TSMC Alleges Some Customers Are Hoarding Chips Creating Artificial Shortages

TSMC Wafers
There are many factors that play into the chip shortage that continues to affect the market for all kinds of various electronics, from graphics cards and game consoles, to certain smart automobile features and everything in between. Some of the reasons include rabid demand for cutting edge hardware, manufacturing challenges spurred by the pandemic, and cryptocurrency mining (as it relates to GPUs). According to TSMC, you can also add chip hoarding to the pile.

It may seem unfathomable that companies would be able to hoard chips when there is a shortage, but let us offer you this context. Remember when the pandemic first began and toilet paper was as valuable as gold? Part of the reason toilet paper was in short supply was because panicked and hoarded rolls of the cheek wipes.

Likewise, that has played out in the chip industry to a certain extent. In an interview with Time, TSMC chairman Mark Liu explains that some firms hoarded semiconductor chips over concerns of what impact a trade war between the US and China would have on the industry. Simply put, more chips ended up in factories than actual products, prompting Liu to conclude "there are people definitely accumulating chips who-knows-where in the supply chain."

TSMC is a major player in semiconductor manufacturing. It churns out wafers and chips for practically every type of electronic device imaginable, with AMD, Apple, Intel, NVIDIA, and many others being among its varied customers.

Hoarding is one of the challenges TSMC apparently faces. It's already pouring massive amounts of money into new and upgraded facilities (over $100 billion within the next few years), which should help in the long run. But as it relates to customers stockpiling chips, it has been taking measures to deal with the situation.

Liu says he and his team analyze data points to determine which customers are in actual need of chips, versus ones who are buying them and setting them aside. As a result, Liu said TSMC has delayed orders for major customers, even when they "may not be satisfied" with the decision, because "we just have to do what's best for the industry."

We imagine that can be a delicate balancing act. TSMC is not a small player, though, so it can afford to take hard line stances. But it is also not completely without competition. It will be interesting to see how this players out over the next year, because unfortunately, the shortage could linger through the entirety of 2022.

In the meantime, the full article on TSMC's manufacturing challenges is worth a read.