Graphics processing unit (GPU) designer Nvidia Corp. and Taiwan Semiconductor Manufacturing Company (TSMC) seem to have difficulties with their relationship, an analyst warned its clients. The fabless chip developer does not reportedly get sufficient capacity allocation, which may pose a risk for the firm in the short-term and mid-term future.

Doug Freedman, an analyst at American Technology Research, said in a research note that Nvidia was not getting the 55nm capacity it needs from the silicon foundry giant and that the problem was likely to get even once Nvidia starts to utilize more advanced fabrication processes, 45nm and 40nm. It is crucial for Nvidia to utilize the most advanced process technologies possible as this allows the company to build very powerful GPUs at lower costs.

Even though Nvidia as well as ATI, graphics product group of Advanced Micro Devices, are the largest customers of TSMC, the latter reportedly remains cautious over expansion of its leading-edge manufacturing capacities. Despite of the fact that TSMC introduced its 90nm process technology about three years ago and has been manufacturing GPUs for ATI using 55nm process technology for about a year now, the vast majority of its customers use 130nm or even less advanced technologies to build their chips. As a consequence, TSMC builds less capacity for newer nodes.

Mr. Freedman wrote that the “fabless business model seems to be getting stressed out” and that the Nvidia-TSMC relationship “sounds problematic” and “needs to evolve,” reports EETimes India web-site.

Even though the analyst only noted Nvidia as a primary victim of insufficient capacities at TSMC, AMD’s ATI division is also likely to suffer in case TSMC proceeds with the tactics of building fewer production lines.

Tags: Nvidia, ATI, AMD, Geforce, Nforce, Radeon, TSMC