Supply has improved and demand has fallen. There are various factors behind both those changes and we can argue that for hours, but the main takeaway from this is, many manufacturers who betted big on next-gen demand are now stuck in an awkward position. Global inflation has hit countries all around the world harder than ever, driving down the demand of consumer electronics, which are mostly considered a ‘want’ rather than a ‘need’. In a time where people are trying to just survive, it’s easy to understand why computers aren’t their priority right now. That, mixed with the recent historic crypto crash causing mined GPUs to be sold off at cheap prices, has caused graphics card demand to fall dramatically. It’s much easier to simply go online and find a GPU of your choice in stock at the moment. While this is great for the customer, it’s not exactly ideal for the companies behind these products.
NVIDIA stuck with extra 5nm wafers
AMD and NVIDIA are in line to launch their next-gen graphics cards in the next two quarters of the year. Both companies are using TSMC‘s bleeding-edge 5nm processes to manufacture their GPUs. AMD is using TSMC N5 while NVIDIA is using a slightly advanced version of that node, the N4, designed exclusively for Ada Lovelace. Since these series were in the works for years, orders for the 5nm wafers were placed months in advance, too. However, since these orders were made back when the conditions were a bit different, the companies’ estimates are more reflective of that time when demand was a lot higher. Therefore, now both companies are in a bit of a predicament. DigiTimes’ new report says that its sources claim AMD, NVIDIA, and Apple are now all wishing to change their orders with TSMC. AMD reportedly wants to reduce the number of 7nm and 6nm wafers it ordered from TSMC while NVIDIA also wants to lower the order of its next-gen wafers due to the demand issues I’ve talked about. Apple, on the other hand, is cutting down its initial iPhone 14 shipping estimates by 10% which also affects the company’s wafer orders at large. Due to lower demand and better supply in the market, NVIDIA is not stuck with a host of RTX 30-series chips, which it wants to phase out to make room for RTX 40-series GPUs. Since current-gen wafers aren’t being utilized as much anymore, the next-gen wafers become subject to the domino effect and are now expected to sell less. NVIDIA is in a real predicament because it has already paid in advance to TSMC and TSMC is in no mood to bulge. The semiconductor giant is not willing to reconsider the order. NVIDIA’s best bet is to hope that the quarterly delays push back 5nm wafer supply which would help alleviate the demand issues. NVIDIA has no other choice but to find customers that will buy the GPUs housing the pre-ordered 5nm wafers. This could force the company to reduce MSRPs, offer incentives, or simply hoard stock in turn for a grim opportunity cost. Whether this behind-the-scenes fiasco yields beneficial for the end-consumer remains to be seen.
