TSMC should be charging NVDA much more

woulda, coulda, shoulda

After Apple, Nvidia pays more than anyone else for the latest nodes. They reserved capacity for a price and they get it for that price.

Why it's not happening ?

For the first quarters after AI exploded, I thought it was just that contracts were already signed, but what's stopping them now ?

Because Nvidia can say no and nobody else (except Apple) is willing to pay more for the latest node.

Can really Nvidia say no ?

They are making 78% of margin on those chips - I would think that that leaves a lot of bargaining power to TSMC. They would loose much less than Nvidia.

You can't do shakedowns for your second best customer. Nvidia works also with Samsung for new 3nm nodes.

Prices are defined by the profit margins of Nvidia's closest competitor (AMD 4.89%.)

Why not ?

Nvidia may be working with Samsung, but they don't have any alternative for now.

So my understanding is, that TSMC currently has the monopoly on producing Nvidia chips, and Nvidia obviously has the monopoly on selling those chips.

And somehow, Nvidia is extracting 99% of profits from that situation, while TSMC is getting close to nothing. My understanding of game theory is that it should be way closer to an even split.

Could you elaborate on why the prices are defined by AMD margins ? I'm obviously missing something, but can't see what.

>You can't do shakedowns for your second best customer.

Except Nvidia is shaking down its best, second best, and all the rest of their customers!

Like an auction where you pay the second highest bid.

Nvidia can only say no if they have another shop to turn to. Do they?

The way that could play out is that Nvidia wouldn't buy directly from them, but somebody else purchases cheaper from TSMC and then Nvidia buys from them.

So TSMC would have to increase prices for everyone, but then for some it would be too expensive and so they would lose those customers.

That's not how it works. You can't resell.

Nvidia engineers work shoulder to shoulder with TSMC to squeeze everything from the architecture even before the fab is build. TSMC makes custom job for their best customers.

For old established process it's possible to send design and get functioning chips without a huge R&D hassle and loss of performance.

They have. Samsung is competing for Nvidia orders with their 3nm node.

Second price auctions are the efficient way to allocate supply in a monopoly.