NVIDIA Limiting GPU Production Due To Excess Inventory, Could Lead To GeForce RTX 40 Price Cuts If Things Don’t Improve

Recent reports citing NVIDIA's GeForce RTX 40 price reduction and limited production may be due to excess inventories, claims a report by EETimes. According to an analysis by \research firm, Arete Research, NVIDIA is amongst the list of TSMC's Top fabless customers whose inventory far exceeds the 5-year industry average of 92 days.

When the recent NVIDIA GeForce RTX 4070 hit the market two weeks ago, the amount of inventory across the board, except for a few manufacturers' graphics cards, was packed on many retail shelves, whether online or in stores. NVIDIA has begun to sell the cards for cheaper to entice new and returning consumers, but it is not only due to the cards not selling fast enough.

TSMC and Samsung were previously on an increased path to be the first company to develop and manufacture the 3nm process technology for chips used in processors and graphics cards. TSMC recently acquired this goal, but not without problems. According to a report by EE Times, the semiconductor giant is struggling with "tool and yield" issues that are slowing the volume of production of 3nm-based chips to its customers, i.e., NVIDIA.

Our 3-nm technology is the first in the semiconductor industry to high-volume production with good yield. As our customers’ demand for N3 [TSMC terminology for 3 nm] exceeds our ability to supply, we expect N3 to be fully utilized in 2023, supported by both HPC and smartphone applications. Sizable N3 revenue contribution is expected to start in the third quarter, and N3 will contribute a mid–single–digit percentage of our total wafer revenue in 2023.

— C.C. Wei, Taiwan Semiconductor Co. CEO during a conference call with analysts

The report explains that over the last five years, "the industry's chip inventory safety line" was, at most, an estimated 92 days. NVIDIA has the most extensive inventory of GPUs, with an estimated 220 days' worth of supply. NVIDIA is one of six companies that are the largest fabless customers for TSMC and is the highest of five companies to exceed what is being called the "warning line."

The current market conditions aren't supporting either with inflation and economic devaluation of currency making gamers reluctant to buy new graphics cards such as NVIDIA's GeForce RTX 40 series. NVIDIA is also trying to limit production so that its partners don't end up with excessive inventories which would mean that price cuts and other incentives might be the only solution to push these GPUs out of warehouses.

The recent NVIDIA cuLitho hardware and software are being utilized in NVIDIA graphics cards, such as the H100 GPU, which uses a 5nm process technology. The new software and hardware will assist TSMC in "deploying inverse lithography and deeper learning."

We recently see TSMC partnered up with NVIDIA, Synopsys, and ASML on 2-nm production and beyond. TSMC is currently the only foundry within that group.

— Brad Lin, research analyst, Bank of America

TSMC is slated to increase N3, N4, and N5 nodes to assist companies like Apple and its A17 and M3 processors, ASIC-based server processors, and fabricate N4 and N5 nodes for AMD, Intel, and NVIDIA during H2 2023. However, N3 nodes are delayed because of the demand for adopting "multi-patterning with EUV lithography" from EUV lithography company ASML.

While the high cost of EUV multi-patterning has made the cost/benefit of EUV unattractive, loosening the design rules to minimize the number of EUV multi-patterning layers has led to a much higher die size. The “real” 3-nm node will not scale until a higher-throughput EUV system, ASML’s NXE:3800E, is available during the second half of 2023.

— Mehdi Hosseini, senior equity research analyst, Susquehanna International Group

TSMC's inventory woes are also causing companies other than NVIDIA to struggle with demand for parts and technology. This could be the more significant catalyst for the stagnant GPU sales for AMD, NVIDIA, and Intel, causing the three companies to reduce pricing almost upon launch.

News Sources: EE Times, Huai Technology