TSMC should be charging NVDA much more
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.
For the first quarters after AI exploded, I thought it was just that contracts were already signed, but what's stopping them now ?
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.
Prices are defined by the profit margins of Nvidia's closest competitor (AMD 4.89%.)
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.
Except Nvidia is shaking down its best, second best, and all the rest of their customers!
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.
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.