Hot on the heels of stories from last week, it looks like TSMC [TSM] is in serious trouble with two of its key customers. According to information we have, both ATI [AMD] and nVidia [NVDA] are "seriously disappointed" at Taiwanese Semiconductor Manufacturing Company. I had couple of conversations this weekend with people that are in the know on the subject, and learned that the situation is looking gloomier than first news lead us to believe. Leaking issues are a standard manufacturing problem that can happen to anyone, including Intel [does anyone remembers Prescott e.g. PressHot].
Problem that both ATI and nVidia have is the fact that in case of CPU manufacturing, AMD and Intel will have it "easy". Processors will almost always be configured in a vertical position, so the thermal load will go to upper part of the package. With GPUs, they're almost always positioned at the worst possible spot - facing downwards, with any thermal load pushing not just the chip packaging, but the PCB [Printed Circuit Board] as well. Chip packaging usually does not fail [nVidia's GeForce 8600 series is the only case to date], but PCBs such as graphics cards or motherboards - do fail.
Our sources close to the heart of both AMD and nVidia told us that Windows 7 momentum is "the largest opportunity to date" [referring to graphics chips sales], and that TSMC has to ramp up the yields and that serious volume production has to happen by the end of May, or the sales for Back-to-School are gone. Bear in mind that AMD/ATI & nVidia aren't sitting idle and telling TSMC to improve. Engineers at both companies are working with TSMC in order to tweak up the process, and sometimes, even take the lead in manufacturing process development. Good example of that was "55nm high performance", which was a heavily modified half-node process where AMD lead the development.
Since its announcement a year ago, 40nm half-node process faced serious challenges, and tooling companies are expressing their doubt at the "40nm" part, since some customers such as FPGA-maker Altera [ALTR] were told that they're working with TSMC on a 45nm node, and then end up surprised to hear that TSMC is considering them as "a leading 40nm customer".
nVidia is set to launch three 40nm parts around Computex timeframe, and those three products [GT215, GT216, GT218] are a prequel into the 40nm beast called NV70-G300-GT300 architecture.
If TSMC fails to deliver, the foundry might lose both of its key customers in 2010 to GlobalFoundries and their 32nm and 28nm bulk and SOI processes. According to one of our sources, one of these two companies is seriously working on SOI [Silicon-On-Insulator] technology for its upcoming SOC and GPU parts. The answer might surprise you.