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0 pointsgizajob2y ago0 comments

It does seem strange, because ok there’s competition, but there’s very limited competition – we’re talking maybe five or six chip manufacturers? And it seems they would all know the metrics of price and can ratchet upwards what they would charge Nvidia, like a cartel without officially forming a cartel.

If TSMC doubled or 10x what they charge Nvidia on Monday, Nvidia can’t switch suppliers overnight, and it would crash Nvidia’s valuation, leaving TSMC to say “ok we have the capacity for anyone who wants to take on Nvidia”.

Another side of that, while the whole “China invading Taiwan thing” isn’t exactly on the cards, there’s now $1+Trillion at stake shorting Nvidia stock alone if China felt like putting a few boots on the ground for a week.

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Rinzler892y ago· 1 in thread

>If TSMC doubled or 10x what they charge Nvidia on Monday

Chip manufacturing isn't like selling lemonade. You're not paying spot prices. You negociate fixed prices upfront for the duration of the manufacturing contract with various exit clauses and penalties for both sides.

>Nvidia can’t switch suppliers overnight

They can't switch overnight, but you also don't make good business by screwing over your customers for a one time hitjob just because you've locked them in for a few years. That trick will only work once. After that they'll avoid you with a 3,048 meter pole.

You stay afloat by building long term trust with your customers.

gizajobOP2y ago

I realise I’m oversimplifying yeah, but it still seems like TSMC has a fairly huge amount of leverage that they’re not wielding.

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