TSMC's chip demand has reportedly reached a level where customers are now willing to pay up to 100% premiums to have their chips fabbed by the Taiwan giant.
TSMC's Production Lines Are Experiencing a 'Hot Run', Driven By Demand From AI Customers
The AI frenzy has managed to disrupt almost every mainstream supply chain, whether it involves memory, advanced packaging, semiconductors, or similar elements. The demand from hyperscalers and GPU manufacturers is so gigantic that companies like TSMC are unable to cope with it, which is why, according to a new analysis by JPMorgan's Gokul Hariharan, it is claimed that customers are willing to pay up to a whopping 100% premiums in getting their chips produced an "expedited basis", implying that the priority here is to get the end product, with worrying about the manufacturing costs.
TSMC's production lines are apparently being classified under 'hot runs', as customers are willing to pay double the amount in order to get their chips on emergency basis, and while JPMorgan doesn't name any customer, there is without a doubt that mainstream AI giants, like NVIDIA and AMD, are in the line to get their products out of production lines, and shipping to customers. Especially when you look at NVIDIA in particular, whose product cadence is approximately nine months, the firm indeed needs its partners to accelerate.
These hot runs enable TSMC to adopt a 'high-mix service model', where the revenue generated by expedited production accounts for a significant portion of the company's overall revenue, given the premiums paid by customers. The more interesting question here is how TSMC is actually managing to prioritize customers, given that constant expediting within production lines undermines overall efficiency and increases the likelihood of error rates as well.
There is no doubt that TSMC is one of the most crucial players of the AI supply chain, and with HPC customers now accounting for a significant portion of the company's revenue, TSMC needs to ensure that it can meet standards, whether in terms of performance or delivery times.
News Source: Jukan
About the author: Muhammad Zuhair is a hardware and technology reporter for Wccftech, specializing in the semiconductor industry and the complex interplay between technology, manufacturing, and geopolitics. His coverage focuses on the corporate strategies and technological roadmaps of industry giants like TSMC, NVIDIA, Samsung, and Intel. Zuhair's expertise lies in deconstructing complex topics such as fabrication nodes (e.g., 2nm process), the economic impact of policies like the CHIPS Act, and the strategic development of AI infrastructure from NVIDIA, AMD and Intel.
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