TSMC Might Cut 3nm Prices to Lure AMD, Nvidia

ASML
(Image credit: ASML)

Although TSMC's N3 (3nm-class) family of fabrication processes brings a number of benefits in terms of performance and power, the very high costs of the foundry's initial N3 node hampers widespread adoption. Unsurprisingly, the company is rumored to be preparing to lower its quotes for 3nm production to stimulate interest from chip designers, according to a report from MyDrivers

While at this point any published TSMC's N3 quotes and prices should be considered rumors, it's likely that TSMC's production costs on its N3E process will be lower than those on its initial N3. It remains to be seen how much the company will charge for production on other N3-class nodes, such as N3P, N3S, and N3X. Lowering prices of 3nm production will attract more customers to these nodes, but this is not something that is going to happen overnight. 

TSMC's initial N3 manufacturing technology (also known as N3B) is rumored to be used only by Apple because the company is the foundry's largest client willing to adopt leading-edge nodes ahead of others. But N3 is an expensive technology to use. N3 extensively uses extreme ultraviolet (EUV) lithography for up to 25 layers, according to China Renaissance, and each EUV scanner now costs $150 million - $200 million, depending on configuration. To depreciate fabs equipped with such production tools, TSMC has to charge more for production on its N3 process and successors.  

Some say that TSMC might be charging as much as $20,000 per N3 wafer — up from $16,000 per N5 wafer — and while such quotes depend on numerous factors, the key takeaway is that chip production keeps getting more expensive. Increased costs mean lower profits for companies such as AMD, Broadcom, MediaTek, Nvidia, and Qualcomm, which is why chip developers are reconsidering how they create advanced designs and use leading-edge nodes. 

"We believe the meaningful [N3] ramp-up will be in 2H 2023 when the optimized version, N3E, will be ready," wrote Szeho Ng, an analyst with China Renaissance. "Its major customers in HPC (i.e., AMD, Intel), smartphone (i.e., QCOM, MTK) and ASIC (i.e., MRVL, AVGO, GUC) will likely stay in N4/5 and choose N3E as their maiden N3 class foray, in our view. Meanwhile, we believe the baseline N3 (aka N3B) adoption will be largely limited to Apple products." 

To stimulate its partners into using its N3-class process technologies, TSMC is reportedly considering lowering its quotes for these nodes. In particular, TSMC's N3E process uses EUV only for up to 19 layers and features somewhat lower complexity in terms of manufacturing, and is thus cheaper to use. TSMC could lower quotes of N3E production without harming profitability. N3E provides zero advantages over N5 when it comes to SRAM cell scaling, which means larger die sizes when compared to those made on N3/N3B. 

AMD publicly announced that it planned to use an N3 node for some of its Zen 5-based designs due in 2024, and Nvidia is expected to adopt N3 for its next-generation Blackwell architecture-based GPUs set to arrive around the same timeframe. Due to high costs, adoption of N3-class nodes is expected to be limited to certain products — so lowering quotes will probably make chip designers reconsider their adoption strategy.  

There's also another issue with TSMC's N3: low yields. Some estimate yields are between 60% and 80%, and sources at DigiTimes (via Dan Nystedt) indicate that they're below 50%. That said, since only Apple reportedly uses this manufacturing technology and the company is known for being very secretive, any details about yields of initial N3 chips should be taken with a large grain of salt.

Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • cyrusfox
    Sounds like TSMC was overly aggressive on price increases as they are now not able to fill new top node by apple alone. Priced out everyone else.

    As N3 is the first new node where you don't get all the same scaling benefits. We are approaching diminishing returns of scaling, coupled with competition from Intel Foundry, as well as Samsung, Foundry market looks to be heating up! Too bad Global bowed out of this competition.
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  • InvalidError
    With AMD having to drop prices on Zen 4 due to low sales, Nvidia's 4000-series not selling particularly well due to exorbitant prices and AMD presumably not faring a whole lot better based on how the 7900XT has consistently been in stock since launch, I can't imagine anyone being in a rush to sign major commitments for N3/N3E.

    Interesting times ahead as the industry adjusts to grossly overshooting the consumers' spending limits.
    Reply
  • Mandark
    they obviously have no idea how economics works. Skyrocketing, inflation and peoples wages, stagnating or going down. Etc
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  • DavidLejdar
    The disposable income varies among countries though. E.g. in Germany inflation exists as well, but last year the minimum wage was increased by more than 10% (without the economy crashing, and with jobs still available), and rents are way lower than e.g. in London. So here I sit in Berlin, with an income below the local median, and I am like: "Wait, what? 3nm-based GPUs are not in production already? Lame! First these companies get me all hyped about the newest technology and stuff, and now all they want to sell me is like some last-gen pen and paper? What a let-down!".

    I mean, e.g. a 4090 would be quite an expense for me. But because it is just an expense, I can not afford to purchase such a GPU every year, and why then go for some technologically last-gen stuff?

    Joking aside though, I think what the GPU makers have been somewhat overestimating is the interest for 4K gaming. Many gamers do not want that, or do not care about it, or simply upscale (as consoles do), possibly thinking that they have full 4K already. And in such a context, offering a 4-nm based GPU primarily designed for 1080p gaming, and one for 1440p, and reasonably priced of course, that may arguably drive sales a bit more than just trying to sell what is way over the top for many a gamer.
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  • PlaneInTheSky
    This TSMC/Samsung foundry duopoly really has to stop.

    I am not buying any GPU until prices are halved.
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  • Co BIY
    PlaneInTheSky said:
    This TSMC/Samsung foundry duopoly really has to stop.

    I am not buying any GPU until prices are halved.

    The major "duopolist" having to drop prices just to secure sufficient utilization of its enormously expensive fab investments does not sound like market conditions that would entice others to join!

    But Intel is jumping in anyway ...
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  • Co BIY
    Mandark said:
    they obviously have no idea how economics works. Skyrocketing, inflation and peoples wages, stagnating or going down. Etc

    Pretty sure they understand it - They are lowering prices in response to reduced demand in order to most efficiently use the fabs and processes they build though years of investment.

    That they are overbuilt for this particular moment on this node is not some foolish mistake. It takes years to develop these kinds of plans. They don't stop or turn on a dime. I don't think their major competitors are in better shape

    TSMC may be in for rough times - 45% profit instead of 60%. They are running a Sale when others are performing mass layoffs.
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  • sweepyjoelschl
    So Question: who exactly bears the brunt of cost for the low yields? Does Apple pay full price for each wafer even if only 60% is good? or does TSMC have to issue "make good refunds". If it is the former then what company in their right mind want to sign up until they get the process snafus worked out and yields in very high percentages? At $20,000 per wafer I would not bewilling to fork that out if half of the dies end up bad and unusable
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  • digitalgriffin
    sweepyjoelschl said:
    So Question: who exactly bears the brunt of cost for the low yields? Does Apple pay full price for each wafer even if only 60% is good? or does TSMC have to issue "make good refunds". If it is the former then what company in their right mind want to sign up until they get the process snafus worked out and yields in very high percentages? At $20,000 per wafer I would not bewilling to fork that out if half of the dies end up bad and unusable

    From what I heard, if TSMC makes a claim "for a given XXX sq mm chip running our yield rate is Y% +- Z%" that has to be written into the contract. The client would have to prove it's a true defect vs a design problem.

    It is a lot more complicated complicated than that because of binning saying "v% will have 1 defect. Or u% to will have 2 defects." But you get the idea. If you design a chip where you allow two from national units to be defective you might have close to 100% yield if it's a small enough chip. (Think 3600x vs 3800x)

    Calculating yield stats with Poisons distribution is something they teach you in second year comp sci.
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  • digitalgriffin
    TSMC did and did not get greedy.

    TSMC was running full capacity during the beer virus. They were also facing supply constraints. So TSMC invested heavily into new fabs for future demand.

    But cost of new fabs is exponentially growing. And the number of steps it takes to make a finished wafer is obscene now. So yes it is costing them more.

    But TSMC wanted considerably more than organic growth due to all the demand. So they charged more with higher margins during high demand to pay for that growth. Now it is biting them in the tail.
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