Yield issues may hurt graphics IC market

Advanced Micro Devices Inc. and Intel Corp. gained share in the graphics chip business in the Q2 09. However, graphics chip yields remain an issue for both AMD and Nvidia Corp., causing a possible shortfall in shipments at the high-end, according to an analyst.

As reported, Taiwan Semiconductor Manufacturing Co. Ltd is having issues with its 40nm yields. TSMC makes graphics chips on a foundry basis for AMD and Nvidia, including 40nm products.

"With respect to TSMC, yield issues at 40nm were admitted by the company and it has been spending on process control during its current capacity ramp. In fact, our checks suggest that the yield for 40nm may have been under 30 percent in May 2009," said C.J. Muse, an analyst at Barclays Capital, in a new report.

"And while our current checks suggest that TSMC may have actually improved the yield somewhat, the GPU releases from Nvidia and AMD are still either delayed or are likely to be available in limited supply," Muse said. "But these poor yields cannot continue—it leads to unhappy fabless customers—and with new entrants into the foundry space, namely Samsung LSI and Global Foundries, we expect that the focus on yields will only increase."

The trends favor KLA-Tencor Corp. and other metrology tool vendors, according to the analyst. "Yield issues are cropping up everywhere you look and we expect time to yield will only become more difficult with chip complexity increasing as chipmakers continue to focus on shrinks," he said "Importantly, we see process control playing a more important role in memory going forward, driven by current roadmap of shrinks for both NAND and DRAM."

Growing market
Still, graphics chip shipments were up in Q2, said Jon Peddie Research (JPR). Shipments jumped up to 98.3 million units, up 31.3 percent from last quarter, according to the firm.

"After the channel stopped ordering GPUs and depleted inventory in anticipation of a long drawn out worldwide recession in Q3 and Q4 of 2008, expectations were hopeful, if not high that Q1 09 would change for the better," according to the firm.

"In fact, Q1 showed improvement but it was less than expected, or hoped. Instead, Q2 was a very good quarter for vendors—counter to normal seasonality—but then these are hardly normal times. It's clear the channel is gearing up for what it thinks is going to be a robust back-to-school season," according to the firm.

"Things probably aren't going to get back to the normal seasonality till Q3 or Q4 this year, and we won't hit the levels of 2008 until 2010," it said. "We are still predicting an upturn in the PC market in Q3 and Q4 and in particular for the graphics market (which serves not just PCs but aerospace and automotive, industrial systems, medical systems, kiosks and POS)."

In terms of share, it's a three-company race between AMD, Intel and Nvidia.

- Mark LaPedus
EE Times