14 DAY TRIAL // TSMC is the world’s largest contract semiconductor manufacturer that produces processors and different chips for fabless companies doing chip design. Qualcomm is the world’s largest fabless chip designer and it is a traditional customer of TSMC.
When one of your biggest customers is signing contracts with two of your main competitors, you can’t just dismiss the importance of the move for your own business and your image in the industry.
The problem for TSMC is that they can’t do much else, as their 28nm process is in very good condition with good yields and low leakage, while they are already working on expanding their 28nm manufacturing capacity.
Therefore, besides ensuring quality and working hard on increasing quantity, there’s not much TSMC can do.
As we already emphasized here, Qualcomm’s move is mainly caused by the company’s anticipation of the market’s high demand for its products, and because TSMC’s 28nm process is not up to par.
The American fabless chip designer is getting ready for the Windows 8 and Windows RT tablet storm that’s coming later this fall, and it wants to be ready with chips to supply to its partners.
However, Qualcomm is not only anticipating (or guessing) increased market demands.
The company surely knows something most others don’t, as there is a great deal of work to design and modify your design so that it’s compatible with different fabs.
Such a move is not decided upon in a week or in a month. The chip designer surely has some clear deals ahead or already signed, and it spent a lot of effort and money to design different revisions of their processors so that those could be manufactured by different fabs.
TSMC’s spokesperson reportedly said:
“We do not comment on business with clients. We're confident in our leadership status in 28-nm and will fulfill customers' demands in the fourth quarter.”
We tend to agree with them on this one, but we can’t help but wonder just how great the demand for Qualcomm’s ARM processors is, and how the market will react to the ARM storm that’s coming.