Jensen Huang: Nvidia Could Source GPUs Elsewhere if Taiwan Faces Issues

• Jensen Huang discussed Nvidia’s reliance on TSMC with Goldman CEO David Solomon on Wednesday.
• TSMC, based in Taiwan, produces Nvidia’s GPUs, which raises concerns amid fears of a potential Chinese invasion of the island.
• Huang ensured Nvidia’s supply chain resilience, but acknowledged the difficulty of transitioning suppliers.

Taiwan Semiconductor Manufacturing Company (TSMC) is crucial to Nvidia, producing the graphics processing units (GPUs) at the heart of their operations. Any disruption in this partnership would significantly impact the workflow of AI chip production.

During a conversation with Goldman Sachs CEO David Solomon on Wednesday, Nvidia CEO Jensen Huang acknowledged this delicate relationship, especially considering escalating tensions in the Taiwan Strait.

“The majority of your supply chain partners operate out of Asia, particularly Taiwan,” Solomon pointed out. “Given the geopolitical climate, how are you addressing this moving forward?”

In response, Huang noted that if TSMC faced challenges, Nvidia would still manage to maintain supply, though it might not be as efficient.

Huang emphasized that Nvidia possesses adequate intellectual property, allowing them to pivot to alternative fabrication facilities if necessary. These facilities, known as fabs, are where semiconductors are manufactured.

A significant portion of the world’s chip manufacturers rely on TSMC for the complex and intricate process of producing chips en masse. TSMC’s location in Taiwan, an area claimed by China, raises critical concerns regarding the future of technology and AI.

In previous statements, Huang expressed confidence in relying on Taiwan for manufacturing. However, in this discussion, he provided more detail.

“While the technological processes might not match TSMC’s, and we might not achieve the same level of performance or cost, we will still be able to ensure supply,” Huang stated. “Should any situation arise, we can manufacture elsewhere.”

Despite this assurance, Huang acknowledged that TSMC is currently the top chip manufacturer globally by a significant margin.

Options for Nvidia’s manufacturing partners are limited. Apart from TSMC, Samsung and Intel have capabilities in producing powerful chips, although Intel’s manufacturing reputation has faced scrutiny in recent years.

Dylan Patel, chief analyst at SemiAnalysis, remarked, “Transitioning to a new supplier would be a monumental task, taking years to rebuild capacity.” He added that this kind of reorganization is not feasible in a short time frame.

Chris Miller, the author of “Chip War,” similarly highlighted the time it would take to activate supply chains outside Taiwan, estimating it would take at least a couple of years.

When Business Insider sought clarification from Nvidia about Huang’s assurances regarding continuity of supply if TSMC’s main sites faced disruption, a spokesperson refrained from elaborating beyond Huang’s statements, reiterating the company’s commitment to supply chain resilience.

Nvidia has indicated in regulatory filings that while efforts are ongoing to enhance supply chain resilience, potential new export controls could affect alternative manufacturing locations and impact the business negatively.

According to another filing from January, Nvidia sources its wafers, which are essential for their high-performance chips, from both TSMC and Samsung. Although Samsung matches some of TSMC’s capabilities, it currently trails behind as the leader in advanced chip production.

The pivotal role TSMC plays in the semiconductor sector is hard to overstate. Financial analysts closely monitor how TSMC allocates production output among its clients, as this can significantly influence revenue for fabless companies—those that design chips without manufacturing them.

Moreover, TSMC is responsible for advanced manufacturing processes for Nvidia’s latest Blackwell chips, which have faced delays that have raised concerns in the market.

While TSMC is in the process of establishing a chip factory in Arizona to diversify its operations, this facility will likely not produce cutting-edge semiconductors initially. The development of such facilities requires substantial investments and several years.

According to Patel, “TSMC Arizona will definitely serve Nvidia’s needs.” Huang expressed appreciation for TSMC’s ability to scale to meet the rising demand that has driven Nvidia’s recent earnings growth.

“We work with TSMC because of their excellence, but if required, we can transition to other suppliers as needed,” he stated.

Source: Business Insider