NVIDIA and TSMC’s 30-Year Collaboration Shows Signs of Strain
NVIDIA and TSMC’s 30-year alliance is showing signs of tension, as reports indicate that NVIDIA is reducing its dependence on the Taiwanese semiconductor giant. This development comes amid production challenges with NVIDIA’s new AI accelerator, “Blackwell,” and potential shifts in the semiconductor manufacturing landscape.
On Oct. 16 (local time), IT specialized media The Information, citing sources, reported that NVIDIA shows signs of reducing its dependence on TSMC. This revelation has sent ripples through the industry, given the longstanding partnership between the two companies, which dates back to 1995. NVIDIA has historically entrusted the manufacturing of its advanced chips entirely to TSMC, making it one of TSMC’s largest clients alongside Apple.
The source stated that NVIDIA has failed in high-voltage environment tests for several weeks after unveiling its new AI accelerator, Blackwell. This failure has sparked a blame game between the two companies. According to sources, TSMC believed that NVIDIA rushed production despite being aware of Blackwell’s defects. On the other hand, NVIDIA pointed to TSMC’s new semiconductor packaging technology as the cause of the delays in Blackwell production. Previously, UBS analysts also attributed Blackwell’s defects to the complexity of TSMC’s technology.
In August, when rumors of Blackwell production delays surfaced, NVIDIA CEO Jensen Huang calmed market concerns during a conference call by stating, “We have modified the design of Blackwell to improve yield, and no functional changes were necessary.” He added that the demand for Blackwell is “incredibly substantial” and declared that mass production of Blackwell would begin within the year.
However, the recent reports suggest that the partnership between NVIDIA and TSMC, often hailed as the most successful and lucrative in the AI business, is under strain. The Information reported, “The most successful and lucrative partnership (between NVDIA and TSMC) in the AI business is showing signs of strain.”
The industry is paying close attention to these developments, as any cracks in the AI alliance between the two companies could have significant implications. Some believe that if NVIDIA reduces its dependence on TSMC, it could be an opportunity for Samsung Electronics’ foundry business. Indeed, The Information reported that NVIDIA is seeking a partnership with Samsung Electronics for the production of new gaming chips, and NVIDIA hopes to receive a 20-30% discount compared to TSMC based on the same generation of chip manufacturing technology.
TSMC’s market share has soared to over 60%, and such dominance could pose a risk for companies designing chips. Diversifying its manufacturing partners could help NVIDIA mitigate these risks and potentially reduce costs.
NVIDIA and TSMC have maintained a partnership for nearly 30 years, a relationship underpinned by a unique network within the Greater China region. NVIDIA’s CEO Huang is a Taiwanese-American, and TSMC is a symbol of Taiwan. It is a well-known anecdote that Huang once remarked, “Without TSMC, there would be no NVIDIA today.”
As the situation unfolds, the industry will be closely monitoring the current status and any expected future developments in the relationship between NVIDIA and TSMC. The potential shift in NVIDIA’s manufacturing strategy could reshape the competitive landscape of the semiconductor industry, with significant implications for all players involved.