. And even GF and many other smaller players. It took DRAM and NAND three years to catch up with demand ( and then over supply ). Which in hindsight is pretty damn impressive. Although during the ~2016 - 2019 everyone felt awful.
This is an interesting point. Apple is pretty hard nosed on their predictions and capacity reservations, to the point where they could be funding part of this expansion at TSMC (as they have done for Hon Hai, among others, for decades).
I continue to be astonished by Apple’s ability to manage their supply chain so tightly (which requires not just an iron fist but very very intense internal process). They seem to be the only ones who can manage to do that.
And it’s not like other big companies are lazy; the part that really amazes me is that their process hasn’t leached out to other companies, as so much else does in the Valley.
So at the end of the day, it isn't that Apple was necessarily better...their demand just didn't change and continued the downward trend in certain product areas, giving them breathing room.
And did that job for Steve Jobs during the growth of the iphone.
It would be expected that Apple would have extended insight into supply chain and capacity, seeing as the head of the company was/is the one who did that job.
Following this trend - 2nm will have something on the order of 200 billion in capex outlays. Given that being first to market has a premium, the loan will be high risk. If you borrow thinking you'll be first and are late by 4 years then you and your bank are going to have a problem.
However, the car industry got it badly wrong - people, afraid of public transit, started buying more cars rather than less. The car industry, being screwed due to their just-in-time religion of zero stock, was faced with their production lines stopping so they called up all their vendors, and asked for those orders back, and some more on top. The vendors then tried to get their fab slots back, and were told to come back next year. Some of them ended up buying other fabless IC designers out of their slots, causing the problem to spread. Others cancelled their existing orders to other customers, and auctioned off their existing inventory to increasingly desperate car manufacturers at a 6x to 8x premium. Anyone who was not prepared to pay that or didn't act fast enough was screwed. From that point on, a bunch of companies that depend on those lines of microcontrollers had to rapidly redesign their product to use another device, taking even more devices off the market with unplanned demand. The users of those devices then had to move to others, causing even more availability cascades. This is how two nasty moves by the car industry caused global market disruption in a number of industries that depend on electronics. This is not a normal "demand has increased, and industry can't keep up" event, it's elephants dancing and trampling everyone else underneath.
This is further aggravated by the top three automotive semiconductor suppliers (NXP, Renesas, Infineon) having their facilities destroyed in two unrelated disastrous events - a fire at Renesas' wafer processing plant, and Texas freezing over, destroying NXP's and Infineon's fabs through cleanroom contamination and process interruption. Those events took out months' worth of production, and destroyed product that had already been sold before manufacture. This would have been recoverable in a normal market, because distributor stock could hold a couple months, but in this case it was game over for non-automotive customers as all distributor stock was already gone by then.
I see this in my work every day now - customers coming to me for help with redesigning products to use a different microcontroller, or help with sourcing parts from unusual sources because their normal channels are gone. I've been in this industry a long time and never seen anything like this before. This is not a failure of supply chain analysis and projection on the part of the fabless semicon vendors. This is their biggest customers fucking their vendors over not once but twice by lying to them about their own demand.
I own a store that sells parts and tools to attach things to each other (originally we sold nuts and bolts but those are unprofitable without gigantic volumes).
In the last months suddenly we started to get an unusually high amount of orders from factories intending to use our products in manufacturing, while until then all we ever got was orders for replacements parts and maintenance.
Since we are a store, not a manufacturer, our prices aren't lowest as possible... so we are very confused about why Toyota/Honda and others for example, called us wanting parts, instead of calling our supplier, since we know they have their contact anyway (I won't say who it was but for example one time a manufacturer asked us if a product would help them, and asked us to design something for their production line... we did, then they ordered the product from our supplier and never paid us anything for all "free" engineering work we did for them).
So now I can guess what happened: car industry cancelled non-semiconductor orders too, their slots got sold, and now they want it back... so my store that tends to have higher stock than others keep getting new clients willing to pay through the nose to have parts because our own supplier doesn't have them in stock and can't deliver any in short term...
If you have 1000 ICs in a car, and one of them is missing, that's a $100,000 car you can't sell.
Car industry haphazardly buying out last stocks of ICs will not help them work around that "one missing chip" problem, and production lines are potentially stuck for many more months.
The panic was undue, well, or best say of no use. The are screwed, but its of no use for them to hope for some desperate moves improving the situation now if they can't assure 100% availability of all, and every component on their BOM.
I have few buddies who went to work on an ECU for MTU/Siemens. They ran exactly into that when their companies went for a complete redesign of their ECU to run on consumer STM32. They had hopes of that such old 180nm-130nm CMOS chips easily tolerating around 130C°, they did tests, it worked fine, and then they ran into undocumented high temperature protection kicking in on a slightly newer chip revision, but they already bough few millions of them, and other ICs for a new design in inventories.
You write at the beginning and end of your post that the car industry lied to their vendors, but then you also write they got it badly wrong, which means they were incorrect about their projections of demand. Surely it can't be both, and it sounds like the car industry did not lie, but simply were wrong about their predictions for the future.
Or am I misunderstanding?
Nevertheless, thanks for providing context for the whole situation.
I'd be interested to learn more about the order cancellation you were saying that fabs were doing to non car manufacturers. Shouldn't contracts prevent that sort of behavior (without proper compensation)? And if they did that, they are burning bridges that would make people less likely to do business with them in the future. Maybe the car chip business is enough money to warrant such moves, but seems potentially sort sighted depending on exactly all what you said happened.
In the US people love to keep huge numbers of cars in stock. Apparently most people buy from stock there, and almost nobody does JIT, for some reason. So this isn’t the case everywhere.
4 Forces Changing Automotive Electronics Systems
https://www.eetimes.com/4-forces-changing-automotive-electro...
I wish the industry would standardize on using "transistors per square millimetre" as the metric for their node size instead of "nm".
The best I believe will be a whole cell library metric using some lowest common denominator blocks like registers, adders, bus pieces etc
https://read.nxtbook.com/ieee/spectrum/spectrum_na_august_20...
That's an oversimplification. As lead times increase, overbooking increases and that gives rise to further extension of lead time. Delays also become more prevalent at high utilization because there's no capacity in reserve. It's very difficult to predict where demand will go in a year of totally abnormal market behavior and unpredictable helicopter money.
In other words, fabless chipmakers are asked to do the impossible and some of them, predictably, failed to accomplish that task. Imagine asking AMD in April of 2020 to predict how many PS5s will sell during Christmas.
Dead Comment
I write a lot of software for my job (although it’s not my title) and I’ve been thinking of trying for pure software jobs even if the work is more boring (I do semiconductor R&D)
This sounds like me in a past life. I assure you: It's worth the change. (Often) Easier work. Paid more. Treated better. Nicer work environment. It's worth it even if the pay were the same.
Also, with SW roles in your resume, you can then find jobs outside the semiconductor industry. Lots more options available to you.
How many dead xboxes and PlayStations have chips in them that are still good?
I'm thinking of a reverse pick and place machine that pulls chips of boards (boards that can not be used to fix other dead devices) and is able to test each valuable component for later reuse.
This is already been happening for decades on industrial scale in countries doing eWaste recycling. Just a decade ago, you could've still find people selling refurbished chips in Shenzhen on every corner. Now it kinds of became a much more low profile enterprise.
The US defence department, colloquially known as the pentagon, ran a wargame scenario a few years ago to see what will happen if US will be hit with a worst case scenario, years long semiconductor unavailability due to sabotage of domestic fabs, massive industry wide cyberattack, or something happening to Taiwan.
One of comissioned think tanks recommended that exact methods of military going door-to-door to gather old gaming console, smartphones, and PCs for conversion to use in munitions, and military equipment.
We defend Taiwan with everything we’ve got. There is no plan B, and it’s not just about semiconductors.
There is also the danger of counterfeit chips. It is already a plague for those of us hoping to get some good deals from Chinese vendors, but the US Navy as well was hit at least once with fakes.
https://www.justice.gov/sites/default/files/criminal-ccips/l... (.pdf document)
Do they actually have machines for this? I understand that the re-work house we use do it by hand and also spend a chunk of time inspecting the chip once removed since it's very easily damaged. Maybe there are more automated places doing this on a mass scale, we don't do it very often which might explain the general poor results.
This video is pretty cool showing the process https://www.youtube.com/watch?v=TIPO4Q9k1Zo
I think the Xbox One is the first console to have no unsigned code execution at all during it's lifetime.
Not that the government doesn't already have copies, of course.
Those things have one big APU (with weak CPU cores), some VRM and memory, GDDR5 + useless DDR3. I'd discount the APU as it'd need someone to make OS support for with the blessing of Sony/Microsoft. That leaves the chips of GDDR5, which can be used by low end GPUs - I don't think they'd ever recoup and investment and likely cheap manual labor of preheat + hot air is the easier option. No idea if anyone would get a license from AMD or NVidia for such GPU.
Edit: the capacitors would have the best value but well... I cant see anyone relying on old caps for anything but repair.
A PS3 only has 256mb of ram, so you need to get it out of the case, remove it from the board, check it still works, package it up and sell it.
But I can buy 2GB for 5 GBP. Can you do all the aforementioned things for less than that?
I wonder if we could sort and melt down chips as a source of raw semiconductors (I hear rare earth metal mining/refining is very dirty). Maybe that would be economic?
With clever software, you can eek much more real world use out of hardware. For example, your PS3 is probably sitting with its CPU idle right now, when it could be doing useful computations for someone else who needs more computing power.
"However, Liu said that it is "economically unrealistic" for all countries to "onshore" additional chip production, warning that this could lead to more unprofitable capacity."
Well. The world is clearly not listening to that. So the question is how the business of chip manufactoring will look in 2 or 3 years?
2. TSMC and the rest of the foundry industry are exposed to the highly cyclical nature of the semiconductor industry. we are seeing the high demands for chip because of covid and car vendors' f'ck up. what you going to do with all the fabs build in the US when you are hit with downturn?
we saw Intel struggle with 10nm and 7nm delay. i think its wiser to invite fab company like TSMC and Samsung to build fab in the US even with smaller capacity.
* "It's economically unrealistic for all the countries to build additional chip production capacity,"
* “Uncertainties led to double booking, but actual capacity is larger than demand,” How quickly those concerns are resolved “really depends on future U.S.-China negotiations.”
* each country developing its own domestic semiconductor industry would lead to a lot of “nonprofitable” capacity.
>what you going to do with all the fabs build in the US when you are hit with downturn?
Priority sourcing from domestic fabs, let TSMC whither, by design. Semi is oil now, there's more strategic/geopolitical considerations than supply/demand curve. US/EU/CN do not want Taiwan to have semi dominance, it's not in anyone's interest. Current TSMC position is happenstance due to poor industrial policies that countries are scrambling to address. IMO press releases and capex spending around Arizona announcement suggest TSMC wasn't prepared to built US fab, let alone 6. US pressured them, EU failed to. There's a good chance TSMC/Taiwan will try to delay their silicon shield evaporating for as long as they can. Probably not a coincidence big ticket US weapons sales are scheduled around when fabs would be up.
I do think that its going to become a race to the bottom for wafer/ic costs, but that is actually a really good thing. I think there are going to be more companies that are developing in house technology and more focus on things like FPGA and edge-based compute. If TSMC, GlobalFoundries, UMC and Intel are smart, they will focus on pivoting towards the software/simulation side of things, IP cores and flexible logic like FPGA type of solutions. Ideally they would want every big company developing their own CPUs, edge devices, etc. and have them optimized for their process nodes.
I suspect this won't be the last major fab push, especially since people are seeing how fragile the supply chain is.
Bare minimum estimates, working backwards:
- $? for marketing and distribution, physical inventory costs
- $100k/y for one field engineer (FAE)
- $250k for first successful manufacturing run
- $250k for first full mask run with bugs
- $100k bringup boards, test equipment, engineering time fixing it
- $25k shuttle run for initial testing. This will find at least one bug.
- $100-200k outsourced layout: this is boring, specialised, and low value-add, so get someone else to do it
- $500k/y misc software and testing staff or consultants
- $100-500k/y each: 3-5 senior design engineers. For best results, these are people you already know and are spinning out of their job at Big Boring Semi Co
- optional $100k really big FPGA + software + custom boards
- $250k/y software licenses from Cadence or Synopsys, unless you're very brave and want to try the open source flow
- IP licenses. Not just obvious things like ARM cores, but analogue or semi-analogue IP like high-speed transcievers.
People are always shocked when I tell how tiny is the semi industry, but it really is.
Besides the super-concentration of semi manufacturing which starts to get more coverage, designs needs some exposure too.
When Apple bought PA Semi, it went rather unnoticed, but people didn't know that the amount of logic designers of a such calibre who can design cores like ZEN, or Firestorm is probably less than 100 in the whole of North America.
Sounds very dramatic, but America is less than 100 senior logic designers away from getting out of design business too.
I'm still in university and I've always liked hardware and low level related stuff but I've heard bad things about software in hardware companies like Qualcomm.
On the design and verification side the story is slightly better, verilator (https://www.veripool.org/wiki/verilator) for instance is an excellent tool that lets you simulate system-verilog code with high performance. It has seen wide industry adoption in the last years and now a couple of companies like Google, SiFive, etc. are investing in open source tooling for hardware. You can go a long way to building your design without having to pay for expensive licenses. The downside is that most of the interface type components (PCI-Express, DDR4, etc.) are prohibitively complicated to build yourself, so you will need to rely on external IP at some point.
Unless you talk about countries where people simply don't pay for software no matter what.
Some companies are just fine with 10 years old pirated Virtuosos in places like China.
It was a big surprise to me that even software which probably has less than 100 licensees globally is still getting warezed.
Dead Comment
Is there an impediment I'm not aware of? Or maybe it's not as good of a deal as I think?
The raspberry pi pico team also did a good podcast episode talking about this - I think it was a podcast called innovation coffee or something like that. Hosted by a guy from ARM Europe.
A decade ago, it would've taken you $1m in China for a 50/50 shot at it.
If your first tapeout works, you will make money, if not... you wasted $1m.
$1m looks like pocket change to most American tech people now, but the fabless trains has long since departed.
You will need a sum with few more zeroes, to get a jumpstart in the industry now.
There was 4-3 years long extreme consolidation push in the industry, with big swallowing dozens producers of commodity products. It is very reminiscent how the demise of American oil industry happened when the industry gone from thousands of oil producers, to less than 10 in one decade. Everybody bets now that there will be 10-15 or so mega-fabless running the industry in coming decade.
There are plenty of designs where just $10k will get you an ASIC built in some university... It won't be anything like leading edge silicon though, but for some products that's all you need.
A bunch of talented people with experience who can use the equipment productively = priceless. Probably can't be bought, otherwise some countries would already have done it.
[0] https://www.google.com/search?q=china+hiring+tsmc
https://news.ycombinator.com/item?id=23755693
Google offers free fabbing for 130nm open-source chips (fossi-foundation.org)
Everyone, their kids and their pets has updated their electronics this year. That made sense as work/school from home was a thing. Now they have new electronics, and no need for additional electronics. Plus pretty soon things will reopen, and people will have opportunities to spend money on beer and restaurants and events.
Even if covid 2.0 launches this year, I already have a new ipad etc.
I think there'll be very low sales for most electronics for a while.
Likely December.
Right now, because everyone is fearful of shortages, they've overbought or are in the process of overbuying.
At some point, everyone is going to realize that, in the US, carrying inventory has tax implications, and everybody is going to try to dump a bunch of inventory back into the system that they really didn't need and aren't prepared to pay taxes on.
Which will be fine for a while--until the middlemen get back up to what they consider useful inventory levels and quit buying. And all the prices will crash.