( ESNUG 509 Item 9 ) -------------------------------------------- [09/13/12]
From: John Cooley <jcooley=user domain=zeroskew not calm>
Subject: TSMC plays hardball vs. Apple and Qualcomm on dedicated 28 nm fabs
The good news is after 12 months and all that Capex spending, it appears
TSMC is finally getting decent capacity and/or yield with its 28 nm fabs!
One source even claimed TSMC 28 nm yield was now supposedly "over 80%".
Yay!
The bad news is that, even at 100,000 wafers per month, it is still nowhere
near enough to fill the insatiable demand that Broadcom, AMD, Nvidia, Apple,
Qualcomm, and TI have for 28 nm chips.
This is where it gets fun.
At his Q2/2012 financial earning call, Morris Chang, the CEO of TSMC said
to the question of TSMC having fabs dedicated to just one customer:
"Actually yes. I think that's almost a natural outcome the way
market is trending. I think that they are going to be larger
customers, and now it makes complete sense to dedicate a whole
fab to just one customer and hold that -- to hold fabs in fact
to just one customer. ... So it makes sense that we dedicate
a whole fab or even more than a whole fab to just one customer."
- TSMC's Morris Chang in his Q2/12 Earning Call (07/19/12)
Did you get that? TSMC's top dog is very publically telling the whole world
that he's very open to the idea of having a whole fab (or more!) dedicated
to just one customer.
So what are these very desperate Nvidia/Apple/Qualcomm/etc. going to try to
do upon hearing this news????
Exactly!
They made an offer ...
And hardball TSMC rebuffed them all!
"Apple (AAPL) and Qualcomm (QCOM) were rebuffed in separate attempts
to invest cash with TSMC in a bid to secure exclusive access to
smartphone chips, people with knowledge of the matter said.
Both proposals included investments, each of more than $1 billion,
for the world's largest custom maker of chips to set aside production
dedicated to making chips exclusively for them, said the people, who
declined to be identified because the details are not public."
- Bloomberg.com (08/29/12)
What's funky here is that not only did the usual chip-head web sites pick
up on this, many of the mainstream techie web sites -- like Electronic News,
CNET, PC Magazine, ZDnet, Ars Technica, and even stogy old IEEE Spectrum --
wrote about this 28 nm deal gone amok.
Which got me thinking -- since when did PC Magazine or IEEE Spectrum start
covering failed chip manfacturing deals? They never cover stuff like this.
Or do they?
A quick Google search showed PC Magazine had one only TSMC chip story in it
this year -- and this story was it. Only one.
IEEE Spectrum had zero, nada, nothing in 2012, 2011, 2010, 2009, 2008, 2007,
and 2006 on any sort of any TSMC chip story. In 2005, IEEE Spectrum had a
general story about chip fabrication moving to China.
 
Even the IEEE Spectrum article on this says that Morris Chang is "big on
control." And since business stories like these about the uber secretive
TSMC don't get leaked unless someone big inside TSMC approves it; it's
almost as if TSMC had privately used it's massive marketing clout to
quietly get these two failed $1 billion bids out to the largest possible
world audience...
  
So why would TSMC rub this NO DEAL news into Apple's and Qualcomm's faces?
For more money, of course! It's a negotiation tactic. Morris isn't against
customer-dedicated fabs; he just won't do it for a tiny $1 billion buy-in
nor if it means he loses control/ownership of any of his fabs. This is his
No B.S. way of demanding much far better terms and more money for dedicating
a fab or two to any one customer. And it's right when his 28 nm customers
are at their most desperate!
Smart guy, that Morris is.
- John Cooley
DeepChip.com Holliston, MA
---- ---- ---- ---- ---- ---- ----
Related articles:
Goldman Sachs, Jefferies, BNP Paribas, Daiwa downgrade TSMC stock
"TSMC meets less than 70% of 28 nm chip demand at present"
After 14 weeks, TSMC now finally admits it has 28 nm problems
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