TSMC 40nm yield woes continue

Taiwan Semiconductor Manufacturing Co. Ltd is still having yield issues with its 40nm process, according to analysts.

The silicon foundry giant's 40nm yield problems surfaced earlier this year but the company claimed it largely resolved the problem. However, during a conference call last week, graphics chipmaker Nvidia Corp. discussed 40nm capacity and yield constraints at its foundry partner—TSMC.

Advanced Micro Devices Inc.'s graphics chip group is also seeing similar problems at TSMC, but not all are suffering with lackluster yields. John Daane, president, CEO, and chairman of the board of Altera Corp., said that the FPGA house has been shipping parts, based on a 40nm process from TSMC. "The yields are good," Daane told EE Times.

Nvidia, in contrast, has been vocal about the yield problems. "Overnight, Nvidia discussed 40nm capacity constraints at its foundry supplier TSMC," said Barclays Capital analyst C.J. Muse.

"Management discussed yields improving but that allocations still remain inadequate. Though yields were improving, they were important enough for TSMC to mention a chamber matching problem on its conference call earlier this earnings cycle," he said in a report, which is based on Nvidia's conference call to discuss its results.

Reports surfaced that TSMC is having issues with its ion implanter supplier, causing a shortfall of 40nm parts. "Demand (at Nvidia) far exceeded supply, particularly in the 40nm product area; the company is in a 'sold out' situation and this is likely to continue for the next several months. Virtually all products are on allocation with very lean inventories in the channel," said Hans Mosesmann, an analyst with Raymond James & Associates, in a report.

"Both AMD and Nvidia are supply constrained, and Nvidia is likely getting most of the allocation," he said. AMD's graphics chip unit is also using TSMC as a foundry.

"With both AMD and Nvidia being supply constrained, the supposed two-month AMD market advantage in new DX-11 GPU's is irrelevant in our view. AMD just missed an important window of opportunity this season in our opinion," he said.

Supply constraints
Nvidia's Q3 sales increased to $903.2 million, up 16 percent compared to Q2 and up less than 1 percent compared to Q3 08, the company said Nov. 6.

The graphics chip vendor recorded a Q3 GAAP net income of $107.6 million, or 19 cents per share, up from $61.7 million, or 11 cents per share, in the year-ago quarter, the company said.

Nvidia's results exceed consensus analyst expectations for Q3. The company said it expects Q4 sales to be up about 2 percent compared with Q3.

"Of particular note, management stated GPUs (40nm specifically) were supply constrained in the quarter, and it could remain that way through FQ4," warned analyst Doug Freedman of Broadpoint AmTech.

"Nvidia guided Q3 sales to grow 2 percent sequentially to $921 million, better than the Street estimate of $868 million. Management's conservative bias was driven by supply constraints, low 40nm yields at TSMC, and current lead times of 12 to 13 weeks," added Craig Berger, an analyst with FBR.

- Mark LaPedus
EE Times