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TSMC to Start Dedicating New Capacity to Auto Chips First

Automobile chip
(Image credit: Shutterstock)

In a move that flies in the face of our new telecommuting-heavy culture, TSMC will apparently be prioritizing automobile chip production as we move into 2021. This news comes from the Taiwan Economics Ministry (via Reuters) and was announced a day after a meeting between Minister Wang Mei-hua and the company’s senior executives.

While TSMC told the minister that its production capacity is currently full, it also noted that it will “optimize” chip production to hopefully free up capacity, and that it will prioritize auto chip production if that capacity opens up.

“Other than continuously maximizing utilization of our existing capacity, Dr. Wei also confirmed in our investors’ conference that we are working with customers closely and moving some of their mature nodes to more advanced nodes, where we have better capacity to support them,” TSMC told Reuters in a statement, referring to comments TSMC CEO C.C. Wei made in an earnings call earlier this month.

“If production can be increased by optimizing production capacity, it [TSMC] will cooperate with the government to regard automotive chips as a primary application,” the Taiwan Economics Ministry added.

According to Reuters, much of the pressure for this decision comes from German Economy Minister Peter Altmaier, who requested in a letter to Wang that Taiwan help ease a shortage of semiconductor chips in the auto sector, as the shortage is stalling Germany's pandemic recovery.

We’re uncertain yet how much of a problem this presents for computer enthusiasts. While companies like AMD and Nvidia rely on TSMC to produce their chips, TSMC’s comments about “moving some of their mature nodes to more advanced nodes” implies that the company may find some way to continue to move forward on new projects with these partners. At the very least, current capacity will not be affected.

Intel, notably, also relies on its own fabs to produce its chips (at least for now), and while that has come back to bite the company before, it also leaves it largely unaffected by decisions such as these.

Nvidia and Intel also have fingers in the car market, so it’s unlikely that this decision would hurt either company’s revenue that much.

The key deciding factors here are how long this shift in priorities will last and how demanding it will be, however. TSMC is set to spend $28 billion building its capacity this year, meaning the company may well be able to meet both its automotive and computing clients without much hassle.

After all, auto chips in 2020 only accounted for 3% of TSMC’s sales. Granted, the first half of the year saw reduced orders from automotive clients, but even a 27% auto chips sale jump in the second half of the year could not push auto chips above the 3% mark on total TSMC sales.

“They dropped their orders due to various reasons when demand was low amid the pandemic,” a senior Taiwan government official told Reuters. “But now they want to boost their production.”

But with current sales so low, is it even possible to boost it enough to make tech enthusiasts start sweating?        

  • bigdragon
    That's not right. The automotive manufacturers should have to play by the same rules as other companies. Auto companies shouldn't be able to cut the line and get their production up faster. Being shortsighted and pinching pennies has consequences. It's not TSMC's fault when Just In Time (I like to call it Not In Time) bites these manufacturers hard for making a forecasting mistake.
    Reply
  • caseym54
    What in God's name do automobile manufacturers need 7nm parts for? They should be perfectly happy with what Intel can make.
    Reply
  • cryoburner
    The article states that the auto chips will be given priority for any new capacity that opens up, but that doesn't mean they'll be using a majority of it, just that they won't be limited by the companies that are using a much larger share of capacity for things like CPUs, GPUs and mobile chips. If the auto industry only accounted for around 3% of TSMC's sales last year, I wouldn't expect that to increase dramatically this year. But they can provide those companies with some assurance that they won't be limited by larger customers squeezing them out of any increased production they require. They're probably doing that to avoid potentially losing them as customers. Due to their relatively low share of the production capacity though, I wouldn't expect this to have much effect on the other, larger customers though. Companies like AMD and Nvidia will still be getting the manufacturing capacity they requested, just if a little more happens to open up somewhere, the auto industry may be given first dibs on it.
    Reply
  • hotaru251
    bigdragon said:
    That's not right. The automotive manufacturers should have to play by the same rules as other companies. Auto companies shouldn't be able to cut the line and get their production up faster. Being shortsighted and pinching pennies has consequences. It's not TSMC's fault when Just In Time (I like to call it Not In Time) bites these manufacturers hard for making a forecasting mistake.
    business is about profit.

    they pick who they think is most profitable.
    Reply
  • Chrys
    caseym54 said:
    What in God's name do automobile manufacturers need 7nm parts for? They should be perfectly happy with what Intel can make.
    High performance specialty chips for Lidar, Cameras (Backup, Side), and Image Processing

    hotaru251 said:
    business is about profit.

    they pick who they think is most profitable.
    TSMC is being pressured by the government. I don't think their pricing varies much(possibly at all) anymore after they got rid of all discounts and increased their prices.
    Reply
  • Chung Leong
    caseym54 said:
    What in God's name do automobile manufacturers need 7nm parts for? They should be perfectly happy with what Intel can make.

    They don't. Embedded chips are usually fabbed on outdated nodes. That's where the shortage is and capacity will only shrink with time. Car-makers can't switch to new chips overnight so TSMC is trying to get other customers to do so.
    Reply
  • jkhoward
    bigdragon said:
    That's not right. The automotive manufacturers should have to play by the same rules as other companies. Auto companies shouldn't be able to cut the line and get their production up faster. Being shortsighted and pinching pennies has consequences. It's not TSMC's fault when Just In Time (I like to call it Not In Time) bites these manufacturers hard for making a forecasting mistake.

    I agree. I’d wager that computers are far more impactful on the world then fancy cars. We’ve been building cars without chips since the 70’s. If there’s truly a shortage in chip production then the auto companies need to work around the shortages like everyone else. Shoot, my new car with its fancy chips has loads of software issues like the freaking touch screen not working or detecting a collision when I’m going down the road lol.
    Reply
  • InvalidError
    bigdragon said:
    That's not right. The automotive manufacturers should have to play by the same rules as other companies.
    There are two sets of rules: regular orders where you get allocated a production window in the back-order queue for a nominal price and rush orders that get squeezed into whatever spots open up and go to the highest bidder which may include compensation to clients for shuffling their delivery windows to accommodate the rush order.

    Someone in the automotive industry probably put in a chunky bid for TSMC's slack. so TSMC is scrambling to make room on its production calendar.
    Reply
  • Endymio
    Anyone (including the article's author) who reads this announcement as being a statement that auto chips are going to get the bulk of new nodes like 3nm or even 5nm is blowing smoke. They'll get some of the new capacity expansion at older nodes only.
    Reply
  • caseym54
    Chrys said:
    High performance specialty chips for Lidar, Cameras (Backup, Side), and Image Processing

    Still, you don't need 7, or even 10nm to do those things. If they are going to use older lines then why TSMC? There are places with perfectly fine 14, 22 and 32nm processes that would be fine for most things. Even Lidar processing can be done at 14nm, and cameras for visual use need nothing of the sort.
    Reply