Wednesday, December 16th 2020

TSMC Ends Its Volume Discounts For the Biggest Customers, Could Drive Product Prices Up

Taiwan Semiconductor Manufacturing Company (TSMC), one of the largest semiconductor manufacturers in the world, is reportedly ending its volume discounts. The company is the maker of the currently smallest manufacturing nodes, like 7 nm and 5 nm. For its biggest customers, TSMC used to offer a discount - when you purchase 10s or 100s of thousands of 300 mm (12-inch) wafers per month, the company will give you a deal of a 3% price decrease per wafer, meaning that the customer is taking a higher margin off a product it sells. Many of the customers, like Apple, NVIDIA, and AMD, were a part of this deal.

Today, thanks to a report from the Taiwanese Central News Agency, TSMC is terminating this type of discount. Now, every customer will pay full price for the wafer, without any exceptions. For now, it is unclear what drove that decision at TSMC's headquarters, but the only thing that we could think is that the demand is too high to keep up with the discounts and the margins are possibly lower. What this means for consumers is a possible price increase in products that are manufactured at TSMC's facilities. The consumer market is already at a drought of new PC components like CPUs and GPUs due to high demand and scalping. This could contribute a bit to the issue, however, we do not expect it to be of any major significance.
Sources: Taiwanese Central News Agency, via Tom's Hardware
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53 Comments on TSMC Ends Its Volume Discounts For the Biggest Customers, Could Drive Product Prices Up

#1
watzupken
It is not unexpected when people look up to them as one of the best out there. With Intel also starting to utilize TSMC, I can expect demand to be very high, with limited allocation/supply. However in my opinion, the demand is not sustainable because overall demand for electronics seems to be exceptionally high this year, and probably extend till mid next year. But will the demand continue this bull run is questionable. Perhaps people travel less, and with some countries/ locations still in lock down mode, they have channeled their resources into buying hardware/ electronics.
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#2
Vya Domus
I wonder what companies like Apple will do which have prices set in stone for their products.
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#3
ratirt
Vya Domus
I wonder what companies like Apple will do which have prices set in stone for their products.
price will go up what else?
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#4
DrCR
Those fabing with TSMC may take a lesson from the memory industry. A 3% increase in manufacturing costs ultimately has to be pass down to the consumer via a 30% price increase. Presumably they couldn't get away with that though, 'cause who on earth would pay $1000-1500+ for CPUs or GPUs? The demand would surely be too anemic for them to demand such prices...
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#5
Vya Domus
ratirt
price will go up what else?
The reason I specifically gave the example of Apple is because they never drop or increase the price of something, they are extremely strict about it.
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#6
Chomiq
Everyone: "Well certainly, CPU, GPU and console availability will be better after new year's"
TSMC: "Hold that thought"
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#7
nguyen
Chomiq
Everyone: "Well certainly, GPU availability will be better after new year's"
TSMC: "Hold that thought"
It's only affecting AMD's products
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#8
Gruffalo.Soldier
I'm the only one
Lol this is where Intel having its own fabs is gonna pay off for them. Amd prices will go up to reflect the higher fab cost.
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#9
Chomiq
Vya Domus
I wonder what companies like Apple will do which have prices set in stone for their products.
They'll just add "S" to the product name and up the price by 10%.
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#11
TumbleGeorge
3% is to do anything with MSPR. But speculant an scalpers shop maybe use as an excuse to make even greater mark-ups. Didn't some traders become too greedy? When will the "hungry" rallies and protests of the clients against this excess start? Are you ready to take to the streets and assert your right to get fair prices?
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#12
opteron
Chomiq
They'll just add "S" to the product name and up the price by 10%.
Add a "max" and mark up by 25% more. Easy marketing lol
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#13
Vayra86
TumbleGeorge
Didn't some traders become too greedy?
Apparently not. People are still buying, pre-ordering... waiting anxiously.

And as long as they are, this will continue. Self-created madness based on FOMO. There are tons of alternatives. The market will correct itself eventually though.
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#14
Metroid
They see cpu, gpu aib partners, nvidia and amd asking 2 to 4 times more x msrp, they want part of that cake too, no surprise here.
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#15
Gruffalo.Soldier
I'm the only one
Can't blame them, they might as well have some of the pie too. I bet Intel are enjoying this though, it will give them a chance to undercut Amd on prices too.
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#16
stimpy88
"For now, it is unclear what drove that decision at TSMC's headquarters"

Answer - No competition.
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#17
ratirt
Vya Domus
The reason I specifically gave the example of Apple is because they never drop or increase the price of something, they are extremely strict about it.
Like new iPhones. Price is settled but you need to buy charger separately. I'm sure they will think of something so that the customer will pay the difference or at least some of the difference in price.
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#18
TumbleGeorge
tigger
Can't blame them, they might as well have some of the pie too. I bet Intel are enjoying this though, it will give them a chance to undercut Amd on prices too.
AMD prices is good. The prices of all hardware not depending of trademarks is too high.
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#19
Mouth of Sauron
/sarcasm mode/

...and a big cheer for (basically) everyone (here) who continuously gloated over TSMC de facto monopoly as the only high-tech foundry!

Surely, monopolies are a good and nothing could possibly go wrong! GO TSMC!

Also, the only real solution is increasing TSMC capacities, god forbid having a healthy competition!

This wasn't bound to happen, and in fact probably didn't happen at all and surely will never happen again...

/exits sarcasm mode/
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#20
Vya Domus
Mouth of Sauron
...and a big cheer for (basically) everyone (here) who continuously gloated over TSMC de facto monopoly as the only high-tech foundry!

Surely, monopolies are a good and nothing could possibly go wrong! GO TSMC!
This isn't the case where there is an equally good or better alternative and TSMC is doing something shady to prevent customers from buying competitor's products. No one else has an equally good or better node, that's it.
Mouth of Sauron
god forbid having a healthy competition!
I don't get it, this is so bizarre, who are you mad at ? Us ? Be mad at Samsung, GloFo, Intel, and the dozens of foundries that have died off in the last couple of decades.

Seriously, this is idiotic. I don't buy wafers, do you ? Let them figure it out.
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#21
Vayra86
Vya Domus
I don't get it, this is so bizarre, who are you mad at ? Us ? Be mad at Samsung, GloFo, Intel, and the dozens of foundries that have died off in the last couple of decades.

Seriously, this is idiotic. I don't buy wafers, do you ? Let them figure it out.
Well put... this is the exact perspective I apply when it comes to competitiveness of some other players in the market ;) I think I don't need to elaborate here.

TSMC can't be blamed for leadership. We as consumers however can show TSMC whether or not these moves are acceptable in the bottom line when we buy stuff. That is where our power begins, and ends. Use it well...

In the end we're talking about the size of a margin here, not a choice of profit or loss. WE are key players here, make no mistake. So... in this age of scarce silicon... don't overpay for it because you'll be setting a new norm.
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#22
Gruffalo.Soldier
I'm the only one
Sorry vayra but the PC market now is very much must have NOW. so inflated prices or not, people will buy.
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#23
Vayra86
tigger
Sorry vayra but the PC market now is very much must have NOW. so inflated prices or not, people will buy.
But you're not getting it now anyway, are you ? :D

I know its a hard sell, but each individual can make his own choice.
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#24
Gruffalo.Soldier
I'm the only one
Vayra86
But you're not getting it now anyway, are you ? :D

I know its a hard sell, but each individual can make his own choice.
I don't shit money unfortunately so i never buy NOW anyway. The NOW crowd are the forum/social media braggers that like to post imo meaninless epeen benchies to justify their $1700 video card.
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#25
Mouth of Sauron
Vya Domus
This isn't the case where there is an equally good or better alternative and TSMC is doing something shady to prevent customers from buying competitor's products. No one else has an equally good or better node, that's it.
I'm not mad at anybody - fanboyism is kinda human nature. We had Intel absolute dominance in lithography tech for so long, and we saw what good it brought...

On another note, comment such as "GO TSMC!" were very common in the last few years - my post is mainly because of their number.
Vya Domus
I don't get it, this is so bizarre, who are you mad at ? Us ? Be mad at Samsung, GloFo, Intel, and the dozens of foundries that have died off in the last couple of decades.

Seriously, this is idiotic. I don't buy wafers, do you ? Let them figure it out.
I agree that finding another foundry that is completely customer oriented (which disqualifies Intel and Samsung) to compete with TSMC is currently impossible.

On a slightly related note, there was a great number of sinophobic anti-SMIC gloating comments - though (un)officially state-controlled foundry in China is not ideal, at least they aren't owned by a dedicated product owner (Intel, Samsung), so at least they *could've* been partially customer-oriented - at least when not producing government-ordered stuff. It's not unrealistic to happen because, well, I doubt government pays as good as would fabless customers.

I've heard that EC isn't particularly happy with the current foundry/semiconductor situation too, and plans to invest in Europe-based facilities (and IPs) - which is undoubtedly a good thing, except it won't happen in years.

Until then, TSMC has a clear path of dominance. I've heard (somewhat dubious source) that TSMC already asks few times more per waffer on the same node. Don't know if it's true, but wouldn't surprise me or wouldn't surprise me that to happen in the next period...
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