SAN JOSE — Moving into the damage-control mode, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) today (March 27, 2003) restated that the foundry alliance between IBM Corp. and Nvidia Corp. would not have a material impact on the Taiwanese company.
TSMC today sent a report from an analyst via e-mail to SBN, which states that the Taiwanese foundry giant will continue to be Nvidia's primary foundry for the foreseeable future. The report, issued by Pacific Crest Securities Inc., also states that TSMC would process 95 percent of Nvidia's wafers in 2003.
However, the report also states that IBM would make Nvidia's next-generation NV40 or Quadro workstation graphic chip and that TSMC stands to lose $7.5-to-$11 million per quarter to IBM in 2003. That figure could go up to $35-to-$45 million per quarter in 2004 as a result of the IBM-Nvidia foundry deal, according to the report.
TSMC initially moved into the damage control phase on Tuesday, when IBM's Microelectronics Division announced a multi-year foundry alliance with TSMC's largest customer — Nvidia. IBM will make Nvidia's next-generation GeForce graphics processor line, based on its 0.13-micron technology.
The announcement represented a change in strategy for Nvidia. For years, the Santa Clara, Calif., chip maker has relied on only one foundry for its IC production — TSMC. Nvidia will continue to use TSMC's foundry services, but now it will also utilize IBM's fabs in order to minimize risk (see March 25 story ).
Just hours after the IBM-Nvidia announcement, TSMC Tuesday issued its own release, stating it remains the primary foundry for Nvidia. A spokesman from TSMC today reiterated that TSMC remains the foundry of choice for Nvidia.
The report from Pacific Crest backs up TSMC's assertions--at least to a degree. The "new pact between IBM and Nvidia is immaterial to TSMC in 2003," according to the report, which was written by Pacific Crest analyst Michael McConnell.
"We do not believe that the IBM-Nvidia foundry pact signifies the start of a broad TSMC market-share loss to IBM," the report said. "Our checks with customers have given no indications of a mass migration to IBM."
On the down side, IBM is making inroads with Nvidia — at TSMC's expense. "TSMC could lose approximately 3,000 to 4,000 wafers, or $7.5 million to $11 million, per quarter to IBM beginning in calendar Q303," the report said. "We anticipate that IBM will garner a higher allocation of Nvidia wafers in 2004, but TSMC will remain Nvidia's primary supplier," the report said.
"Nvidia will evaluate 2004 product allocation at TSMC and IBM on a case by case basis," the report said. However, "We expect IBM to garner a higher allocation of waferouts (roughly 15 percent to 20 percent, or $35 million to $45 million per quarter) in 2004."
The figures are based on how much TSMC charges per wafer. At present, TSMC produces 90,000 wafers for Nvidia per quarter, the report said. The Hsinchu-based silicon foundry giant charges $2,500 per wafer, based on its 0.13-micron process technology, the report added.
Reports surfaced in the Taiwanese press that IBM would make Nvidia's next-generation NV35 graphic chip, but Pacific Crest believes that the IC is already being produced within TSMC's fabs.
Instead, IBM is more likely to make the NV40 or Quadro workstation graphics chip on a foundry basis for Nvidia, according to the securities firm. TSMC will continue to make the NV30, NV31, and NV34 line of graphics chips for Nvidia.
It still remains to be seen if IBM can execute and produce Nvidia's 0.13-micron designs, according to analysts. Like most semiconductor makers, IBM is also wrestling with the ramp up of the 0.13-micron technology, according to sources.
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