The real end of Moore's Law and the true cost of a monopoly

Dec 9, 2024

TSMC's potential price hikes threaten Moore's Law and chip manufacturing viability.

The real end of Moore's Law and the true cost of a monopoly

: TSMC's significant potential price increases on its N2 process are causing concern about the viability of Moore's Law for many companies. Without viable competition, such as from Intel, TSMC's monopoly might lead to unsustainable production costs for smaller volume customers. While some companies like Nvidia may handle these costs, others, including Qualcomm and AMD, face challenges. The need for an alternative to TSMC, potentially provided by Intel, is growing as TSMC gains more pricing power.

TSMC's upcoming price increases for its N2 process are set to significantly impact the semiconductor industry. The absence of viable competition turns TSMC from an effective monopolist into a true monopolist, enabling them to raise prices, making it uneconomical for many companies to stay on the Moore's Law curve.

An example illustrates the impact on a hypothetical TSMC customer, like Qualcomm, where design costs could rise significantly with little room for passing costs to customers. Even with a 15% increase in die per wafer, the cost per chip rises from $61 to $107, dropping gross margins from 55% to 22%, a situation unsustainable for many, including smaller startups and larger companies like AMD.

While companies such as Nvidia might absorb these costs better, the potential for TSMC to increase prices without competition underscores the importance of alternatives like Intel Foundry. With Intel's past competitiveness in question, the monopoly situation could drive the industry to seek other solutions, as relying solely on TSMC becomes increasingly risky.