TSMC abolishes volume discounts – can result in more expensive hardware

Rising costs in the semiconductor industry have meant that almost everyone has thrown in the towel to make their own circuits, where the exception that stands out is Intel. Instead, players such as AMD, Apple, Nvidia and Qualcomm turn to contract manufacturers, where only TSMC and Samsung form a duopoly for those who want access to the most advanced manufacturing technologies.

Now Taiwanese Central News Agency reports that TSMC, Taiwan Semiconductor Manufacturing Company, starting in 2021 will cease volume discounts to its largest customers who order silicon wafers in the order of 10 and 100 thousands. Previously, players such as AMD, Apple, Nvidia and Qualcomm received a discount of 3 percent on each wafer.

The decision is attributed to a lack of capacity on the latest technologies 5, 6 and 7 nanometers, where Samsung as the only competitor has similar technologies to offer. This means that circuit designers, who are completely dependent on contract manufacturers to get any products on the market at all, have no choice but to swallow the higher prices.

Among the current major customers is AMD, which has outsourced the production of processors as well as graphics cards and system circuits (SoC) for all Playstation and Xbox consoles. Apple is another customer that since its break with Samsung is completely in the hands of TSMC for the system circuits in Iphone, Ipad and most recently Macbook.

While a discount of 3 percent can be considered small, the margin is often low on circuits, which is why TSMC’s decisions will most likely affect the prices of hardware in the future.

Source: Tom’s Hardware

More reading about TSMC: