NVIDIA and AMD’s Decision to Partner with TSMC as Their Main Foundry: A Game-Changing Bet

In a recent discussion, NVIDIA’s CEO Jensen Huang and AMD’s Lisa Su reflected on the strategic decision to partner with TSMC as their primary foundry, a move that initially seemed risky but has ultimately proven advantageous.

Trust in TSMC: An Evolving Strategy for NVIDIA and AMD

The AI industry is currently facing significant challenges, particularly concerning supply chain constraints that hinder chip production. In this context, loyalty to partners like TSMC transcends mere business transactions, encompassing early access to production facilities, expedited delivery, and collaborative efforts in intellectual property development. TSMC’s approach reflects a commitment to long-standing relationships rather than purely focusing on immediate revenue streams. This ethos is rooted in their history, emerging as a formidable player amid giants like Intel and Texas Instruments, thanks to the vision of founder Morris Chang.

TSMC reportedly introducing price hike for 2nm wafers for four consecutive years

The firm is known for its gradual and sustainable pricing strategies, avoiding abrupt changes that could alienate its partners. Reflecting on their humble beginnings sheds light on TSMC’s commitment to customer service—a principle it has maintained while growing to prominence within the semiconductor industry.

In a recent podcast interview with Jodi Shelton, Jensen Huang recounted his early promise to Morris Chang that NVIDIA would emerge as TSMC’s largest customer, despite earlier setbacks with technologies like the 28nm process. Huang emphasized this relationship, stating:

Jodi Shelton: I remember Morris Chang has a similar story when he first met you, that you immediately said, “I’m going to be your biggest customer or one of your biggest customers. And he’s like, ‘Wow, that’s a lot of gumption.”So, where did that confidence come from at such an early age?”

Jensen Huang: By the way, Morris will be happy to know Nvidia is TSMC’s largest customer now.

Beyond the hype surrounding high-performance computing and artificial intelligence, NVIDIA’s impressive valuation of $5 trillion is closely tied to its solid partnership with TSMC, providing it with an “exclusive”status. Reports indicate that NVIDIA secures a substantial chip supply from TSMC, thanks to strategically negotiated long-term contracts. This illustrates how fostering meaningful relationships can yield significant long-term benefits, a principle exemplified by NVIDIA’s success.

Two men at a press conference surrounded by microphones, one speaking, another listening attentively. — NVIDIA & TSMC CEOs | Image Credits: CNA

Similarly, AMD made a significant transition by choosing to work with TSMC after previously operating its own fabrication network, which later became GlobalFoundries. In her conversation with Jodi Shelton, Lisa Su acknowledged that trusting TSMC was “one of the major decisions”that has paid off by helping AMD expand its footprint in the client and server markets.

Another major call was deciding you know, really to, you know, change fundamentally our relationship with Global Foundries and, you know, go with, you know, TSMC as our leading manufacturing partner.

– AMD’s CEO Lisa Su

TSMC’s pivotal role in the AI supply chain is undeniable. As the leading semiconductor foundry, it continues to draw loyalty from major companies like NVIDIA and AMD, even as alternatives emerge. The historical context of their collaboration underscores that without TSMC, the achievements of NVIDIA and AMD in AI and computing might not have been realized to the same extent.

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